Hedging Strategy and Electricity Contract Engineering - IFOR

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174 Case study 1500 1000 GWh 500 0 10 11 12 1 2 3 4 5 6 7 8 9 Fig. 7.2: Optimal water level over one hydrological year starting in beginning of October. the end of December, which is the start of a sharp decline of the water level that continuous until the middle of February. An increase in the water level is starting in the middle of June and ends in the beginning of September. The starting water level is 1450 GWh and the optimal end water level after two weeks also happens to be 1450 GWh, which will be our constraint on the end water level in our actual two-weeks optimization. A much-debated issue is the confidence level used in VaR and CVaR. For VaR the quantile is typically 90%, 95% or 99%. We have chosen to have a fairly low confidence level of 90% simply because a higher level would leave us with a small data sample to calculate the expectation in the tail. The parameters specific for this optimization are, as partially already presented, given in Table 7.4. And the general constraint x c X c consists of the limit on the single available future, 10000 x 10000 [MW]. The decision variables are the spill over losses L k5 j, the future position x and i 9:7 and i , and the optimal contract portfolio and opti- the weighting factors 9 4
175 Production Spot price Demand [CHF/MWh] [MW] Pumping Spot price Demand [CHF/MWh] [MW] S41 25 D41 0 S71 25 D71 0 S42 37 D42 1500 S72 30 D72 1200 S43 43 D43 1550 S73 33 D73 1300 S44 49 D44 1600 S74 35 D74 1400 S45 53 D45 1650 S75 37 D75 1500 D46 1700 D76 1600 Tab. 7.3: Exercise thresholds. ; < = J = 250 V 0 = 1450000 [MWh] K = 336 V end = 1450000 [MWh] = 0.90 V max = 1500000 [MWh] r = = 30 p max = 2261 [MW] = 0.70 p min = -285 [MW] Tab. 7.4: Parameters used in case study.
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Diss. ETH No. 14727 Hedging Strateg
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Abstract This thesis studies risk m
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Zusammenfassung Die vorliegende Sch
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Contents Acknowledgements ¡ ¢ ¡
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Contents xi 5.1 Overview . . . . .
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List of Figures 2.1 Illustration of
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List of Figures xv 7.6 Marginal val
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List of Tables 2.1 Spot market bid.
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Chapter 1 Introduction 1.1. Motivat
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1.3 Structure of the thesis 5 hedge
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Chapter 2 The electricity market 2.
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2.1 Overview 9 Generation ¥ Distri
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2.2 Liberalization of the electrici
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duction cost Marginal pro © 2.3 Su
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2.4 Transmission costs 15 10 Peak l
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2.4 Transmission costs 17 destinati
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2.5 Demand 19 2.5. Demand Compared
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2.6 Special characteristics of elec
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2.7 Electricity contracts 23 tions.
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0& K $ 0& K K % + $ 2.7 Electricity
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2.7 Electricity contracts 27 2.7.2.
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04 04 2.7 Electricity contracts 29
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2.8 Power exchanges and pricing mec
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2.8 Power exchanges and pricing mec
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S 0 eH aIKJ 2.9 Price dynamic 35 To
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2.9 Price dynamic 37 400 2000 350 1
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2.9 Price dynamic 39 simple sinus f
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2.9 Price dynamic 41 1800 1800 1600
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2.10 Summary 43 To deal with the un
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Chapter 3 Risk management 3.1. Over
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3.3 The risks in the electricity ma
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3.3 The risks in the electricity ma
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3.4 Traditional risk management mod
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l H xg yLihkjml f 3.5 The need for
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3.5 The need for a new risk measure
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R S x GaRKV is convex and continuou
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R P 3.6 Multi period risk managemen
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“ “ “ 3.7 Valuation models 67
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3.7 Valuation models 69 storability
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3.7 Valuation models 71 by introduc
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“ 3.7 Valuation models 73 formula
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Chapter 4 Contract engineering 4.1.
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4.2 Gas turbine 77 2000 1800 1600 1
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4.2 Gas turbine 79 220 200 Capped l
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4.3 Hydro storage plant 81 facilita
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¢ 4.3 Hydro storage plant 83 I k L
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x k xœk x «k š xœk 0 š x «k 0
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4.4 Coal plant and oil plant 87 4.4
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4.4 Coal plant and oil plant 89 cor
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4.5 Nuclear plant 91 of 1000 MW. Ov
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4.7 All production plants 93 possib
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4.8 Transmission lines 95 Unit type
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4.9 Real option theory 97 The scien
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4.10 Value of different production
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4.12 Summary 101 like the capped sp
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Chapter 5 Hedging strategies 5.1. O
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È È È È È 5.2 Traditional hedg
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É È É È Ì 5.2 Traditional hedg
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5.3 Relevance for electricity hedgi
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5.4 Best Hedge 111 that the expecte
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5.4 Best Hedge 113 that they alread
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Chapter 6 Power portfolio optimizat
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6.3 Power portfolio optimization in
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6.3 Power portfolio optimization in
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6.4 Modeling of plants and their op
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Page 141 and 142: x k xëk x ìk Ü xë k 0Ü x ìk 0
Page 143 and 144: 6.4 Modeling of plants and their op
Page 145 and 146: gìi Û S í SÜ D í DÜ I a í I
Page 147 and 148: õ õ 6.5 Analysis of optimal dispa
Page 149 and 150: õ Ü r á 6.5 Analysis of optimal
Page 151 and 152: ¢ é á 6.5 Analysis of optimal di
Page 153 and 154: ìj Û 1 bë j Ý?Ü j 1Ü á?á@á
Page 155 and 156: u ¦ j Ü è è aëj ¦ bë j u j
Page 157 and 158: õ õ õ á á 6.5 Analysis of opti
Page 159 and 160: 6.6 Power portfolio optimization wi
Page 161 and 162: è á 6.6 Power portfolio optimizat
Page 163 and 164: x Û x p Ü x c Ý Û xë1 Ü á@á
Page 167 and 168: ááá ááá ááá ááá ááá
Page 169 and 170: F Û 0Ü 3Ý í è F Û 0Ü 1Ý?Ü
Page 173 and 174: ö 6.6 Power portfolio optimization
Page 175 and 176: ö Ü 6.6 Power portfolio optimizat
Page 177 and 178: ö S kã j á 6.6 Power portfolio o
Page 179 and 180: ¢ ¢ 6.6 Power portfolio optimizat
Page 181 and 182: î yú1 î é yú1 á ¢ 6.6 Power
Page 183 and 184: 6.7 Summary 167 opportunity set wou
Page 185 and 186: Chapter 7 Case study In this chapte
Page 187 and 188: 171 3200 140 3000 2800 120 2600 240
Page 189: S7 D7 min 8 0 if S i or D p otherwi
Page 193 and 194: 7.1 Efficient frontier 177 lG x 6 9
Page 195 and 196: 7.2 Spot position 179 of the old po
Page 197 and 198: 7.3 Hedging value of water 181 The
Page 199 and 200: 7.4 Value decomposition 183 expecte
Page 201 and 202: MWh CHF/ P 7.4 Value decomposition
Page 203 and 204: 7.6 Summary 187 2500 2000 Dispatch
Page 205 and 206: 7.6 Summary 189 We have quantified
Page 207 and 208: Chapter 8 Conclusions The special c
Page 209 and 210: a4q V a4q G 1 V H a4q 6 Appendix A
Page 211 and 212: 8 _ 195 Proof The results follow im
Page 213 and 214: g b4i d G9:7j b4 j G 1 9j7j H b4 j
Page 215 and 216: Ax 3 V AxK1 G 1 V H AxK2 V b 1 G 1
Page 217 and 218: Bibliography [ABA98] [AD80] [ADEH97
Page 219 and 220: Bibliography 203 [BS73] [BS98] [BT0
Page 221 and 222: Bibliography 205 [GR92] H. Gravelle
Page 223 and 224: Bibliography 207 [Mer76] R. C. Mert
Page 225 and 226: Bibliography 209 [SC89] [Sch90] [Sc
Page 227: Curriculum Vitae Personal Data Name
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