Financial risk management in a competitive electricity market

Journal Article · Mon Nov 01 04:00:00 EST 1999 · IEEE Transactions on Power Systems (Institute of Electrical and Electronics Engineers)

DOI:https://doi.org/10.1109/59.801886· OSTI ID:20013162

Bjorgan, R; Liu, C C; Lawarree, J

This paper proposes solutions for electricity producers in the field of financial risk management for electric energy contract evaluation. The efficient frontier is used as a tool to identify the preferred portfolio of contracts. Each portfolio has a probability density function for the profit. For important scheduling policies, closed form solutions are found for the amount of futures contracts that correspond to the efficient frontier. Production scheduling must consider resource constraints. It is found that, without resource constrains, the portfolio with the highest expected profit can be preferred--even for a risk-averse decision-maker. When resource constraints are present, portfolios not corresponding to the maximum expected profit criteria will more frequently be preferred.

• Research Organization: Univ. of Washington, Seattle, WA (US)
• OSTI ID: 20013162
• Journal Information: IEEE Transactions on Power Systems (Institute of Electrical and Electronics Engineers), Journal Name: IEEE Transactions on Power Systems (Institute of Electrical and Electronics Engineers) Journal Issue: 4 Vol. 14; ISSN ITPSEG; ISSN 0885-8950
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
COMPETITION
ECONOMICS
ELECTRIC POWER INDUSTRY
MARKET
PRICES