Delta-hedging a hydropower plant using stochastic programming

Fleten, Stein-Erik and Wallace, Stein W (2009) Delta-hedging a hydropower plant using stochastic programming. In: Optimization in the energy industry. Springer, Berlin, pp. 507-524. ISBN 9783540889649

Abstract

An important challenge for hydropower producers is to optimize reservoir discharges, which is subject to uncertainty in inflow and electricity prices. Furthermore, the producers want to hedge the risk in the operating profit. This article demonstrates how stochastic programming can be used to solve a multireser-voir hydro scheduling case for a price-taking producer, and how such a model can be employed in subsequent delta-hedging of the electricity portfolio.