Fostering wind power penetration into the Brazilian forward-contract market

Wind power generation plays an important role in most power systems worldwide. Despite that, only in 2009, wind farms appeared as a profitable and competitive investment option in Brazil. The Brazilian power system is mainly hydro based and, due to its many singularities, its coordination is still centralized. A collateral effect of such centralized dispatch coordination is that the system marginal costs, which determine the short-term energy prices, exhibit a highly volatile pattern. In this setting, selling energy through bilateral forward contracts backed up on intermittent generation profiles, such as wind farms and small-run hydros, exposes the generation company (Genco) to the so-called price-quantity risk. In this paper, we explore the well-known complementarity between these two renewable resources (wind and inflows) by proposing a statistical model capable to produce scenarios of renewable resources availability consistently with short-term price scenarios. Hence, we present a novel commercial model for a wind power producer based on a joint-selling strategy with a small-hydro Genco. In this model, the hydro Genco receives a surplus payment in comparison to the amount it would receive in the market and the wind Genco, the rest of the income. We show, by means of realistic data from the Brazilian power system, that such commercial model is able to mitigate the exposure to the short-term price and foster the wind power penetration into the contract market.