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Managing Short-Term Electricity Contracts Under Uncertainty: A Minimax Approach

Summary: Managing Short-Term Electricity Contracts
Under Uncertainty: A Minimax Approach
Samer Takriti
Shabbir Ahmed
March 1, 2002
A common problem facing energy producers is marketing excess capacity in the
short-term market. A producer holds an auction asking interested buyers to submit
bids reflecting their capacity and price requirements. As a buyer's demand is not
known in advance, the supplier constructs several demand forecasts and associates
a set of possible probability measures with these forecasts. The supplier then maxi-
mizes the expected profit while considering the worst-case probability distribution.
The formulation--a minimax mixed-integer program--is solved using a branch-and-
cut technique. The proposed technique is quite general and can be used to solve a
wide class of minimax two-stage stochastic programs. Numerical testing indicates
that the developed method is successful in solving practical models in less than a

Mathematical Sciences Department, IBM T.J. Watson Research Center, P.O. Box 218, Yorktown
Heights, New York 10598, USA, takriti@us.ibm.com


Source: Ahmed, Shabbir - School of Industrial and Systems Engineering, Georgia Institute of Technology


Collections: Engineering