Forward trading for an electricity producer

Abstract

Within a yearly time framework this tutorial paper describes a stochastic programming model to determine the electricity market strategy of a producer. Both a financial forward market and a day-ahead pool are considered. Hourly pool prices are modeled as stochastic variables. Decisions pertaining to the forward market are made at monthly/quarterly intervals while decisions involving the pool are made throughout the year. Risk on profit variability is modeled through the CVaR methodology. The resulting decision-making problem is formulated and characterized as a large-scale linear programming problem, which can be solved using commercially available software.