A stochastic optimization approach for pricing hydropower regulation capacity in electricity markets
With the introduction of an increasing number of regulation markets,
hydropower producers face multiple opportunities regarding how to
utilize their water optimally. Such regulation markets can increase
profits drastically compared to a single day-ahead spot market, thus the
use and comprehension of multi-market optimization tools are valuable
for all hydropower producers with storage.
This report contains the development of a stochastic multi-stage
optimization model where the effects of committing upon different levels
of regulation obligations in electricity markets are investigated seen from
a hydropower producers perspective. A mathematical formulation was
written, and a corresponding optimization code implemented. An
analysis was further conducted through a case study where a stochastic
spot price was constructed and optimized upon by an implemented
watercourse with authentic properties.
Comparison between different levels of regulation obligations, the effect
concerning the introduction of new information during the stochastic
optimization period and the benefits of multiple executions (Monte
Carlo-simulations) are among the essential output data analyzed.
The results indicate such comparisons of regulation obligations to be
useful when deciding whether or not to provide regulation capacity, and
if so, at which level. Also, the value of good information should not be
underestimated when participating in markets with uncertainty
regarding the future.
The market designs are affecting the choice and design of the
optimization strategy used in markets with more complex properties,
analyzing multiple regulation obligations may prove hard to present and
time consuming to process. Thus, using a forecasted price of regulation
markets is often preferred, but unfortunately such forecasts are hard to
obtain. Nevertheless, decision-making tools regarding optimal levels of
regulation obligations can be utilized by considering factors such as the
needed regulation price to break even from a potential loss in the spot
market, as well as the marginal cost of increasing a regulation obligation.
Place, publisher, year, edition, pages
Institutt for elkraftteknikk , 2014. , 181 p.
IdentifiersURN: urn:nbn:no:ntnu:diva-26955Local ID: ntnudaim:11623OAI: oai:DiVA.org:ntnu-26955DiVA: diva2:754221
Fosso, Olav B, ProfessorKlæboe, Gro