WIT Press


Using Options Theory To Identify The Optimal Dispatch Strategy For Electricity Producers In A Deregulated Environment

Price

Free (open access)

Paper DOI

10.2495/CF040051

Volume

38

Pages

9

Published

2004

Size

351 kb

Author(s)

B. Morel

Abstract

The deregulation of the production of electricity has dramatically changed the rules of the electricity market. Before deregulation, to design their optimal dispatch policy, producers had to solve a complicated optimization problem with many operational constraints. Since deregulation their situation is even more complicated. Because they are in a competitive situation, they cannot spread profit and loss over time. Accepting to produce even for a short time at a loss has become a much riskier strategy. One effect of deregulation has been to increase significantly the volatility of the price of electricity. In this research, the decision making of the producers is modeled as a mix of optimization and risk management. To quantify the risks use is made of instruments borrowed

Keywords