On stochastic auctions in risk-averse electricity markets with uncertain supply

TL;DR

This paper analyzes how risk-averse generators behave in stochastic electricity auctions with uncertain renewable supply, providing a closed-form solution for their optimal pre-commitment strategies considering risk measures.

Contribution

It introduces a closed-form characterization of risk-averse generator behavior in stochastic auctions, accounting for risk trading and coherent risk measures.

Findings

Closed-form expression for risk-averse pre-commitment behavior

Impact of risk trading on generator strategies

Framework applicable to renewable integration in electricity markets

Abstract

This paper studies risk in a stochastic auction which facilitates the integration of renewable generation in electricity markets. We model market participants who are risk averse and reflect their risk aversion through coherent risk measures. We uncover a closed form characterization of a risk-averse generator's optimal pre-commitment behaviour for a given real-time policy, both with and without risk trading.