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A Medium-Term Integrated Risk Management Model for a Hydrothermal Generation Company

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7 Author(s)
Cabero, J. ; Escuela Tecnica Superior de Ingenieria, Univ. Pontificia Comillas, Madrid, Spain ; Baillo, A. ; Cerisola, S. ; Ventosa, M.
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This paper presents a methodology to manage the market risk faced by a hydrothermal generation company in the medium-term (one year). This risk is due to uncertainty in fuel prices, power demand, water inflows, and electricity prices. The proposed methodology includes three steps: the generation of scenarios for these random parameters, the approximation of these scenarios by a multivariate scenario tree, and the optimization of the company's operational and financial hedging decisions under a stochastic programming framework. The optimization model permits the representation of a diversified generation portfolio and measures risk exposure by means of conditional value-at-risk. A realistic numerical example is solved to illustrate the possibilities of our approach.

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Power Systems, IEEE Transactions on  (Volume:20 ,  Issue: 3 )