Medium Term Hydroelectric Production Planning - a Multistage Stochastic Optimization Model

Bita Analui* and Raimund Kovacevic

Abstract Multistage stochastic programming is a key technology for making decisions over time in an uncertain environment. One of the promising areas in which this technology is implementable, is medium term planning of electricity production and trading where decision makers are typically faced with uncertain parameters (such as future demands and market prices) that can be described by stochastic processes in discrete time. We apply this methodology to hydro system operation assuming random electricity prices and random inflows to the reservoir system. After describing the multistage stochastic model a simple case study is presented. In particular we use the model for pricing an electricity delivery contract in the framework of indifference pricing.

Mathematics Subject Classification: 90C15

Keywords: Multistage Stochastic Programming; Hydroelectric Operation; Risk Cooperated Portfolio Management.

Minisymposion: Stochastic Models for Optimization of Electric Power Systems