A risk management strategy for a wind power producer based on bilateral contracts

The integration of renewable energy is increasing rapidly in electric energy systems throughout the world. This paper presents a bilateral contract model for wind power and provides a risk management strategy for a wind power producer to trade energy in spot market and bilateral contract market. It uses long-term wind speed prediction to determine contract volume, and uses short-term wind speed prediction to determine offers submitted to spot market. Autoregressive moving average model and autoregressive model are used to simulate wind farm output and spot price series. Profit-at-Risk index is used as a risk management metric. Simulation results of a case study show that the purposed trading strategy can obviously reduce financial risk of a wind power producer with the expected profit unchanged.