Mean-risk efficient portfolio analysis of demand response and supply resources

Shi-Jie Deng and Li Xu

Energy, 2009, vol. 34, issue 10, 1523-1529

Abstract: In the restructured electric power utility industry, reducing the risk exposure of profit to the highly volatile electricity wholesale price and the fluctuating demand of end users is essential to the financial success of load-serving entities (LSEs). Demand response (DR) programs have been utilized to manage the correlated price and volumetric risks, and simultaneously improve the reliability of the power system. This paper proposes an efficient portfolio framework for LSEs to evaluate the role of DR programs in achieving a desirable tradeoff between profit and risk. The mean-risk efficient frontier formed by the optimal portfolios allows LSEs to identify the least amount of risk to bear corresponding to a given profit target. Numerical examples are provided to illustrate the impact of DR programs on the composition of the optimal portfolios in achieving different levels of tradeoff between risk and reward.

Keywords: Demand response; Interruptible contract; Electricity portfolio analysis; Efficient frontier; Value at risk (VaR) (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:34:y:2009:i:10:p:1523-1529

DOI: 10.1016/j.energy.2009.06.055

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