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.