Publication: Risk management in solar-based power plants with storage: a comparative study
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2023-09-18
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Abstract
Investment in solar generation is essential to achieve EU climate neutrality by 2050. Using stochastic programming, we study the management of solar power plants considering trading in the spot and future markets, weather derivatives based on solar radiation, storage, and risk management. We provide a comparative study of two technologies: a concentrated solar power plant with thermal storage and a photovoltaic power plant with electrical batteries. The significant managerial contributions can be classified into four levels. First, regarding trading and generation decisions, we proved that: a) plants sell energy in the spot market during the night and store energy in the morning; b) storage happens at the same time as electricity is purchased in the spot market; c) in the Summer the plants sell more in the futures market; d) storage, in both types of technology, increases trading in futures and spot markets and creates value for generators. Second, regarding the use of options on solar radiation, we show that a) the value of put and call options depends on the expected solar radiation; b) the radiation option prices are correlated with generation and storage levels and with the anticipated trading in spot and futures markets; c) the optimal strategy is to sell calls and buy put options; d) generators with a storage system sell significantly more call options. Third, regarding risk aversion, we proved that: a) the higher the risk aversion, the more the generator sells in the futures market and the higher the number of purchased put contracts; b) the risk-adjusted profit from options trading is zero. Finally, in comparing both technologies, even though the operation and financial management patterns are similar, the photovoltaic power plant is more profitable, and the batteries create more value.
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Decision Analysis, Risk, Natural Resources, Energy, Production-Scheduling, Applications