robust portfolio optimization for electricity planning an application based on the brazilian electricity mix one of the major challenges of today s policy makers and industry strategists is to achieve an electricity mix that presents a high level of energy security within a range of affordable costs and environmental constraints bearing in mind the planning of a more reliable electricity mix the main contribution of this paper is to consider parameter uncertainties on the electricity portfolio optimization problem we assume that the expected and the covariance matrix of the costs for the different energy technologies such as gas coal nuclear oil biomass wind large and small hydropower are not exactly known we consider that these parameters belong to some uncertainty sets box ellipsoidal lower and upper bounds and convex polytopic three problems are analyzed i finding a energy portfolio of minimum worst case volatility with guaranteed fixed maximum expected energy cost ii finding an energy portfolio of minimum worst case expected cost with guaranteed fixed maximum volatility of the energy cost iii finding a combination of the expected and variance of the cost weighted by a risk aversion parameter these problems are written as quadratic second order cone programming socp and semidefinite programming sdp so that robust optimization tools can be applied these results are illustrated by analyzing the efficient brazilian electricity energy mix considered in losekann et al 2013 assuming possible uncertainties in the vector of expected costs and covariance matrix the results suggest that the robust approach being by nature more conservative can be useful in providing a reasonable electricity energy mix conciliating co2 emission risk and costs under uncertainties on the parameters of the model

purchase bidding strategies of an energy coalition with demand response capabilities the implementation of demand response programs drp has gained interest as a means to alleviate energy consumption during peak hours two explanations account for the success of such programs which involve both utilities and electricity consumers with the latter often organized into coalitions the system operator meets its goal of reducing the load peak simultaneously electricity consumers achieve economic benefits when reducing consumption during peak hours in this paper a monte carlo based algorithm has been proposed for the formulation of multiple purchase offers in the day ahead energy market daem by coalitions in which consumers vary in their sensitivity to drp manifesting different responsiveness to hourly tariffs based on the hourly market clearing prices being able to monitor how coalition members use air conditioning in the presence of variable hourly energy tariffs the coordinator can then define a purchase bidding strategy depending on how price sensitive the coalition is simulation results show that the presence of a price sensitive demand leads not only to a subsequent reduction in energy prices during peak hours but also leads to a decrease in their inter hour volatility

strategic demand side response to wind power integration this paper explores the effects of allowing large price responsive consumers to provide reserves in a power system with significant penetration of wind energy a bilevel optimization model represents the utility maximization problem of a large consumer subject to a stochastic day ahead co optimization of energy and reserves that a system operator would solve to clear the market while considering wind power uncertainty an examination of the market outcomes from both an illustrative and a large scale study using this model allows analysis of a the effects of the type of behavior of the large consumer i e strategic vs competitive b limits on the amount of reserves it is allowed to provide and c variability and accuracy of characterization of wind power uncertainty

bond ladders and rolling yield convergence most investment grade bond portfolios have stable durations and can be regarded as duration targeted dt for dt portfolios multiyear returns converge to the starting rolling yield if the yield curve undergoes a sequence of strictly parallel shifts the theoretical convergence horizon is one year less than twice the duration target the laddered portfolios favored by private investors are essentially dt and surprisingly their convergence return coincides with the starting yield of the ladder s top rung bond

forward contracts for the operation of an electricity industry under spot pricing a study is reported of the use of forward contracts as risk instruments for electricity industries operating under spot pricing forward contracts involve financial transactions or commitments which relate to a physical trade at a later time instance price setting and appropriate participant responses are discussed simulation studies are used to demonstrate that forward contracts offer participants an opportunity to reduce their risk exposure without removing the incentive to respond to higher spot prices

financial risk management in a competitive electricity market 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 constraints 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

optimal bidding strategies and modeling of imperfect information among competitive generators the emerging electricity market behaves more like an oligopoly than a perfectly competitive market due to special features such as a limited number of producers large investment size barrier to entry transmission constraints and transmission losses which discourage purchase from distant suppliers this makes it practicable for only a few independent power suppliers to service a given geographic region and in this imperfect market each power supplier can increase its own profit through strategic bidding the profit of each supplier is influenced to varying extents by differences in the degree of imperfection of knowledge of rival suppliers a new framework to build bidding strategies for power suppliers in an electricity market is presented in this paper it is assumed that each supplier bids a linear supply function and that the system is dispatched to minimize customer payments each supplier chooses the coefficients in the linear supply function to maximize benefits subject to expectations about how rival suppliers will bid a stochastic optimization formulation is developed and two methods proposed for describing and solving this problem a numerical example serves to illustrate the essential features of the approach and the results are used to investigate the potential market power

economic efficiency effects of alternative policies for reducing waste disposal abstract reducing the amount of municipal solid waste that is disposed of has become an important policy goal previous research argued that a virgin material tax offered an efficient method of meeting this goal and it continues to be considered as a policy option today this paper demonstrates however that a virgin material tax is not an efficient method of reducing waste but that an alternative policy a combined disposal tax and reuse subsidy is the combined disposal tax and reuse subsidy is theoretically consistent with unit based household charges for waste disposal but may have advantages in some situations

genco s integrated trading decision making to manage multimarket uncertainties fossil fuel generation companies gencos trade in multiple uncertain energy markets fuel and carbon markets on upstream side while electricity market on downstream side global economic and environmental benefits lead these markets to pursue overlapping goals making them highly interactive gencos may identify optimal trading strategies for upstream and downstream trading in an integrated framework to manage an overall secure and profitable position further severe unpredictability of energy market prices may necessitate a genco to make trading plans which perform better meeting its goals under severe uncertainty of involved markets this paper proposes information gap decision theory igdt based approach to select three interrelated trading portfolios in an integrated framework results from a realistic case study provide a comprehensive decision insight to address risk averse and risk seeking behavior of genco explicitly highlighting importance of co variation in prices of interactive markets

demand side bidding agents modeling and simulation problems such as price volatility have been observed in electric power markets demand side participation is frequently offered as a potential solution by promising to increase market efficiency when hockey stick type offer curves are present however the individual end consumer will surely value electricity differently which makes demand side participation difficult as a group and at a bus in this paper demand is categorized into two groups one that highly values reliability and one that does not the two types are modeled separately and a new optimal bidding function is developed and tested based on this model

efficient policies for green design in a vintage durable good model using a dynamic durable good model we investigate efficiency restoring policy schemes in case of free garbage disposal in the long run efficiency is attained by a subsidy on recyclability of the durable and a tax on the purchase of the durable on the short run adjustment path in contrast both policy instruments may change their signs such that the government harms recyclability by taxing it and promotes the demand for the durable good by subsidizing it a deposit refund system is shown to yield the efficient allocation both in the short run as well as in the long run

a stochastic electricity market clearing formulation with consistent pricing properties we argue that deterministic market clearing formulations introduce arbitrary distortions between day ahead and expected real time prices that bias economic incentives we extend and analyze a previously proposed stochastic clearing formulation in which the social surplus function induces penalties between day ahead and real time quantities we prove that the formulation yields price bounded price distortions and we show that adding a similar penalty term to transmission flows and phase angles ensures boundedness throughout the network we prove that when the price distortions are zero day ahead quantities equal a quantile of their real time counterparts the undesired effects of price distortions suggest that stochastic settings provide significant benefits over deterministic ones that go beyond social surplus improvements we propose additional metrics to evaluate these benefits

economic analysis of paper recycling vis a vis wood as raw material abstract concerns for the environment has forced many firms define policies that protect the environment within which they operate this paper presents a linear optimization model for paper industry to compare total system cost of wood as a raw material with recycling of waste paper objective of the proposed model is to minimize the cost of paper in the supply chain costs included in the objective functions are costs for collection of raw material transportation inventory manufacturing segregation and disposal during recycling the model also includes the economic implications of using these alternative material sources on environment as well as quality of final product to gain further insights into system behavior sensitivity analysis shortage analysis and indifference curve analysis have been performed the analysis clearly reveals that the paper recycling is an economical option compared to wood as a raw material the paper analysis highlights various strategies that could be followed under different market conditions

forward contracting and selling price determination for a retailer to procure the electric energy to be sold to its clients a retailer has to face two major difficulties while buying electric energy it must cope with uncertain pool prices or sign forward contracts at higher average prices while selling electricity it should handle the uncertainty of the end user demand and the fact that customers might choose a different retailer if the selling price is not competitive enough we propose a risk constrained stochastic programming framework to decide which forward contracts the retailer should sign and at which price it must sell electricity so that its expected profit is maximized at a given risk level the developed model takes into account the elastic behavior of end users with respect to the selling price offered by the retailer a realistic case study illustrates the methodology proposed

evaluation of alternatives for power system coordination and pooling in a competitive environment the paper defines and classifies essential issues that relate the need for electric power system coordination with the increasing development of competition principles are formulated and a coordination model and a market structure are proposed emphasizing the need for economic dispatch in the wholesale market a detailed comparison is made of the market and pooling implementations developed in argentina and chile countries that have pioneered the creation of competitive markets in the electric energy sector an evaluation of strengths and weaknesses of those two implementations is included

optimal involvement in futures markets of a power producer this paper addresses the optimal involvement in a futures electricity market of a power producer to hedge against the risk of pool price volatility the considered trading horizon spans one whole year recognizing the highly uncertain nature of future pool prices a stochastic programming framework with recourse is used to model this decision making problem the resulting problem is a large scale mixed integer linear programming problem scenario reduction techniques are used to make this problem tractable risk is properly modeled using the cvar methodology results from a realistic case study are provided and analyzed some conclusions are finally drawn

gaming and price spikes in electric power markets many challenging issues arise under the newly deregulated competitive electric power markets instead of centralized decision making in a vertically integrated environment as in the past decision making is now decentralized and driven by market forces gaming and price spikes have been observed in almost every electricity market but explicit analysis of these phenomena is rare in this paper the authors study historical bidding behavior to see how power suppliers and demand service providers were actually bidding in the california day ahead energy market based on their observations they formulate a prisoner s dilemma matrix game and introduce the notion of opportunistic tacit collision to explain strategic bidding behaviors in which suppliers withhold generation capacity from the market to drive up prices this explanation is applicable with or without market power transmission constraints and insufficient supply and is only enhanced by these factors their analysis is generally applicable to any uniform price electricity market in which there is significant insensitivity to price on the demand side

market clearing with stochastic security part ii case studies this paper analyzes the market clearing formulation with stochastic security developed in its companion paper through two case studies solved using mixed integer linear programming techniques the generation and reserve schedules as well as the nodal prices of energy and security are assessed under various conditions such as a line flow limits b when nonspinning reserve is excluded from the formulation c demand side valuation of energy not served d generator ramping limits and e the set of pre selected contingencies

risk based electricity procurement for large consumers in a competitive electricity market consumers seek strategies to procure their energy needs from different resources pool bilateral contracts and their own generation facilities at minimum cost while controlling the risk in this paper a novel method is proposed to address the electricity procurement problem of large consumers using the concept of information gap decision theory the method can be used as a tool for assessing the risk levels considering whether a large consumer is risk taking or risk averse regarding its midterm procurement strategies in the proposed method procurement decisions are evaluated by means of two criteria the first criterion is the robustness of the decision against experiencing high procurement costs and the second one is the opportunity of taking advantage of low procurement costs the pool price is considered an uncertain variable and it is assumed that the large consumer has an estimate of the prices in this study two models of uncertainty are addressed for the pool price based on the concept of weighted mean squared error using a variance covariance matrix and the expected procurement cost is modeled using a joint normal probability distribution function a case study illustrates the working of the proposed technique

a comprehensive assessment of the evolution of financial transmission rights financial transmission rights ftrs are complementary to the locational marginal pricing of energy the basic aim of the ftr mechanism is to guard forward contracts from uncertain congestion charges ftrs are also useful to individual generators and loads for selling and buying power respectively at the prices of other locations the concept has evolved encompassing many features such as a simultaneous feasibility test various ways to conduct auctions and allocations and secondary trading ftrs also have a close relation to market power and transmission investment this paper reviews most of the landmark research papers on the evolution of the ftr concept it reports a comprehensive assessment of various facets of ftrs and allied issues financial transmission rights and flowgate rights fgrs are compared the concept of long term ftrs is discussed the paper also touches upon future proposals in this area

on the dynamics of recycling and natural resources we study the dynamic impact of recycling through its effect on the production set of the economy and its relationship with natural resources the contribution of renewable and recyclable resources for sustainability is studied although in the short run recycling may alleviate resource scarcity in the long run it is not enough to compensate for the exhaustibility of non renewable resources and the possibility of obtaining non decreasing output paths crucially depends on the extent to which production rests on renewable resources furthermore recycling interacts with natural resource growth surprisingly not always favoring sustainability the production and recycling function is a generalization of the traditional production function providing an integrated view of regular production and recycling and representing the production set of the economy when a recycling technology is available

nash equilibrium bidding strategies in a bilateral electricity market this paper examines bidding strategies in a bilateral market in which generating companies submit bids to loads a load accepts electricity delivery from the generator with the lowest bid at its bid price as long as this price is not higher than the load s willingness to pay necessary and sufficient conditions of nash equilibrium ne bidding strategy are derived based on a generic generating cost matrix and the loads willingness to pay vector the study shows that in any ne efficient allocation is achieved furthermore all nash equilibria are revenue equivalent for the generators based on the necessary and sufficient conditions this problem is formulated as an optimal assignment problem network optimization techniques are applied to calculate ne bid prices for the generators

long term bond returns under duration targeting although most bond portfolios maintain a relatively stable duration over time and are thus implicitly or explicitly duration targeted the distinctive nature of duration targeting dt is underappreciated the authors theoretical dt model demonstrates that over multi year horizons annualized dt returns converge back to the starting yield regardless of the rate path for example for almost all six year holding periods since 1985 barclays bond index returns have converged to within 1 of the starting yield

evolution toward standardized market design the evolution toward the standardized market design smd is presented in this paper with references to the market developments in new zealand australia pjm iso ne and ercot in the development of market designs two main objectives market liquidity facilitating bilateral trading and pricing efficiency facilitating congestion management have been pursued the efforts to balance the seemingly conflicting objectives led to most markets designed with a uniform or zonal pricing model introduction of locational marginal pricing and evolution of transmission rights from physical to financial form made it possible to harmonize the potentially conflicting goals in a market design the close coupling between energy and ancillary services requires that markets for these commodities be carefully coordinated different operational practices and reliability standard requirements have led to major differences in ancillary service market designs

electricity procurement for large consumers based on information gap decision theory in the competitive electricity market consumers seek strategies to meet their electricity needs at minimum cost and risk this paper provides a technique based on information gap decision theory igdt to assess different procurement strategies for large consumers supply sources include bilateral contracts a limited self generating facility and the pool it is considered that the pool price is uncertain and its volatility around the estimated value is modeled using an igdt model the proposed method does not minimize the procurement cost but assesses the risk aversion or risk taking nature of some procurement strategies with regard to the minimum cost using this method the robustness of experiencing costs higher than the expected one is optimized and the related strategy is determined the proposed method deals with optimizing the opportunities to take advantage of low procurement costs or low pool prices a case study is used to illustrate the proposed technique

application of mechanism design to electric power markets republished as competition is introduced across the electric power industry around the world market design for the industry is urgently needed to shape its future structure and performance when generator companies compete with one another in a deregulated market they may not be willing to share the information needed to perform an economic dispatch of the generation using game theory this paper designs a new mechanism that achieves efficiency economic dispatch in spite of this information problem in this mechanism when each company acts in the best of its own interest the outcome is efficient the paper demonstrates the merits of the mechanism by simulations including the ieee 14 bus case this paper contained an incorrect graphic when it originally appeared in the ieee transactions on power systems vol 16 no 1 p 1 8 2001 it is republished here with the correct graphic

an ordinal optimization based bidding strategy for electric power suppliers in the daily energy market the deregulation and reconstruction of the electric power industry worldwide raises many challenging issues related to the economic and reliable operation of electric power systems traditional unit commitment or hydrothermal scheduling problems have been integrated with generation resource bidding but the development of optimization based bidding strategies is only at a very preliminary stage this paper presents a bidding strategy based on the theory of ordinal optimization that the ordinal comparisons of performance measures are robust with respect to noise and modeling error and the problems become much easier if the optimization goal is softened from asking for the best to good enough solution the basic idea is to use an approximate model that describes the influence of bidding strategies on the market clearing prices mcp a nominal bid curve is obtained by solving optimal power generation for a given set of mcps via lagrangian relaxation then n bids are generated by perturbing the nominal bid curve the ordinal optimization method is applied to isolate a good enough set s that contains some good bids with high probability by performing rough evaluation the best bid is then selected by solving full hydrothermal scheduling or unit commitment problems for each of the bids in s using ordinal optimization approach we are able to obtain a good enough bidding strategy with reasonable computational effort numerical results using historical mcps from the california market and a generation company with 10 units show that the ordinal optimization based method is efficient

a post consumer waste management model for determining optimal levels of recycling and landfilling the present study examines the optimal recycling rate for municipal solid waste first an optimal control model is developed to account for the physical costs of recycling the social costs of landfilling and consumers environmental preferences second an optimal solution is simulated using waste disposal data from the helsinki region in finland the benefits from recycling are included in the simulation using the results of a recent contingent valuation study the results of the present research suggest that mandates for achieving 50 recycling in municipalities are not far fetched and are both economically and environmentally justified

garbage recycling and illicit burning or dumping abstract with garbage and recycling as the only two disposal options we confirm prior results that the optimal curbside fee for garbage collection equals the direct resource cost plus external environment cost when illicit burning or dumping is a third disposal option that cannot be taxed directly the optimal curbside tax on garbage changes sign the optimal fee structure is a deposit refund system a tax on all output plus a rebate on proper disposal through either recycling or garbage collection the output tax helps achieve the first best allocation even though it affects the choice between consumption and untaxed leisure

financial bilateral contract negotiation in wholesale electricity markets using nash bargaining theory bilateral contracts are important risk hedging instruments constituting a major component in the portfolios held by many electric power market participants however bilateral contract negotiation is a complicated process as it involves risk management strategic bargaining and multi market participation this study analyzes a financial bilateral contract negotiation process between a generation company and a load serving entity in a wholesale electric power market with congestion managed by locational marginal pricing nash bargaining theory is used to model a pareto efficient settlement point the model predicts negotiation outcomes under various conditions and identifies circumstances in which the two parties might fail to reach an agreement both analysis and simulation are used to gain insight regarding how these negotiation outcomes systematically vary in response to changes in the participants risk preferences and price biases

revaluing the hierarchy of paper recycling this article revalues the hierarchy of paper waste management policies in a dynamic general equilibrium model incineration material recycling and the distinction between non renewable fossil fuels and renewable forest assets are incorporated by comparing the first order conditions from the command optimum with the conditions from the market model it is discovered that the unregulated market fails to create an optimal resource allocation to see how the market behaves in absence of environmental policy compared to the first best solution a numerical model is used pigouvian taxes and subsidies are derived to correct for the externalities

optimal allocation of energy storage system for risk mitigation of discos with high renewable penetrations along with the increasing penetration of renewable energy distribution system power flow may be significantly altered in terms of direction and magnitude this will make delivering reliable power on demand a major challenge in this paper a novel battery energy storage system bess based energy acquisition model is proposed for the operation of distribution companies discos in regulating price or locational marginal price lmp mechanisms while considering energy provision options within disco controlled areas based on this new model a new battery operation strategy is proposed for better utilization of energy storage system ess and mitigation operational risk from price volatility meanwhile optimal sizing and siting decisions for bess is obtained through a cost benefit analysis method which aims at maximizing the disco s profit from energy transactions system planning and operation cost savings the proposed energy acquisition model and ess control strategy are verified on a modified ieee 15 bus distribution network and risk mitigation is also quantified in two different markets the promising results show that the capacity requirement for ess can be reduced and the operational risk can also be mitigated

markets and pricing for interruptible electric power a market is proposed for interruptible or callable forward contracts for electric power in which the consumer grants the power supplier the right to interrupt a given unit of load in return for a price discount the callable forward contracts are traded continuously until the time of use this allows recourse for those customers with uncertain demand while risk averse consumers can minimize their price risk by purchasing early callable forward contracts are simple in form and can be directly incorporated into the utility s economic dispatch procedure

exhaustible resources and secondary materials a macroeconomic analysis abstract in this paper we have developed an endogenous growth model to deal with exhaustible resources and secondary materials together under the assumptions that these two inputs are or are not technologically perfect substitutes of each other in order to compare the results obtained under both hypotheses we highlight the implication of these two assumptions on the rate of growth of total output and upon the flow of exhaustible resources extracted there are also some other interesting findings related to the spill over on welfare of the waste recycling process and the dynamics of shadow prices of both inputs considered finally some implications on hotelling s rule also emerge in our analytical framework

optimization based generation asset allocation for forward and spot markets one of the most important daily decisions that a genco has to make is to allocate generation assets between the forward and spot markets that is how much capacity should be contracted in the forward market and how much should be kept to bid in spot market this paper focuses on generation asset allocation between monthly forward contracts such as bilateral contracts futures contracts options contracts and daily spot markets considering operating costs and constraints of generating units as well as spot price risk the problem is to find the optimal hedging position based on the known forward price and the forecasted hourly spot prices and is formulated based on the model of pjm market the double dynamic programming method is applied to solve this optimal asset allocation problem with all the short term operating constraints of the generating unit satisfied three types of forward contracts that are commonly used in practice are considered and their impact on generation asset allocation are analyzed and compared the analytic relationship between the optimal contract quantity of a particular type and spot generation is established based on this relationship the applicability and characteristics of a particular type of contract are discussed furthermore with the solution to the generation asset allocation problem as a basis the pricing strategy in the forward market is analyzed a nash game model is established and an iterative process is developed to determine the equilibrium pricing of futures contracts numerical testing shows that the method for the generation asset allocation is effective various factors influencing the decision of generation asset allocation and the relationship between futures contract price and spot price are tested and analyzed

optimal electricity supply bidding by markov decision process the bidding decision making problem is studied from a supplier s viewpoint in a spot market environment the decision making problem is formulated as a markov decision process a discrete stochastic optimization method all other suppliers are modeled by their bidding parameters with corresponding probabilities a systematic method is developed to calculate transition probabilities and rewards a simplified market clearing system is also included in the implementation a risk neutral decision maker is assumed the optimal strategy is calculated to maximize the expected reward over a planning horizon simulation cases are used to illustrate the proposed method

a comparison of public policies for lead recycling policies that encourage recycling may be used to reduce environmental costs from waste disposal because direct restrictions on disposal are difficult to enforce four recycling policies have been advanced i taxes on the use of virgin materials ii deposit refund programs iii subsidies to recycled material production and iv recycled content standards in this article i analyze the structure of these policies and their cost effectiveness in achieving reductions in disposal i then examine the policies in the empirical context of the recycling of lead from automobile batteries in order to calculate the effects of recycling programs i estimate the elasticities for primary and secondary lead supply and demand my results suggest that price based policy mechanisms can be successful in increasing lead recovery and that the difference in efficiency between the four approaches is similar

does international harmonization of environmental policy instruments make economic sense harmonization of the instruments used in environmental policy has beenconsidered necessary to guarantee fair competition in internationalmarkets we examine the economic costs of harmonizing paper recyclingstandards in countries where the urgency of the waste disposal problemsdiffer using data of seven european countries we estimate thetechnologically feasible input combinations of pulp and waste paper forpaper production short term effects of two environmental policy measures minimum content requirement and utilization rate target are analyzed bytranslating the two administrative instruments into taxes and subsidies weshow that the shadow costs of the harmonization vary considerably betweencountries the difference in the domestic availability of waste may explainthe variation and a modification of the policy measures to incorporate thisaspect is suggested

strategic bidding in secondary reserve markets electricity markets are based on several sequential energy and reserve trading mechanisms to constantly maintain the balance between generation and demand during the last years reserve markets are getting much importance all around the world with the increasing social awareness of the renewable energy benefits additional reserve quantities and larger remunerations are being implemented by the regulators since this renewable energy is highly dependent on weather conditions uncertainties utilities are therefore demanding more and more powerful models to better optimize their reserve bidding curves to be sent to the system operators this paper describes a new methodology to obtain an optimized real bidding curve for the secondary spinning reserve market the approach is based on the maximization of a company profit assuming a set of residual demand curves scenarios for its competitors representation and considering the day ahead market opportunity cost to build the reserve cost curve the case study validates the main features of the proposed methodology by its application to the spanish secondary reserve market this methodology is being daily used by one of the most important electricity companies in spain

a security constrained bid clearing system for the new zealand wholesale electricity market this paper reports upon the mathematical models and implementation of the scheduling pricing and dispatch spd application for the new zealand electricity market nzem spd analyzes bids for energy offers reserve offers and energy demands and recognizes explicitly the effects on bid clearing due to transmission congestion network losses reserve requirements and ramp rate limits advanced lp solution methods are utilized to solve the large scale constrained optimization problem results on a 67 bus test system and the nzem are included

electricity markets volatility estimates regularities and risk management applications the recent deregulation of the market for electric power in many parts of the us and canada has expanded the set of potential tools for managing the types of risks faced by both generators and consumers of electric power in particular manufacturing and other firms whose operations are powered by electricity now face on a continuing basis the engineering management decisions concerning whether they should buy or produce electricity and if they are to buy or sell electricity what types of contracts are optimum these types of risk management decisions typically involve futures forwards options and other financial derivatives the price and volatility of electric power are known to play an essential role in determining which of these instruments should be used however electricity as a commodity possesses certain special features not shared by other commodities and hence its risk properties are not yet well understood in this paper we consider and test certain hypotheses about the properties of electricity price using recent market data we find that electricity prices possess certain volatility and other systematic properties that can be characterized by the type and method of delivery of electricity these properties can be used by firms in formulating their optimal demand and supply schedules of electric power

negotiating bilateral contracts in electricity markets in mixed pool bilateral electricity markets participants can sign forward bilateral contracts several months in advance of its delivery in addition generators may sell to and loads may buy from the pool at the spot price through the day ahead or balancing markets forward bilateral contracts have the advantage of price predictability in comparison with the uncertain spot price however the risk is that such a contract commits the partners to a price that may be disadvantageous compared to the spot price here we propose a systematic negotiation scheme through which a generator and load can reach a mutually beneficial and risk tolerable forward bilateral contract either physical or financial under this approach the generator and load respond rationally to a stream of bilateral bids counter bids and offers counter offers considering their respective benefits while accounting for the risks incurred by the prediction uncertainty in the pool spot price and other market parameters over the length of the contract each negotiating party can choose its own definition of risk which can be influenced by regret value at risk or dispersion from the mean numerical tests show that this flexible negotiating approach can be readily put into practice

feasibility and optimality of sustainable growth under materials balance abstract pollution from consumption and production is an inevitable part of economic processes we employ a materials balance approach and develop an endogenous growth theory with recycling activity to examine the evolution of the economic and environment systems this paper provides feasibility and optimality conditions for sustainable economic growth with rising environmental quality the fundamental condition of feasibility is that the flow of natural resources which eventually returns to the environment as waste and pollution has a negative growth rate in the long run

self scheduling of large consumers with second order stochastic dominance constraints this paper develops a decision making framework for mid term scheduling problems of the large industrial consumers the proposed approach is based upon the recently introduced class of stochastic programming problems established by the concept of second order stochastic dominance ssd in this paper it is assumed that the electricity price and the rate of availability unavailability of the generating unit forced outage rate are the sources of uncertainty in the decision making problem in the developed ssd constrained stochastic programming problem the consumer risk is managed by minimization of the pool procurement as the objective function and economic issues e g cost minimization are considered in the sd constraint furthermore while most approaches optimize the cost subject to an assumed demand profile our method enforces the electricity consumption to follow an optimum profile for mid term time scheduling i e three months 12 weeks so that the total production will remain constant simulation results for a typical cement factory as an industrial consumer and comparison to a mean risk approach with cvar risk measure revealed the interesting results and benefits of the proposed approach

combined pool bilateral dispatch i performance of trading strategies this three paper series deals with the dispatch of power networks under mixed pool bilateral trading the major questions examined are i to what degree does the relative level of pool versus bilateral trading influence performance in terms of individual power levels costs prices revenues and expenditures ii what is the comparative performance of mixed trading with firm and nonfirm bilateral contracts under various curtailment strategies and iii is the revenue derived from the pool and bilateral trading consistent with the corresponding unbundled costs the above issues are sequentially addressed in each of the three parts the eventual goal of these results is to help generator and load serving entities choose appropriate relative levels of pool versus bilateral trades while considering risk economic performance as well as physical constraints this paper proposes a one step optimal power flow model that dispatches the pool in combination with the privately negotiated bilateral contracts while minimizing cost and accounting for both losses and congestion in part i notions of pool bilateral demand and generation as well as a number of technical and economic performance measures for each competing entity are defined this dissection of total and individual financial measures according to pool or bilateral trading allows the market participant to evaluate the profitability of each component of its chosen pool bilateral mix a number of simulation results illustrate the effect of varying the relative levels of pool bilateral trading on the values of individual performance measures

how can a competitive market for electricity be made compatible with the reduction of greenhouse gas emissions abstract under what conditions can the creation of a competitive market for electricity allow the efficient use of energy to compete on an equal basis with electricity supply thus providing both economic benefits to consumers and reductions in greenhouse gas emissions in this paper the current micro economic reforms to the australian electricity industry are taken as a case study to investigate this question it is found that the proposed competitive market for electricity contains barriers to the wider implementation of efficient energy use and renewable energy which are additional to those already existing in a highly regulated market in order to allow efficient energy use to compete on an equal basis with electricity supply it is necessary to create a market for energy services not electricity at the retail level to do this requires institutional changes correct pricing is not sufficient

product design and efficient management of recycling and waste treatment abstract using a general equilibrium model where material is first extracted then used for producing a consumption good recycled and finally treated to reduce environmental damage we study efficiency restoring policies when one or more of the constituent markets are inactive the material is modeled as being embodied in the output and forms an important aspect of green product design if all markets for embodied material per unit output fail and if recycling benefit exceeds environmental damage the policy instruments needed for green design are a tax on the consumption good supply and a subsidy on the demand for material input

transaction analysis in deregulated power systems using game theory the electric power industry is in transition to a deregulated marketplace for power transactions in this environment all power transactions are made based on price rather than cost a regional power pool is noted as the most straightforward path to a deregulated electricity marketplace however many questions remain unanswered regarding the economics of power pool participation in a deregulated energy marketplace participants are interested in maximizing their own profits regardless of the system wide profits it is perceived that competition will reduce the price of electricity for retail customers however the key issue for participants is related with the price definition to remain competitive in this paper the authors use game theory to simulate the decision making process for defining offered prices in a deregulated environment the outcome of this study may be used by power pool coordinators to discourage unfair coalitions a modified ieee 30 bus power system is used as a deregulated power pool to illustrate the main features of the proposed method

optimization of electricity retailer s contract portfolio subject to risk preferences when an electricity retailer faces volume risk in meeting load and spot price risk in purchasing from the wholesale market conventional risk management optimization methods can be quite inefficient for the management of an electricity contract portfolio in this context we develop a multistage stochastic optimization approach which accounts for the uncertainties of both electricity prices and loads and which permits the specification of conditional value at risk requirements to optimize hedging across intermediate stages in the planning horizons our experimental results based on real data from nordpool suggest that the modeling of price and load correlations is particularly important the sensitivity analysis is extended to characterize the behavior of retailers with different risk attitudes thus we observe that a risk neutral retailer is more susceptible to price related than load related uncertainties in terms of the expected cost of satisfying the load and that a risk averse retailer is especially sensitive to the drivers of the forward risk premium

financial optimization in the turkish electricity market markowitz s mean variance approach abstract electricity constitutes the input into many products that produced by industry and used by people hence it can be considered as a product or service that has vital importance in human life and economy since it has such special properties of instantaneous production and consumption obligation and unfeasible storage electricity market is not like other markets in a competitive electricity market generation company faces price risks and delivery risks so that risk management is an important part of a generation company and can deeply effect companies profitability this paper focuses on electricity generation asset allocation between bilateral contracts such as forward contracts and daily spot market considering constraints of generating units and spot price risks the problem is to find the optimal portfolio based on known electricity generation total costs bilateral contract prices it employed turkish historical balanced market hourly system marginal and day ahead hourly market prices between of 2006 and 2011 there are limited studies about portfolio optimization in electricity markets in literature and this paper should be considered frontier study taking spot market s hourly prices separately as risky assets markowitz mean variance optimization which is claimed to be the beginning of modern portfolio theory in financial sector is used to demonstrate this approach mean variance optimization has been successfully applied to all cases that modeled for electricity market some suggestions for future work are also listed in this paper

a study of basic bidding strategy in clearing pricing auctions this paper models bidding behaviors of suppliers in electricity auction markets under clearing pricing rule and with some simplified bidding assumptions optimal bidding strategy of suppliers is derived by solving a set of differential equations that specify the necessary conditions for bidders to maximize their expected payoffs the derived result indicates that bidders have incentives to mark up their bids above their costs of production the amount of markup depends on the probability of winning below and on the margin that are computed from the cost distribution of all suppliers market demand and the number of suppliers participating in the auction

risk constrained profit maximization in day ahead electricity market the deregulation of the electricity industry has caused for the generation company genco the need of tools for measuring and managing the risk beyond the classical problem of generating unit scheduling in this paper a probabilistic framework for the problem of managing risk faced by gencos trading in day ahead energy market is proposed in particular a stochastic forecast of electricity price and the technical features of hydrothermal units are considered the approach is based on an optimization procedure for maximizing expected profits in the presence of risk constraints conditional value at risk for the distribution of daily profit is used as risk measure

nodal uniform or zonal pricing distribution of economic surplus competitive markets for electricity determine either a uniform marginal price ump a set of nodal marginal prices nmps or a smaller set of zonal marginal prices zmps in theory the nmp system is best as it correctly accounts for transmission constraints and losses in some versions but critics allege that the large number of prices is confusing since the ump or zmp solution must be adjusted to account for transmission constraints and losses it is reasonable to consider a market design in which actual dispatch corresponds to an nmp model that accounts for losses and if a ump or zmp model is used at all it is only to compute prices for settlements and compensation for constrained on or off generation or load we prove that if used in this way the ump or zmp models a do not affect the total economic surplus b redistribute the surplus among generators and loads at the different nodes and c give perverse incentives for generation expansion we illustrate on a realistic system

the economics of household solid waste generation and disposal abstract we develop a household production model of waste management that explicitly incorporates many of the technical and behavioral elements germane to current regulatory and non regulatory solid waste policy initiatives examination of first order conditions shows the interaction among household preferences these production options and external prices and fees a simplified simulation of our model illustrates these relationships showing that household response elasticities can vary widely over common price ranges and that relatively large household welfare gains may be obtained by adopting curbside recycling and unit pricing programs

optional forward contracts for electric power markets this paper extends the idea of callable forward contracts which are potentially useful as demand side interruptible load contracts to their supply side analogues together these contracts allow market participants to take advantage of flexibility in generation or consumption to obtain a monetary benefit while simultaneously removing the risk of market price fluctuations this paper also considers the effects of strategic behavior on the part of market participants in their contract sales purchase decisions

risk assessment in energy trading this paper provides a state of the art summary of risk assessment in energy trading techniques from financial engineering are needed by electric energy companies to manage price risk these tools are needed by suppliers distributors and traders in a competitive electric power marketplace tools that have been adapted to the specific environment of the electric power system include portfolio analysis and hedging instruments this paper provides a comprehensive critical literature survey of what has been applied to date in the power markets and which areas continue to need additional research one example market scenario is used throughout the paper to demonstrate the usefulness of the risk assessment methods

a medium term decision model for discos forward contracting and tou pricing time varying prices by motivating customers to reduce their consumption in peak periods propel the electricity industry towards a higher efficiency compared to that of common flat prices focusing on time of use tou sale prices this paper establishes a stochastic model for the medium term decision making problem faced by a distribution company disco the developed model deals with the disco s decisions on the level of involvement in forward contracts and in the pool as well as the sale prices offered to customers the demand response to tou prices is captured using a price elasticity matrix pem the objective is to maximize the disco s profit while the exposure risk imposed by uncertainties is limited to a given level the model is formulated as a mixed integer linear programming milp problem that can be effectively solved via commercial software packages a typical finnish 20 kv urban distribution network is used to demonstrate the effectiveness of the developed model

managing the financial risks of electricity producers using options abstract electricity producers participating in electricity markets face risks pertaining to both selling prices and the availability of the production units among electricity derivatives options represent an adequate instrument to manage these risks in this paper we propose a multi stage stochastic model to determine the optimal selling strategy of a risk averse electricity producer including options forward contracts and pool trading a detailed case study highlights the advantages of an option vs a forward contract to hedge against the financial risks related to pool prices and unexpected unit failures

contingency constrained reserve requirements in joint energy and ancillary services auction this paper presents a security constrained unit commitment model for energy and ancillary services auction which can be used by an iso to optimize reserve requirements in electricity markets the proposed day ahead algorithm determines reserve requirements by simulating contingencies rather than specifying the requirements as fixed system constraints to address the computational complexity the original auction problem is decomposed into a master problem for solving unit commitment and subproblems for considering network security constraints numerical examples show that the proposed joint auction model can clear energy and ancillary services bids simultaneously while minimizing the total operating cost and satisfying transmission security constraints

purchase allocation and demand bidding in electric power markets the purchase allocation problem is one of the most important problems faced by an electric energy service provider under new market environments the optimal purchase allocation problem for dual electric power markets and demand bid generation are discussed in this paper the price volatility is explicitly considered in purchase allocation problems and the sequential nature is modeled by conditional stochastic characteristics an analytical solution for the optimal allocation is derived with given demand and statistical characteristics of the market prices the method for generating demand bids for purchaser based on market allocation and price forecasting is then developed the numerical simulations for market allocation and bid generation are demonstrated based on the actual data of the u s california power market

hedging with futures contracts in a deregulated electricity industry this paper is a statistical study of direct and cross hedging strategies using futures contracts in an electricity market a comparison of the strategies is based on the standard deviation or risk of the values of the hedging positions results indicate that the use of electricity futures contracts is superior to using other related futures contracts such as crude oil

application of mechanism design to electric power markets as competition is introduced across the electric power industry around the world market design for the industry is urgently needed to shape its future structure and performance when generator companies compete with one another in a deregulated market they may not be willing to share the information needed to perform an economic dispatch of the generation using game theory this paper designs a new mechanism that achieves efficiency economic dispatch in spite of this information problem in this mechanism when each company acts in the best of its own interests the outcome is efficient the paper demonstrates the merits of the mechanism by simulations including the ieee 14 bus case

forecasting next day electricity prices by time series models in the framework of competitive electricity markets power producers and consumers need accurate price forecasting tools price forecasts embody crucial information for producers and consumers when planning bidding strategies in order to maximize their benefits and utilities respectively this paper provides two highly accurate yet efficient price forecasting tools based on time series analysis dynamic regression and transfer function models these techniques are explained and checked against each other results and discussions from real world case studies based on the electricity markets of mainland spain and california are presented

portfolio optimization under lower partial moments in emerging electricity markets evidence from turkey abstract optimization of the electricity markets under modern portfolio theory has a crucial role for financial decision makers power suppliers in deregulated electricity markets need to optimize their generation capacities and bidding strategies so as to effectively participate in bilateral contract and spot markets market players have to deal with continuously changing electricity prices in competitive electricity market environment during their daily routine system operations electricity not like the others is a unique product service and cannot be stored economically however it should be generated and consumed simultaneously in addition to all power suppliers face with fuel price water regime delivery and network risks in view of the scene described above prudent decision making methodologies are of critical importance to maximize profit while minimizing managing risks this paper presents a comprehensive comparison of mean variance down side and semi variance methods for optimization in electricity markets and the corresponding methodologies to maximize the return while minimizing risk real turkish day ahead market data set between december 2009 and december 2012 is used in numerical calculations generation cost data of hydraulic plants lignite coal fired thermal power plants and natural gas combined cycle power plants are taken into consideration in the course of optimization evaluations in the present of real data these methods can also be applied to renewable energy generation types these three methods were able to be applied to all case scenarios effectively and produced efficient frontiers optimal minimal portfolios and utility functions successfully the results have revealed that the methods significantly provide decisions for power suppliers with different risk aversion levels and for various instruments to maximize the profit while minimizing the associated market risks and to meet generation obligations consequently financial optimization under lower partial moments constraints would give notable results in analyzing the efficient frontiers for electricity markets in turkey

impact of unit failure on forward contracting a generating unit can sell its production in the pool facing the financial risk inherent to volatile pool prices alternatively it can sell its production through the futures market at comparatively stable but smaller average prices unlike the pool forward contracts involve an obligation to sell during a specified time period and if the unit fails it should buy energy from the pool to meet its futures market commitments hence taking into account its forced outage rate the unit should determine the appropriate mix of pool and futures market involvement so that its expected profit is maximized for a prespecified risk level on profit variability within this context this paper analyzes the impact of the degree of unavailability of the generating unit on its forward contracting decisions a detailed case study illustrates the analysis performed

duration targeting and the management of multiperiod returns modern portfolio management increasingly includes the use of targeted duration strategies as a means of achieving a desired balance between risk and return in such strategies a constant duration is maintained through periodic rebalancing one of the most important characteristics of duration targeting strategies is the focusing of the return distribution on a minimum variance point this point occurs when the duration is equal to about one half the investment horizon it is consequently possible to achieve partial immunization of a bond portfolio by simply maintaining its duration at one half the length of the investment horizon many performance benchmarks including the salomon brothers big index exhibit an almost constant duration it follows that by tracking a bond index one can obtain many of the results of a duration targeting strategy

pricing and quality decisions and financial incentives for sustainable product design with recycled material content under price leadership abstract design for recycling has been promoted by companies and governments around the world as one of the most important practices for achieving sustainability the success or failure of such a practice however depends heavily on the financial incentives for firms to design products with more recycled or recyclable material contents an interesting phenomenon that can be observed in many markets with products made predominately from either virgin or recycled materials is the existence of price leadership in this paper we utilize an interdisciplinary approach with both theoretical and empirical analyses to study the pricing and design decisions for products with virgin and recycled material contents in a duopoly market consisting of both the environmentally conscious green and non environmentally conscious brown consumers under price leadership our analytical results show that the brown segment s efficient quality provides an anchor product position for the price leader regardless of whether the price leader is a brown or green firm the price follower s financial incentive for becoming a green or brown firm will then lead to different cases of price leadership with very different environmental consequences specifically the arrangement where the brown and green firms are the price leader and follower respectively leads to more environmentally friendly design decisions than those under the other arrangement where the duopolists switch their pricing roles in addition we conduct an empirical analysis to explore the specific types of price leadership in the markets of aluminum cardboards and pet based on the equilibrium pricing and quality decisions we analyze the financial incentives for the more environmentally friendly case of price leadership to be realized and derive important insights to formulating strategies and policies to implement the practice of design for recycling from the interdisciplinary perspective

electricity price short term forecasting using artificial neural networks this paper presents the system marginal price smp short term forecasting implementation using the artificial neural networks ann computing technique the described approach uses the three layered ann paradigm with backpropagation the retrospective smp real world data acquired from the deregulated victorian power system was used for training and testing the ann the results presented in this paper confirm considerable value of the ann based approach in forecasting the smp

a theory of electricity tariff design for optimal operation and investment this study addresses the problem of balancing supply and demand side operation and investment activities existing theory is extended to cover electricity industry models with uncertainty in future conditions and intertemporal linking such as storage and investment an optimal pricing structure which takes these into account is presented it would induce participants suppliers and consumers to make profit maximizing investment and operation decisions which are socially optimal the structure contains two terms a short run marginal cost pricing as well as a new incentive term to account for the interaction of participants at different time points a probabilistic forecast of pricing structures at future time is required a justification of the result and three simple illustrative examples are given

linear complementarity models of nash cournot competition in bilateral and poolco power markets two cournot models of imperfect competition among electricity producers are formulated as mixed linear complementarity problems lcps and a simple example is presented to illustrate their application the two models simulate bilateral markets the models include a congestion pricing scheme for transmission but other transmission pricing approaches can also be represented in this framework the two models differ from each other in that one has no arbitrage between nodes of the network while in the other model arbitragers erase any noncost based differences in price the latter bilateral model turns out to be equivalent to a cournot model of a poolco the models differ from other cournot market models in that they include both of kirchhoff s laws via a dc approximation can include arbitragers possess unique solutions and are readily solved by efficient lcp algorithms the key assumption that permits their formulation as lcps is that each producer naively assumes that its output will not affect transmission prices

optimal policies for solid waste disposal taxes subsidies and standards abstract pricing trash collection and disposal services can be politically unpopular and may lead to increased illegal disposal of trash several studies have shown that deposit refund systems can act like disposal charges without the illegal disposal problem and thus can generate an optimal amount of solid waste disposal we assess the efficiency implications of an alternative policy currently in use in some states in the u s and considered at the federal level recycled content standards these are requirements that a certain fraction of total material use in production be comprised of secondary materials we find that such standards by themselves cannot generate the optimal amount of disposal but must be combined with additional taxes on both the final product and other inputs to production moreover the information requirements for setting the optimal standards and accompanying taxes are high the deposit refund approach would be preferred in most cases

managing price risk in a multimarket environment in a competitive electricity market a generation company genco can manage its trading risk through trading electricity among multiple markets such as spot markets and contract markets the question is how to decide the trading proportion of each market in order to maximize the genco s profit and minimize the associated risk based on the mean variance portfolio theory this paper proposes a sequential optimization approach to electric energy allocation between spot and contract markets taking into consideration the risks of electricity price congestion charge and fuel price especially the impact of the fuel market on electric energy allocation is analyzed and simulated with historical data in respect of the electricity market and other fuel markets in the u s simulation results confirm that the proposed analytic approach is consistent with intuition and therefore reasonable and feasible for a genco to make a trading plan involving risks in an electricity market

tax exempt investors and the asset allocation puzzle abstract investors frequently hold equity in pensions and other tax exempt savings plans despite the prediction of the standard model that they hold only bonds we provide a new explanation for this empirical puzzle based on differences between tax exempt and taxable assets in the tax treatment of capital losses we show how limits on refundability of losses on taxable equities leads to diversity of investors preferences for corporate leverage on the basis of tax rates in the simplest equilibrium of the model tax exempt savers hold risky highly levered equities while low bracket taxable savers hold bonds and high bracket taxpayers hold relatively safe unlevered equities we discuss the implications of tax exempts for risk taking and agency costs within the firm

pricing flexible electricity contracts this paper is concerned with pricing of electricity contracts that allow flexible scheduling of the supply or demand of electric energy the contracts are priced based on the principle of no arbitrage variables of the contracts are used to determine arbitrage opportunities and the price of contracts pricing of flexible contracts involves a scheduling policy by representing the spot price with an appropriate stochastic process the scheduling policy can be found using stochastic dynamic programming simulation examples illustrate the tradeoffs between prices and scheduling flexibility