Multiperiod Portfolio of Energy Purchasing Strategies including Climate Scenarios

Juan M. Gómez and Yeny E. Rodríguez
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Juan M. Gómez: Faculty of Business and Economic Sciences, Universidad Icesi, Calle 18 No. 122-135, Cali 760031, Colombia
Yeny E. Rodríguez: School of Management, Universidad de los Andes, Calle 21 No. 1-20 Off 100, Bogota 111711, Colombia

Energies, 2022, vol. 15, issue 9, 1-25

Abstract: Because electricity retailers must ensure that energy supply matches end-user demand, electricity that is not traded through bilateral contracts is typically traded in power exchanges which are subject to great price volatility. In Colombia, the spot price is a reflection of climate variability because approximately 70% of the country’s electricity is generated by large hydropower stations. In this study, we forecast 2018′s prices and calculated its corresponding purchase margins using the 2015 to 2017 bilateral contract prices for electricity plus power exchange price information and climate information. Our forecasts included climate uncertainty and evaluated two multi-period portfolio methods for deciding among three purchasing strategies: bilateral contracts in the regulated market, bilateral contracts in the non-regulated markets, and purchases in the power exchange. The results indicate that retailers should follow a middle course that is neither conservative nor risky. Creation of portfolios independent of the multi-period method can balance purchases through bilateral contracts and in the power exchange in a way that considers climatic uncertainty. This type of balanced portfolio could control medium-term risks of price volatility and result in good levels of purchase margins.

Keywords: multiperiod; portfolio; energy retailer; climate scenarios; optimization; decision tree (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
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