Issue: 2022/Vol.32/No.4, Pages 75-90
PORTFOLIO MANAGEMENT OF A SMALL RES UTILITY WITH A STRUCTURAL VECTOR AUTOREGRESSIVE MODEL OF ELECTRICITY MARKETS IN GERMANY
Cite as: K. Maciejowska. Portfolio management of a small RES utility with a structural vector autoregressive model of electricity markets in Germany. Operations Research and Decisions 2022: 32(4), 75-90. DOI 10.37190/ord220405
Electricity producers and traders are exposed to various risks, among which price and volume risk play very important roles. This research considers portfolio-building strategies that enable the proportion of electricity traded in different electricity markets (day-ahead and intraday) to be chosen dynamically. Two types of approaches are considered: a simple strategy, which assumes that these proportions are fixed, and a data-driven strategy, in which the ratios fluctuate. To explore the market information, a structural vector autoregressive model is applied, which allows one to estimate the relationship between the variables of interest and simulate their future distribution. The approach is evaluated using data from the electricity market in Germany. The outcomes indicate that data-driven strategies increase revenue and reduce trading risk. These financial gains may encourage energy traders to apply advanced statistical methods in their portfolio-building process.
Keywords: intraday electricity market, day-ahead electricity market, structural vector autoregressive model, probabilistic
Received: 4 July 2022 Accepted: 14 December 2022
Published online: 8 February 2023