Stochastic Up to Congestion Bidding Strategy in the Nodal Electricity Markets Considering Risk Management

Dongliang Xiao,Haoyong Chen

doi:10.1109/access.2020.3015025

Abstract

Up to congestion (UTC) is a type of financial product available in the nodal electricity markets of the United States, based on which a financial participant can earn profits by utilizing the different congestion and loss components of the electricity prices in the day-ahead (DA) and real-time (RT) markets. This paper proposes the UTC bidding strategy by using stochastic optimization technique, where the uncertain electricity prices on the UTC transaction paths are represented via scenario sets. In the established stochastic model, the total expected profit and the Conditional Value at Risk (CVaR) of the UTC bidding strategy are maximized simultaneously considering risk management, where the risk preference of financial participant is characterized by using a risk aversion parameter. By solving the proposed stochastic model, non-increasing DA UTC bidding curves can be generated for all the time periods of the next operating day, where the credit requirements for UTC transactions are taken into account in detail. Finally, to verify the effectiveness of the proposed strategy, case studies are carried out based on the historical data and trading policies of the Pennsylvania-New Jersey-Maryland (PJM) electricity market, and the UTC bidding strategies generated by different models are analyzed. The numeral results indicate that, compared to the deterministic UTC bidding strategy, the proposed stochastic strategy can bring much higher expected profit and lower potential risks for the financial participant. Moreover, by adjusting the risk aversion parameter in the proposed model, the risks can be managed efficiently according to the financial participant’s preference.

Highlights

Most of the two-settlement electricity markets in the United States adopt a nodal pricing framework to determine the electricity price at each node in the power network, in which case the nodal electricity price consists of energy, congestion and loss components [1]
According to the credit requirements for up to congestion (UTC) transactions, the risk exposure of a UTC bid represents the potential loss that may occur in the electricity market, which is calculated based on the bidding capacity of the financial participant and the reference price of the path [20]
The computational cost of solving the proposed stochastic optimization model considering more UTC transaction paths are provided in Table 4, which are acceptable for the financial participants in practice

Summary

INDEXES AND SETS w

W ∈ {1, . . . , Nw. Index of the paths for up to congestion (UTC) transactions, d ∈ {1, . . . , Nd. Nt. Index of the pricing nodes in the electricity market, s∈ {1, . PUd,t,w UTC bidding capacity on path d in time period t for scenario w. ΠdU,t,w Profit of the UTC bid used on path d in time period t for scenario w. EdR,t,w Risk exposure of the UTC bid used on path d in time period t for scenario w. Day-ahead (DA) electricity price at node s in time period t for scenario w. Binary parameter which is equal to 1 if the risk exposure of the UTC bid on path d in time period t for scenario w is positive, and is equal to 0 otherwise. Λrde,ft,w Actual reference price for the UTC bid on path d in time period t for scenario w.

INTRODUCTION

Findings

CONCLUSION