Application of CVaR risk aversion approach in the expansion and operation planning and for setting the spot price in the Brazilian hydrothermal interconnected system

Traditionally, long-term power generation planning problems has been performed with the main objective of minimizing the expected value of generation and load curtailment costs. However, more recently there has been a need to apply some risk measure in order to avoid large amounts of load curtailment in critical inflow scenarios. This paper describes a direct approach for the implementation of a Conditional Value-at-Risk (CVaR) version for the long term hydrothermal coordination problem under a stochastic dual dynamic programming solving strategy. We also present an actual analysis that was made to validate and determine the key parameters of this model for a real application to the Brazilian system, where since September 2013 the proposed methodology has been officially used for operation planning and dispatch, to set the spot prices in the market and to perform expansion planning studies.