Minimizing forced outage risk in generator bidding

Competition in power markets has exposed the participating companies to physical and financial uncertainties. A random outage after acceptance of bids by the ISO forces a generator to buy power from the real-time hourly spot market and sell to the ISO at the set day-ahead market-clearing price, incurring losses if the real-time hourly spot market is expensive. This paper assesses the financial risk of the generators using risk profiles and VaRs. A risk minimization module is developed which derives optimum bidding strategies of the generator company such that the estimated total earning is maximized keeping the Value at Risk (VaR) below a tolerable limit.