Energy Production Optimisation Increased Profit by 40% @ Power Utilities, Hedging, Risk Management

A German electricity producer sells its production of energy in both the futures market and the pool. Its current method for nominating volumes to be sold in the futures market needed improvement, as there are frequent opportunity costs related to this hedging strategy. Moreover, if any of the generation units fails, the producer may have to buy energy in the pool to meet its contracting obligations.

In a simulation-based framework, Integral Solutions redefined the producer's objective by maximising its expected profit over a given planning horizon, while controlling the risk of profit variability, using the Conditional Value-at-Risk. This resulted in a 40% increase in risk-adjusted profit over 3 years.

The detailed model explanation can be found in the company's website. You may also try an online model as a simulation and optimisation of your production.

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