Financial tools to manage dispatchable Distributed Generation economic risks

Abstract

Distributed Generation (DG) has received increasing attention during the last decade. Advantage and constraints of DG application are well known to both DG owner and electric utility. Various technologies are available for DG units among them gas GenSet is, in particular, more attractive to the investors as the technology provides the control on DG generation. However, there are various financial risks associated with dispatchable DG units that prohibit wide private investment in such technologies. This paper examines the use of financial tools to manage dispatchable DG economic risks. A comprehensive framework has been proposed to consider various economic risks to DG owner. Suitable models have been used to incorporate risk management tools, in particular the financial tools, in the problem. Optimal use of risk management tools has been determined based on conditional value-at-risk (CVaR) approach. The proposed approach has been applied to a test case and the effectiveness of the solution has been verified.