Risk Management for Optimal Wind Power Bidding in an Electricity Market: A Comparative Study

Currently, it is common to trade wind energy in competitive electricity markets. However, wind power traders face additional risks beside the common market risks due to wind uncertainty. Hence, risk management is crucial for trading wind power in the pool. In this paper, the risk management of a stochastic optimization-based model without and with different risk measures, including variance, value at risk (VaR), and conditional value at risk (CVaR), as well as the stochastic dominance-based risk management method for trading wind energy in the pool are presented and compared. Case studies are conducted for an 80 MW wind power producer to show and compare the performance of the stochastic optimization-based bidding models without risk management and with different risk management approaches. In this paper, the comparison is based on various parameters of the distributions of the optimal objective function value obtained from different considered cases, rather than just one or two distributions' parameter(s) which is the common in the literature.