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Open AccessArticle

Electricity Portfolio Optimization for Large Consumers: Iberian Electricity Market Case Study

1
Department of Engineering and Management, CEG-IST, Instituto Superior Técnico, Universidade de Lisboa, 1049-001 Lisboa, Portugal
2
Department of Applied Computer Science, School of Management, AGH University of Science and Technology, 30059 Krakow, Poland
3
Haas School of Business, University of California at Berkeley, Berkeley, CA 94720, USA
*
Authors to whom correspondence should be addressed.
Energies 2020, 13(9), 2249; https://doi.org/10.3390/en13092249
Received: 12 February 2020 / Revised: 6 April 2020 / Accepted: 24 April 2020 / Published: 4 May 2020
(This article belongs to the Section Energy Economics and Policy)
Electricity markets are nowadays flooded with uncertainties that rise from renewable energy applications, technological development, and fossil fuel prices fluctuation, among others. These aspects result in a lumpy electricity prices for consumers, making it necessary to come up with risk management tools to help them hedge this associated risk. In this work a portfolio optimization applied to electricity sector, is proposed. A mixed integer programming model is presented to characterize the electricity portfolio of large consumers. The energy sources available for the portfolio characterization are the day-ahead spot market, forward contracts, and self-generation. The study novelty highlights the energy portfolio characterization for players denoted as large consumers, which has been overlooked by the scientific community and, focuses on the Iberian electricity market as a real case study. A multi-objective methodology is explored, using a weighted-sum approach. The expected cost and the conditional value-at-risk (CVaR) minimization are used as objective function. Three case studies illustrate the model applicability through the characterization of how the portfolio evolves with different demand profiles and how to take advantage from seasonality characteristic in the spot market. A scenario analysis is explored to reflect the uncertainty on the price of the spot market. The expected cost and CVaR are optimized for each case study and the portfolio analysis for each risk posture is characterized. The results illustrate the advantage to reduce costs and risk if the prices seasonality is considered, triggering to an adaptive seasonal behavior, which support the decision-maker decision towards its goals. View Full-Text
Keywords: electricity markets; portfolio optimization; conditional value-at-risk; electricity portfolio; mixed integer programming electricity markets; portfolio optimization; conditional value-at-risk; electricity portfolio; mixed integer programming
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Canelas, E.; Pinto-Varela, T.; Sawik, B. Electricity Portfolio Optimization for Large Consumers: Iberian Electricity Market Case Study. Energies 2020, 13, 2249.

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