Research On Electricity Purchasing Strategy And Risk Management Of Power Utilities In Electricity Markets

In the electricity markets, the electricity purchasers have the opportunity topurchase electricity through many approaches. But its benefit is always influenced bymany uncertain factors, such as the fluctuation of spot electricity price. The electricitypurchasers hopes the benefit maximum and risk minimum, so the efficient riskmanagement plays a vital role for electricity purchasers. Based on the existing tradingmodes in present electricity markets, this paper makes load forecasting and priceforecasting firstly, then proposes an approach on energy purchasing portfolio based onthe modern portfolio theory and risk management method. This paper applies thetechnique of Value at Risk (VaR), which is commonly used in the financial engineeringto assess the electricity purchasing strategies. The ratio of profit over VaR is presentedto compare different purchasing combinations. The calculation method of expectedprofit and VaR of electricity purchasing strategies are showed. The calculation gives outinstructive conclusions, and show the proposed method effective for electricitypurchasers to make power purchasing strategy and risk assessment.