Risk-constrained dynamic energy allocation for a wind power producer

• Choosing a time-inconsistent formulation can lead to inappropriate decisions.
• A wind power producer determines the optimal energy allocation.
• A time-consistent and coherent dynamic risk measure is formulated as MILP.
• Efficient formulation based on dynamic programming is proposed to solve the problem.

Participants in competitive electricity markets make their dynamic decisions under uncertainty. Choosing a time-inconsistent formulation can lead to an incorrect procedure for risk and, consequently, to a sequence of inappropriate decisions. In a market context with uncertainty in energy prices, the net income of a company is the result of selling their energy in the spot market and through bilateral physical contracts. The purpose of this paper is to describe a dynamic multistage stochastic programming framework for sequential decision making under uncertainty that allows wind power producers to maximize their profit for a given risk level on profit variability. In this context, Conditional Value at Risk (CVaR) has been chosen as a time-consistent and dynamic risk measure. An example is provided to illustrate the methodology proposed.