Modeling risk management in oligopolistic electricity markets: a benders decomposition approach

J. Cabero, M. Ventosa, S. Cerisola, Á. Baíllo

IEEE Transactions on Power Systems Vol. 25, nº. 1, pp. 263 - 271

Summary:

This paper presents a model for addressing the market risk management problem faced by a hydrothermal generation company trading in an oligopolistic market. The risk is due to uncertainty in fuel prices, power demand, water inflows, and electricity prices. The model permits the representation of a diversified generation portfolio and measures risk exposure by means of conditional value at risk. The model is formulated and solved as a stochastic linear complementarity problem. In order to deal with realistically sized problems, Bender’s decomposition technique is adapted to solve equilibrium models. A numerical example illustrates the possibilities of the algorithm we propose.

Keywords: Complementarity problem, market equilibrium, risk hedging, stochastic programming

JCR Impact Factor and WoS quartile: 2,355 (2010); 6,600 - Q1 (2022)

DOI reference: https://doi.org/10.1109/TPWRS.2009.2036788

Published on paper: February 2010.

Published on-line: January 2010.

Citation:
J. Cabero, M. Ventosa, S. Cerisola, Á. Baíllo, Modeling risk management in oligopolistic electricity markets: a benders decomposition approach. IEEE Transactions on Power Systems. Vol. 25, nº. 1, pp. 263 - 271, February 2010. [Online: January 2010]