Power Purchase Model of Provincial Grids Based on Diverse Energy Coordination Hedging Optimization

Dunnan Liu^1*, Yujie Xu¹, Weimin Zeng², Jiangping Liu², Min Fan², Xinming Liu¹

¹School of Economics and Management, North China Electric Power University, Beijing, China.
²Hubei Provincial Electric Power Company Power Exchange Center, Wuhan, China.

DOI: 10.4236/jpee.2014.24062                

Abstract

Under the background of energy conservation, the grid companies should give priority to consumptive hydropower, wind power and other clean electricity to fulfill their social responsibility and promote the carbon emission reduction in power industry. But under the current power purchase mode, grid companies must first perform the contract. This is extremely uneconomical and
not environmentally friendly. Based on hedging theory, this paper proposes a power purchase optimization model using the strategy of “compression and compensation”. If outer price is lower than the contract price, the grid can compress contract power appropriately, leaving more space for purchasing electricity; if outer price is not attractive enough, the grid should timely improve contract proportion, compensating the deviations of contract caused by "compression". Based on the strategy of "compression and compensation", it can effectively reduce the abandoned wind and water, enhance the economic and social benefits of provincial power grid.

Keywords

Power Purchase Optimization; Hedging; "Compression and Compensation"; Large-Scale System Decomposition-Coordination

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	Liu, Y.-B., Liu, J.-Y. and Tang, J.-M. (2008) An Optimal Decision-Making Model for Power Supply Company’s Power Purchase in Weekly Market Considering Price Elasticity Matrix of Demand Side and Risk. Power System Technology, 32, 18-24,35.
[2]	Hu, B.Q., Wang, J.B., Wang, E.Q., et al. (2010) Research on Optimization Purchasing Model for Grid Companies Based on Grid-connected of Pumped Storage Power Station. Water Resources and Power, 28, 149-150,160.
[3]	Sheng, F.-Z. and Ji, J.-H. (2007) Study on Optimal Sourcing Strategy of Power Supplier with Option Contract. Power System Technology, 31, 54-57.
[4]	Li, C., Song, T. and Xu, F.-Y. (1997) Study of Applying the Large Scale System Decomposition Coordination Theory in Dynamic Dispatching of Power System. Journal of East China University of Technology, 19, 41-47.
[5]	Li, A.-L. (1997) A Study on the Large-Scale System Decomposition-Coordination Method Used in Optimal Operation of the Hydroelectric Station System. Water Resources and Power, 15, 58-63.
[6]	China Futures Association. Hedging and Arbitrage Trading. China Financial and Economic Publishing House, Beijing.