Optimal portfolio-theory-based allocation of wind power: Taking into account cross-border transmission-capacity constraints

Allocating wind farms across different locations in different countries may reduce the variability of hourly wind power changes. Taking into account cross-border transmission-capacity constraints between countries can however decrease the effect of this diversification. A portfolio-theory-based model is developed that takes into account these cross-border transmission-capacity constraints when allocating wind power as efficient as possible across different locations.Three models are developed, looking to the cases where cross-border transmission-capacity constraints are equal to infinity, zero and a certain limited value, respectively. It is notably this last model that brings new perspectives in the allocation of wind power, based on portfolio theory modelling. Keeping cross-border transmission-capacity available for wind-power flows is an effective measure to limit hourly wind-power variations.

► A new portfolio-theory-based model for wind-power allocation is developed.
► Model optimises wind allocation towards lowest risk (variability) with given return.
► Model takes into account cross-border transmission-capacity constraints.
► Increasing transmission capacity will lower risk (variability of wind profile).