Utilization of financial contracts by wind power plants to benefit promotion and risk reduction

Abstract

Recently, in a lot of power markets, costs arisen from imbalance generation of wind farms are taken from owners of the power plants which cause it. Consequently, the wind farm owner's benefit is threatened. It is assumed in this paper that the wind farm owner turns to utilize forward, put option and call option contracts in order to overcome benefit reduction caused by application of imbalance penalties. His aim is to determine optimal amounts of each contract to manage the risks. Indeed, maximizing benefit expectation besides minimizing its standard deviation, are considered as two parallel objective functions. Simulation results show that, besides promotion of expected benefit, the power plant owner can substantially reduce his risks utilizing financial contracts.