Hedging against uncertainties for wind power producer with block futures contracts

Wind power producers face risks on both power generation and market price in electricity markets. This paper proposes the block futures contracts as a financial approach to risk management for wind power trading, where futures contracts are signed with different hedge ratios for different power blocks. The independent transaction on futures contracts for each power block leads to a much better hedging efficiency due to a closer relation between futures price and wind power-faced price, where the wind power-faced price is introduced to consider uncertainties of both power generation and market price simultaneously as the price wind power producers actually face. With a risk-constrained decision framework adopting conditional value-at-risk (CVaR) as the risk measure, optimal contracting strategies for wind power producers with different risk preferences are discussed. A case study verifies the feasibility and efficiency of the proposed method based on real-world data.