Premium
Hydropower scheduling and financial risk management
Author(s) -
Kristiansen Tarjei
Publication year - 2006
Publication title -
optimal control applications and methods
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 44
eISSN - 1099-1514
pISSN - 0143-2087
DOI - 10.1002/oca.768
Subject(s) - stochastic programming , hydropower , risk management , scheduling (production processes) , dual (grammatical number) , dynamic programming , risk aversion (psychology) , computer science , electricity , operations research , actuarial science , economics , finance , business , environmental economics , operations management , expected utility hypothesis , mathematical optimization , engineering , financial economics , mathematics , art , electrical engineering , literature , algorithm
This paper describes a risk management tool for hydropower generators and its application to Norway's second‐largest generation company and largest electricity consumer, Norsk Hydro ASA. The tool considers both operations scheduling and the utilization of financial contracts for risk management. Financial risks are accounted for by penalizing incomes below a reference income. The risk management problem is solved by a combination of stochastic dual dynamic programming and stochastic dynamic programming. Simulations demonstrate that lower income scenarios improve when risk aversion is introduced. Copyright © 2005 John Wiley & Sons, Ltd.