Hydro inflow forecasting and virtual power plant pricing in the Turkish electricity market

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2016

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Çabuk, Sezer

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Hydro inﬂow forecasting with most accurate quantitative models is a very crucial subject for effective hydro optimization, virtual power plant pricing, volume risk management and weather derivatives pricing in the Turkish electricity market. Predicting increase or decrease in hydro inﬂow, seasonal characteristics of hydrological years such as wet, dry or normal, allow the decision makers to economically use water for optimal periods, quantify of volume risk and determine effective portfolio management strategies. In this study, we focus on deﬁning and pricing a hydroelectricity power plant as a Virtual Power Plant (VPP). For pricing of this non-standard option, we worked on inﬂow and price scenarios and optimization model with the possible real world constraints. For the hydro inﬂow forecasting that will be used in optimization model, we applied Seasonal Autoregressive Integrated Moving Average model with Exogenous Variable (SARIMAX), whereas lagged indexed precipitation data, having the highest correlation with historical inﬂow data, is included as exogenous variable. In addition to point forecast of hydro inﬂow, we generated various inﬂow scenarios by using the distribution of model ﬁt residuals as stochastic processes for deﬁned VPP. Moreover, we worked on hydro optimization problem where objective function is maximizing the expected value of generation by tracing to generated inﬂow and price scenarios. Price scenarios are simulated by using the hourly shape of historical Day Ahead Market (DAM) prices. As a result, we could analyze the optimization outputs according to different price and inﬂow levels. For deﬁned VPP, Volume at Risk measure is expressed to explain the meaning of risky volume for the valuation of VPP. Furthermore, in the last section of the study, by the help of the ﬂexibility of optimization model, by using different constraints, we worked on the constructions, solutions and evaluations of different optimization cases as a signiﬁcant contribution in academic literature and common practice in current electricity markets.

Subject Keywords

Hydroelectric power plants., Hydroelectric power plants, Electric power consumption

URI

http://etd.lib.metu.edu.tr/upload/12620204/index.pdf
https://hdl.handle.net/11511/25826

Collections

Graduate School of Applied Mathematics, Thesis

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Citation Formats

S. Çabuk, “Hydro inflow forecasting and virtual power plant pricing in the Turkish electricity market,” M.S. - Master of Science, Middle East Technical University, 2016.