Optimization of purchase allocation in dual electric power markets with risk management

Although the market structures worldwide may be quite different in kinds based on peculiarities of different countries, there generally exist long-term forward market and real time market. An energy service company in electric power market usually purchases energy from long term market and real time market. One key issue in purchase strategy is to allocate purchases among markets to minimize the total purchase costs and the associated risks. This paper discusses the purchase allocation problem of two markets with risk management. The analytical solution is obtained and the numerical simulation results are presented with the actual market data. This research result is helpful for the market purchasers optimizing his markets allocation and further building bid curves in power market.