A Planner-Trader Decomposition for Multimarket Hydro Scheduling

Abstract

Multimarket Multireservoir Hydro Scheduling Peak/off-peak spreads on European electricity forward and spot markets are eroding due to the ongoing nuclear phaseout in Germany and the steady growth in photovoltaic capacity. The reduced profitability of peak/off-peak arbitrage forces hydropower producers to recover part of their original profitability on the reserve markets. In their paper titled “A Planner-Trader Decomposition for Multimarket Hydro Scheduling” Schindler, Rujeerapaiboon, Kuhn, and Wiesemann propose a bi-layer stochastic programming framework that jointly optimizes the trading strategies on the spot and reserve markets. The model faithfully accounts for uncertainty in electricity prices, water inflows, and reserve activations, and it ensures that the hydropower producers can fulfill their market commitments under any circumstances. The model is numerically challenging due to the various sources of uncertainty that are revealed at different time scales and that affect the problem's objective function and constraints, and the authors propose a new planner-trader decomposition and an information restriction for its solution. A case study based on real data from Austria reveals significant benefits of simultaneously participating in the spot and the reserve markets.