Hedging strategies for wind renewable generation in electricity markets

Due to the increasing concern over the environmental impact and sustainability of conventional fossil-fueled power plants, renewable energy sources are becoming an important part of the generation mix in many electricity markets. In particular, wind power has taken an active role in the Spanish system by participating both in the day-ahead spot market and in the base-load energy auctions organized every three months to cover a percentage of the demand of the distribution companies. In this framework, besides the inherent variability and unpredictability of the wind power, wind producers face also the market price uncertainty. This paper presents a general overview of the problems faced by a wind producer participating in an electricity market, and it compares two formulations (LP and MILP) of a two-stage stochastic model to solve the problem of coordinating the joint operation of a wind farm and a supporting hydro pumped-storage unit.