Ornstein-Uhlenbeck-Lévy Electricity Portfolios with Wind Energy Contracting : A Theoretical Approach

Longoria, Genaro and Davy, Alan and Shi, Lei (2018) Ornstein-Uhlenbeck-Lévy Electricity Portfolios with Wind Energy Contracting : A Theoretical Approach. Technology and Economics of Smart Grids and Sustainable Energy, 3 (1). ISSN 2199-4706

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To leverage the potential of integrating renewable sources into electricity portfolios the risk and cost trade-off of intermittency needs to be assessed. From the perspective of a Load Serving Entity (LSE), this work present the theoretical implications of energy allocation from two type of markets: bilateral long-term contracts and real-time trading. The purchasing of energy on both markets and from two different sources: wind energy and conventional generation is formulated with a stochastic procurement model (SPM). The unexpected jumps of spot market prices are modeled with a mean-reverting Lévy process. The wind energy availability is modeled with multiplicative Brownian motion transformed to a Rayleigh probability density function. The risk assessment is defined by the efficient frontier and a user defined risk level. The SPM is tested numerically. The contracted share of wind power is found to range between 8% and 16%. Moreover, the analysis shows the convergence of SPM to an optimal portfolio irrespectively of the wind farm autocorrelation decay rate.

Item Type: Article
Additional Information: Funding Information: This work was partially funded by 1) Waterford Institute of Technology and 2) Science Foundation Ireland via the CONNECT research centre (grant no. 13/RC/2077). Publisher Copyright: © 2018, Springer Nature Singapore Pte Ltd.
Uncontrolled Keywords: /dk/atira/pure/subjectarea/asjc/2100/2105
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Depositing User: Admin SSL
Date Deposited: 19 Oct 2022 23:05
Last Modified: 07 Jun 2023 18:43
URI: http://repository-testing.wit.ie/id/eprint/3951

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