Medium-term Planning for Thermal Electricity Production.

In the present paper we demonstrate a mid-term planning model for thermal power generation which is based on multistage stochastic optimization and involves stochastic electricity spot prices, mixture of fuels with stochastic prices, the effect of CO2 emission prices and various types of further operating costs. Going from data to decisions, the first goal is to estimate simulation models for various commodity prices. We apply geometric Brownian motions with jumps to model gas, coal, oil and emission allowance (EUA) spot prices. Electricity spot prices are modeled by a regime switching approach which takes into account seasonal effects as well as jumps and spikes. Given the estimated models we simulate scenario paths and then use a novel approach based on a multiperiod generalization of the Wasserstein distance for constructing the stochastic trees used in the optimization model. Finally, we solve a one year planning problem for a fictitious configuration of thermal units, producing against the markets. Numerical examples are used to demonstrate the effect of CO2 prices on cumulated emissions and to show an application of indifference pricing to electricity delivery contracts.