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Wind Park Valuation and Risk Management in the German Intraday Power Markets

Banff International Research Station for Mathematical Innovation and Discovery

The rapid growth of renewables in Germany in the last decade has led to various new modeling challenges for many energy firms. Wind park owners and operators in particular require valuation and risk analysis techniques which capture the high volatility and intermittency of wind power generation, the dynamics of intraday prices and their correlation with changes in wind forecast levels. Under typical contract terms, owners of wind parks receive production volume times the spot price minus a premium $p$, while managers receive revenues dependent on how they nominate the power and rebalance their positions in the day-ahead and intraday markets. Here we present a trading and hedging strategy for determining a fair premium $p$, which can vary significantly across wind parks, for example due to their forecast variability and whether they are more or less correlated with overall wind in Germany, which drives market prices. This valuation problem is of significant interest to many market participants, including investors and policy makers looking to further grow the penetration of renewables.

Mathematics; Probability theory and stochastic processes; Numerical analysis; Industrial Mathematics / Modelling And Simulation

video/mp4

Author affiliation: The University of Sussex

2020-09-13

Attribution-NonCommercial-NoDerivatives 4.0 International

http://hdl.handle.net/2429/76005

Unreviewed

http://creativecommons.org/licenses/by-nc-nd/4.0/