Optimal Bidding Strategies for Wind Power Producers with Meteorological Forecasts

Abstract

In recent years, the interest in clean renewable energy resources, such as wind and photovoltaic, has grown rapidly. It is well known that the inherent variability in wind power generation and the related difficulty in predicting future generation profiles, raise major challenges to wind power integration into the electricity grid. In this work we study the problem of optimizing energy bids for an independent Wind Power Producer (WPP) taking part into a competitive electricity market. It is assumed that the WPP is subject to financial penalties for generation shortfall and surplus. This means that, if the energy delivered over a given time slot is different from that subscribed in the bid, the WPP will be penalized, the monetary entity of the penalty depending on the wholesale market behavior, the day of the year and the time slot involved. An optimization procedure is devised to minimize this risk and maximize the expected profit of the seller. Specifically, each energy bid is computed by exploiting the forecast energy price for the day ahead market, the historical wind statistics at the plant site and the day-ahead wind speed forecasts provided by a meteorological service. We also examine and quantify the strategic role of an energy storage device in increasing reliability of bids and mitigating the financial risks of the WPP.