Coalitional Aggregation of Wind Power

This paper explores scenarios in which independent wind power producers form willing coalitions to exploit the reduction in aggregate power output variability obtainable through geographic diversity. In the setting of a two settlement electricity market, we examine the advantage gained through optimal coalitional contract offering strategies for quantity risk reduction. We show that a group of independent wind power producers can always improve their expected profit by cooperatively offering their aggregated power. Using coalitional game theory we identify sharing mechanisms to fairly allocate the profits to coalition members. We show that the resulting coalitional game is balanced, guaranteeing that the core of the game is necessarily nonempty. In addition, we propose a profit sharing mechanism that minimizes the worst-case dissatisfaction to recover an imputation in the core. Finally, we illustrate our theoretical results with empirical studies using data from five representative wind farms in upstate New York.