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Structuring Bilateral Energy Contract Portfolios in Competitive Markets

In: Stochastic Optimization Methods in Finance and Energy

Author

Listed:
  • Antonio Alonso-Ayuso

    (Universidad Rey Juan Carlos)

  • Nico di Domenica

    (Value Lab.)

  • Laureano F. Escudero

    (Universidad Rey Juan Carlos)

  • Celeste Pizarro

    (Universidad Rey Juan Carlos)

Abstract

A multistage complete recourse model for structuring energy contract portfolios in competitive markets is presented for price-taker operators. The main uncertain parameters are spot price, exogenous water inflow to the hydro system and fuel-oil and gas cost. A mean-risk objective function is considered as a composite function of the expected trading profit and the weighted probability of reaching a given profit target. The expected profit is given by the bilateral contract profit and the spot market trading profit along the time horizon over the scenarios. The uncertainty is represented by a set of scenarios. The problem is formulated as a mixed 0–1 deterministic equivalent model. Only 0–1 variables have nonzero coefficients in the first-stage constraint system, such that the continuous variables only show up in the formulation of the later stages. A problem-solving approach based on a splitting variable mathematical representation of the scenario clusters is considered. The approach uses the twin node family concept within the algorithmic framework presented in the chapter. The Kyoto protocol-based regulations for the pollutant emission are considered.

Suggested Citation

  • Antonio Alonso-Ayuso & Nico di Domenica & Laureano F. Escudero & Celeste Pizarro, 2011. "Structuring Bilateral Energy Contract Portfolios in Competitive Markets," International Series in Operations Research & Management Science, in: Marida Bertocchi & Giorgio Consigli & Michael A. H. Dempster (ed.), Stochastic Optimization Methods in Finance and Energy, edition 1, chapter 0, pages 203-226, Springer.
    • Handle: RePEc:spr:isochp:978-1-4419-9586-5_10
    DOI: 10.1007/978-1-4419-9586-5_10
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    Cited by:

    1. Maria Teresa Vespucci & Marida Bertocchi & Laureano F. Escudero & Stefano Zigrino, 2013. "A risk averse stochastic optimization model for power generation capacity expansion," Working Papers (2013-) 1305_qum, University of Bergamo, Department of Management, Economics and Quantitative Methods.

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