IEEE TRANSACTIONS ON SUSTAINABLE ENERGY, VOL. 2, NO.

3, JULY 2011 277

Coordinated Trading of Wind and Thermal Energy
Ali T. Al-Awami, Student Member, IEEE, and Mohamed A. El-Sharkawi, Fellow, IEEE
AbstractTrading wind energy in short-term electricity mar-
kets has high associated risks due to the uncertainties in hourly
available wind, energy prices, and imbalance penalties. Coordi-
nated trading of wind and thermal energy is proposed to miti-
gate risks due to those uncertainties. The problem of wind-thermal
coordinated trading is formulated as a mixed-integer stochastic
linear program. The objective is to obtain the optimal trade-off
bidding strategy that maximizes the total expected prots while
controlling trading risks. For risk control, a weighted term of the
conditional value at risk (CVaR) is included in the objective func-
tion. The CVaR aims to maximize the expected prots of the least
protable scenarios, thus improving trading risk control. A case
study comparing coordinated with uncoordinated bidding strate-
gies depending on the traders risk attitude is included. Simulation
results show that coordinated bidding can improve the expected
prots while signicantly improving the CVaR.
Index TermsCoordinated bidding strategy, mixed integer sto-
chastic programming (SP), risk, thermal power production, wind
power production.
NOMENCLATURE
The most important notations used throughout the paper are
listed below for quick reference.
Indices:
Bidding period.
Scenario.
Thermal unit.
Wind plant.
SegmentB.
Decision Variables:
Optimal bid of a thermal unit.
Optimal bid of a wind plant.
Actual, or realized, thermal power output.
Thermal unit state; 1 means ON; 0 means OFF.
Thermal power output corresponding to a
segment of a piecewise linear thermal heat
rate curve.
and Auxiliary variables for computing .
Manuscript received August 06, 2010; revised December 15, 2010; accepted
January 27, 2011. Date of publication February 04, 2011; date of current ver-
sion June 22, 2011. The work of A. T. Al-Awami was supported by King Fahd
University of Petroleum & Minerals (KFUPM), Dhahran, Saudi Arabia.
The authors are with the Department of Electrical Engineering, University
of Washington, Seattle, WA 98195 USA (e-mail: aliawami@u.washington.edu;
melshark@u.washington.edu).
Color versions of one or more of the gures in this paper are available online
at http://ieeexplore.ieee.org.
Digital Object Identier 10.1109/TSTE.2011.2111467
Stochastic Variables:
Actual, or realized, wind power output.
Spot market energy price.
, Under- and over-generation imbalance
penalties as multipliers of the energy price.
Combined imbalance penalty
.
Other Variables:
Total optimal combined bid of wind and
thermal power outputs.
Total expected prots.
Conditional value at risk at the condence
interval.
Condence level.
Risk-aversion parameter.
Prots associated with a scenario.
Imbalance-up, or total over-generated energy
in excess of combined schedule.
Imbalance-down, or total under-generated
energy in decit of combined scheduleE.
Parameters and Constants:
Start-up cost of a thermal unit.
Minimum up-time of a thermal unit.
Minimum down-time of a thermal unit.
Initial minimum up-time of a thermal unit.
Initial minimum down-time of a thermal unit.
Thermal ramp-up rate [megawatt per hour
(MW/h)].
Thermal ramp-down rate (MW/h).
Thermal fuel cost.
, , , Thermal heat rate curve parameters.
Offset of a piecewise linear thermal heat rate
curve.
Slope of a segment of the piecewise linear
thermal heat rate curve.
Break point of a segment of the piecewise
linear thermal heat rate curve.
Initial state of a thermal units.
1949-3029/$26.00 2011 IEEE
278 IEEE TRANSACTIONS ON SUSTAINABLE ENERGY, VOL. 2, NO. 3, JULY 2011
,
Minimum and maximum thermal power
output.
Rated wind power output.
Number of periods.
Number of scenarios.
Number of thermal units.
Number of wind plants.
Number of segments.
Probability of a scenario.
I. INTRODUCTION
B
ECAUSE of the negative environmental impacts of fossil
fuel coupled with the desire to achieve energy indepen-
dence, power system researchers are working diligently on de-
vising the tools necessary to accommodate renewable energy
sources into a smarter power grid. Wind power has shown to be
one of the most promising renewable sources. Several regions
in the world have already set targets for the level of wind energy
penetration into their power grids. The target set by the U.S. De-
partment of Energy is 20% by 2030 [1]. The European Unions
target is 14%17% by 2020 and 26%34% by 2030 [2].
In order to achieve these targets, several countries are sub-
sidizing wind energy [3]. However, as wind technologies ad-
vance, wind energy is becoming more competitive and subsi-
dies will eventually be signicantly reduced or even halted. As
such, wind producers are becoming more interested in partici-
pating in electricity markets to maximize their prots.
Most short-term electricity markets require that energy pro-
ducers submit day-ahead schedules. In addition, system opera-
tors apply imbalance penalties for producers not meeting their
energy schedules. Because wind is stochastic and day-ahead
wind forecast is highly uncertain, wind traders are exposed to
high risks due to generation-schedule mismatch. In addition, en-
ergy prices and imbalance penalties are uncertain as well. There-
fore, wind traders need to mitigate the risks associated with
these three sources of uncertainty.
Researchers have suggested several approaches to mitigate
wind trading risks. In [4][7], stochastic models have been de-
veloped to optimally bid into the electricity market. One of the
most comprehensive works is presented in [7], in which the un-
certainty of energy spot market prices, imbalance penalties, and
wind power output are considered. The objective is to maximize
wind trading prots while controlling its risks by maximizing
the conditional value at risk (CVaR).
Another risk mitigation approach reported in the literature
is coordinating wind with hydro power or pumped storage
[8][12], other storage media [13], or thermal units [14]. In
[8][12], coordination between wind and hydro is suggested
and comparison between coordinated and uncoordinated bid-
ding strategies is carried out. In [11], risk analysis is carried
out through examining the standard deviation of the expected
prots before and after coordination. In [12], wind-hydro coor-
dination is formulated with transmission congestion constraints.
It is assumed that the wind and hydro plants are separately
owned. The use of Shapley value is suggested to share the
extra prots due to coordination. However, these papers do
not include risk control terms in the objective function or the
constraints.
Coordination between wind and other storage media is exam-
ined in [13]. The added value of coordination is analyzed and a
sensitivity analysis of the added value due to energy prices, im-
balance prices, wind variations, and market closure lead-time is
carried out. Again, no risk control is included in the optimiza-
tion problem itself.
One promising way to deal with wind trading risks is via
coordination with thermal generators. Some thermal units have
relatively high production costs. Hence, they might not be com-
petitive to bid individually in the energy market during periods
of low expected energy prices. Nevertheless, some of these
expensive thermal units are exible; they have fast-ramping,
near-zero minimum output power and very short minimum
up/down time [15]. These features make them very suitable for
balancing wind. In fact, the coordination with the larger, less
exible thermal units can also improve the total expected prots
for a producer participating in the day-ahead energy market
and substantially reduce its risks, as discussed in this paper.
In [14], a simplied model of coordinated bidding between a
wind plant and a thermal unit is presented. An insight of the
interaction between the wind plant and the thermal unit due to
coordination is provided. It was observed that the thermal unit
operated whenever the energy price or the imbalance charges
were expected to be higher than the units incremental cost.
However, some thermal constraints, such as minimum up/down
times and ramping rate, are not considered and no risk analysis
is carried out.
In this paper, a wind-thermal coordinated bidding strategy
is proposed for the day-ahead energy market. The problem is
formulated as a mixed integer linear program (MIP) that deter-
mines the optimal bidding curves for wind and thermal units
as well as the optimal thermal commitment schedules. The un-
certainties of wind power outputs, energy prices, and imbal-
ance prices are included. The objective is to obtain the optimal
trade-off between the expected prots and risk, depending on
the producers risk aversion attitude. The CVaR for a selected
condence level is used as a risk control metric. This tends to
maximize the expected prots of the least protable scenarios.
Thermal constraints, such as minimum up/down times, ramping
rates, minimum and maximum power outputs, and startup costs
are considered. A case study for a producer with a wind plant
and several thermal units is carried out. The results demonstrate
the coordination benets for the producer in terms of improving
the expected prots while signicantly reducing both wind and
thermal bidding risks. The results also show the impact of co-
ordination and risk aversion attitude on both wind and thermal
optimal scheduling decisions.
II. PROBLEM DESCRIPTION
This section gives a description of the market framework,
coordination benets, stochastic programming (SP) approach,
and the data preprocessing required for the optimization.
AL-AWAMI AND EL-SHARKAWI: COORDINATED TRADING OF WIND AND THERMAL ENERGY 279
A. Market Framework
Consider a pool-based electricity market at which suppliers
and consumers submit day-ahead energy supply and demand
bidding curves (bidding offers) for each hour. The hourly bid-
ding curves represent the bid volumes in MW as functions of
the energy spot market prices per MWh. The market operator
aggregates these bidding curves to determine the hourly market
clearing prices (MCPs) and the cleared energy volumes assigned
to each participant by identifying the point of intersection of
the aggregated supply and demand bids. Afterwards, balancing
markets are carried out closer to real-time in order to help the
market operator maintain the supply-demand balance.
For each hour, each supplier is paid the MCP times the cleared
energy volume and penalized for any imbalance between the
cleared energy volume and the actual energy produced. Dif-
ferent markets apply different imbalance penalty rules. For ex-
ample, in the Spanish market, the imbalance charges depend on
the direction of imbalance of the supply with respect to the di-
rection of the overall system imbalance. Therefore, when the
system is running short
1
, then those suppliers who are running
short
2
are penalized, while those who are running long
3
are not
penalized. The opposite holds true when the system is running
long. These rules are set up such that the suppliers that degrade
the system balance are penalized, while those that help maintain
the system balance are rewarded.
B. Coordination Benets
Most electricity markets require that market participants
submit their schedules for the next day several hours before
the start of that day. In the Spanish market, for example, the
market participants are required to submit their hourly bids
for hours 124 of day at 10:00 A.M. of day . That is,
the gap between the time the bids are submitted and real-time
is 1438 hours. This leaves wind producers very vulnerable
to high imbalance penalties due to the highly uncertain wind
forecasts. In addition, energy prices and imbalance penalties
are uncertain as well. Therefore, wind producers seek to nd
ways to mitigate risks associated with these uncertainties.
Unlike wind turbines, thermal units are highly predictable
and controllable. However, they are still exposed to the uncer-
tainty in energy prices. In addition, most thermal units are re-
strained by such constraints as minimum up/down times and
minimumpower outputs. Therefore, a thermal unit is exposed to
the risk of operating at low-protability or even at loss at some
periods because of these constraints. Other types of thermal
units, such as reciprocating engines [15], are exible enough
to operate with no minimum up/down time and zero minimum
power output. However, these units usually have relatively high
operating costs making them often uncompetitive in the spot
market, especially at periods of low expected energy prices.
Wind-thermal coordination, especially at periods of thermal low
protability, is expected to be very benecial for both wind and
thermal units. Coordination offers wind facilities the opportu-
nity to avoid high imbalance penalties utilizing these thermal
1
Generation is less than demand.
2
Under-generating.
3
Over-generating.
units. For the thermal units, instead of operating at low-prof-
itability due to their various constraints, the coordination allows
them to participate in balancing wind energy more economi-
cally, thus more protable operation is achieved.
Wind-thermal coordination is benecial for the independent
system operator as well. For stability purposes, the ISO is re-
quired to maintain the generation-load balance at all times. Co-
ordination results in a reduction in the overall imbalance due to
wind forecast uncertainty, thus helping the ISO achieve this ob-
jective.
C. Two-Stage SP Approach
The problem of obtaining the optimal wind-thermal coordi-
nated bidding curves that maximize the expected total prots
while reducing trading risks is formulated as a two-stage mixed
integer stochastic program. SP is commonly used for han-
dling uncertainties in optimization [16]. It involves generating
scenarios for each stochastic variable that represent plausible
realizations of that variable. The generated scenarios of each
stochastic variable need to reect the statistical properties of
that variable. Then, using the generated scenarios of all the
stochastic variables, a scenario tree is built.
The models most commonly used in SP involve two stages.
The decision variables of the rst stage must be decided upon
before the stochastic variables are realized. These are called
here-and-now decisions. The decision variables of the second
stage depend on which of the scenarios is realized. These are
called wait-and-see decisions. Note that the second stage de-
cisions are affected by those of the rst stage.
In this study, the stochastic variables are the wind power out-
puts, the spot market energy prices, and the imbalance prices.
Each branch of the scenario tree consists of a set of three strings:
one for the hourly wind power outputs, one for the hourly en-
ergy prices, and one for the imbalance prices. The here-and-now
decision variables are the hourly bids of the wind plants and
thermal units and the thermal unit commitment schedules. The
wait-and-see decision variables are the thermal units actual
power outputs since they depend on the realized scenarios of
wind power, energy prices, and imbalance prices.
D. Scenario Generation
Several scenario generation techniques have been reported in
the literature. In [17], Monte Carlo simulations were used to
generate energy price scenarios given the hourly expected en-
ergy prices and their associated variances. Scenarios for wind
power output were generated in a similar fashion in [8]. The
problem with the technique used in [8] and [17] is that coupling
in the stochastic variable among consecutive hours is not taken
into account. In [7] and [18], time series models were used to
generate energy price scenarios, thus coupling among consec-
utive hours is considered. Nonlinear optimization is suggested
in [19] to generate scenarios that maintain a given set of statis-
tical properties. In this work, a simple, yet effective, technique
to generate wind power scenarios is developed. This technique
takes into account the expected wind forecast, its variance, and
the hour-to-hour coupling of wind power output.
To generate wind scenarios, the knowledge of the following
two statistical properties is assumed:
280 IEEE TRANSACTIONS ON SUSTAINABLE ENERGY, VOL. 2, NO. 3, JULY 2011
1) the distributions of the hourly wind power outputs given
the forecasts; and
2) the distribution of the wind power ramping rate.
The day-ahead hourly wind power outputs given the forecasts
are assumed to follow normal distributions. However, any other
distribution can be used. Both the expected value and the stan-
dard deviation of the day-ahead hourly wind power forecasts are
assumed to be available.
Similarly, the wind power ramping rate is assumed to follow
normal distribution whose mean and standard deviation are as-
sumed to be known from historical wind data. The wind power
ramping rate reects the correlation between the wind power
output at hour and that of the proceeding hour .
Using the wind forecasts and ramping rate, a set of wind
power scenarios is generated. The way the scenarios are gener-
ated is explained as follows:
1) For any given hour, use the expected value and standard
deviation of the wind power forecast to generate
scenarios. Do the same for all hours in the forecast time
horizon. , i.e., . That guarantees satisfying the
rst property.
2) Rearrange the scenarios generated in (1) to ensure that they
obey the ramping rate statistical properties. This is done as
follows:
a) Given the wind power output of period , scenario
, , generate a possible wind power output for
period , . This is done by generating a
number at random that follows the ramping rate sta-
tistical properties and adding it to , i.e.,
, where and are ramping
rates mean and standard deviation.
b) Among the scenarios generated in (1) for period ,
search for the scenario that is closest to . That
is, nd such that
c) Swap with .
d) Do (a)(c) for all scenarios in period .
e) Do (a)(d) for all periods.
f) Note that as gets larger for a given , there are
fewer elements in to compare with , i.e.,
the chances that does not have an acceptable
t in are higher. Therefore, after processing
(a)(e), the last of the rearranged scenarios are
eliminated. The distribution of the hourly wind power
output should not deviate signicantly as long as is
kept small. In general, as increases, the ramp rate
criterion improves at the expense of a slight devi-
ation in hourly distribution of the conditional wind
power output. Hence, the choice of is determined
heuristically based on the above properties.
This ensures that the generated scenarios meet both of the sta-
tistical properties of the wind power forecast. Note that swap-
ping scenarios within a given one-hour period does not affect
the distribution characteristics of the generated wind power sce-
narios at that period.
For the energy spot market prices and imbalance prices, sea-
sonal ARIMA models [7] are commonly used. The same tech-
nique is used in this paper.
Note that the structure of imbalance penalties described
in Section II-A is utilized to combine under-generation and
over-generation penalty multipliers in one stochastic variable,
as shown in [7]. This can be further explained as follows:
1) From the supplier perspective, when the supplier is run-
ning short, it is penalized by paying to the market operator
, where . When the supplier
is running long, it is penalized by being paid by the market
operator , where . Note that
the suppliers running long are penalized by being paid less
than or equal to MCP for the energy they supply in excess
of their cleared energy volumes.
2) From the system perspective, when the system is running
short, the imbalance penalty multipliers applied to sup-
pliers are and . This way, the suppliers
running short are penalized while those running long are
not. However, when the systemis running long, the penalty
multipliers are and . This way, the sup-
pliers running long are penalized while those running short
are not.
3) From the above, it is observed that and .
Also, at least one of the two penalty multipliers is exactly
equal to one at any given period and scenario.
4) Hence, for scenario generation purposes, the two penalty
multipliers can be combined in one stochastic variable
such that:
a) When the system is running short, .
b) When the system is running long, .
E. Scenario Reduction
The size of the scenario tree might render the optimization
problem intractable. Hence, a reduction technique is applied to
obtain a set of reduced scenarios that maintains the statistical
properties of the original set to acceptable levels. This reduced
scenario tree is then used to obtain the optimal solution.
The forward selection algorithm proposed in [20] is used in
this paper to reduce wind, energy price, and imbalance price
scenarios. This algorithm is based on selecting a subset of
scenarios from the original set such that the sum of minimum
distances between all the members of the two sets is minimized.
The algorithm starts with an empty subset . The rst member
in is the scenario with the minimum sum of distances from
the rest of the scenarios in . This, in essence, is approximately
the centroid of all scenarios. The second member of is the sce-
nario that minimizes the sumof minimumdistances between the
members of and those of . The algorithm goes on until
the required size of is reached or the required sumof minimum
distances between the members of the two sets is achieved.
III. MATHEMATICAL FORMULATION
This section gives a detailed mathematical formulation of the
wind-thermal coordinated bidding problem.
AL-AWAMI AND EL-SHARKAWI: COORDINATED TRADING OF WIND AND THERMAL ENERGY 281
A. Risk-Neutral Wind-Thermal Coordinated Bidding
The objective of maximizing the expected prots for a pro-
ducer that owns both thermal generating units and wind plants
can be expressed as follows:
(1)
where
(2)
The three terms between the brackets in (2) are the per-sce-
nario prots due to the thermal units, wind plants and imbal-
ances, respectively. These three terms can be expressed as fol-
lows:
(3)
(4)
(5)
Equation (3) is the thermal prots per scenario. It constitutes
the thermal energy revenues, thermal production costs, and the
startup costs per period and per generating unit. Equation (4)
shows the wind prots per scenario, which is a function of wind
revenues. It is assumed that wind production, operating, and
maintenance costs are negligible. If some or all of these costs
are considerable, they can be incorporated easily in the wind
prot. Equation (5) is the imbalance term, which consists of the
imbalance-up prots and the imbalance-down penalty. Only one
of these two terms can be nonzero for any given period and sce-
nario. Imbalance-up is nonzero whenever the producer is run-
ning long. Imbalance-down is nonzero, however, whenever the
producer is running short. Mathematically, Imbalance-up and
Imbalance-down conditions can be expressed as
if
otherwise
(6)
if
otherwise
(7)
where
(8)
and
(9)
(10)
(11)
1) Modeling Imbalance: To model the discontinuities in the
and functions, an auxiliary binary variable is
introduced in [6], [11], and [12] for each period and each sce-
nario. In [7], the mutual relationship of the two terms is utilized
to avoid using any additional binary variables. That is done by
adding three more constraints for each period and each scenario.
This method is more computationally efcient [7]. A similar ap-
proach is used in this work. Awind-thermal coordinated version
of the constraints used in [7] is shown as follows:
(12)
(13)
(14)
2) Wind Operating Constraints: At each period and each
scenario, the scheduled wind power of each wind plant must
be within its operating limits
(15)
3) Thermal Operating Constraints: At each period and each
scenario, the actual, or realized, thermal power of each com-
mitted thermal unit must be within its operating limits
(16)
At each period and each scenario, the realized thermal power
of each committed thermal unit must not exceed its maximum
ramping limits
(17)
As shown in [21] and [22], a computationally efcient way
to model the minimum-up time constraint is as follows:
(18)
(19)
(20)
The rst condition ensures that the thermal unit will not be
shut off unless it has been on initially for a sufcient number
of periods . The second condition enforces the min-
imum-up time constraint from to
. The last condition enforces the minimum-up time
282 IEEE TRANSACTIONS ON SUSTAINABLE ENERGY, VOL. 2, NO. 3, JULY 2011
constraint for the rest of the planning horizon such that if the unit
started at any of these periods, it remains on until the end of the
planning horizon.
Similarly, the minimum-down time constraint can be en-
forced as follows:
(21)
(22)
(23)
4) Piecewise Linearization of Thermal Production Cost:
Production cost of thermal units is usually expressed as a
quadratic function of the thermal power output [23]
(24)
As shown in [17] and [22], a computationally efcient piece-
wise linear version of (24) can be used
(25)
(26)
(27)
(28)
5) Nondecreasing Bidding Curves: Most energy markets re-
quire hourly bidding offers that are nondecreasing with respect
to energy spot market prices. This requirement can be enforced
in the optimization constraints as follows:
(29)
(30)
(31)
(32)
Note that (29) and (30) correspond to the wind bidding offers
while (31) and (32) correspond to the thermal bidding offers. To
enforce nondecreasing offers, (29) and (31) are used.
As stated earlier, there are three different stochastic variables
in the problem under consideration: energy prices, imbalance
prices, and wind power outputs. Therefore, it is very likely that
two or more different scenarios can have the same energy price.
To enforce the fact that scenarios with the same energy price
must have the same bidding offer, (30) and (32) are included.
A similar set of constraints is used by [7] and [17] to enforce
nondecreasing bidding offers for wind energy [7] and thermal
energy [17]. In each of (29)(32), a set of constraints
is included for each period and each generating unit. However,
for , the constraints are already satised. In addition,
by symmetry of each set of constraints with respect to scenario
pairs, if any of the constraints is satised for and ,
it is also satised for and . In this work, these
two observations are utilized in order to reduce the number of
constraints to (about half). This is done by
considering only in (29)(32).
B. Incorporating Risk Control
The optimization problem described so far aims to maximize
the expected prots with no consideration to risk. Note that one
of the main incentives of wind-thermal coordination is to miti-
gate trading risks for both wind and thermal plants. Therefore,
a risk metric is necessary both to assess the benets of coordi-
nation and to avoid risky bidding strategies.
In nance, the value-at-risk (VaR) is commonly used to quan-
tify a portfolio exposure to risk [24]. In SP terms, the VaR at a
certain condence level represents the upper bound
of the prot for the least protable scenarios.
For example, for a condence level and scenarios
considered and arranged in a descending order based on prof-
itability, VaR is the prot associated with the 96th scenario
(i.e., the fth least protable scenario).
Therefore, VaR does not reect the extent of risk associated
with the scenarios whose prots fall below the threshold indi-
cated by VaR . In addition, VaR is difcult to handle when the
prots are not normally distributed [25].
As an alternative measure, the CVaR is known to have better
properties than VaR [25]. The CVaR at the condence level
gives the expected prots for the
least protable scenarios, i.e., the scenarios whose prots are
less than or equal to VaR . Hence, for the example above,
is the expected value of the prots associated with
scenarios 96100 (i.e., the ve least protable scenarios).
In this work, CVaR is used to control risk. The CVaR can be
expressed as a linear term in the objective function [7], [25]. To
include the CVaR, the objective function needs to be modied
as follows:
(33)
where
(34)
In addition, the following constraints need to be included:
(35)
(36)
is a weighting parameter to be set by the producer before
the optimization algorithm is run in accordance with its risk-
aversion attitude. Therefore, a risk-neutral attitude would corre-
spond to , while a risk-averse attitude would correspond
to . A more comprehensive mathematical description of
the CVaR and the rationale behind (34)(36) is given in [25].
C. Individual Uncoordinated Bidding
The mathematical formulation discussed above results in co-
ordinated wind-thermal bidding. For comparison purposes, in-
dividual thermal and individual wind bidding results are also
AL-AWAMI AND EL-SHARKAWI: COORDINATED TRADING OF WIND AND THERMAL ENERGY 283
needed. In this paper, individual thermal optimization is per-
formed by setting all the realized wind scenarios to zero
for all , , and . To run individual wind optimization, the fuel
costs of all thermal units are set to extremely high values.
IV. TEST SYSTEM
A system with one wind plant and ve thermal units is con-
sidered. The wind plant installed capacity is 200 MW, while the
thermal plant total installed capacity is 340 MW. The thermal
units operating characteristics are given in the Appendix.
Both the expected value and the standard deviation of the day-
ahead hourly wind power forecast are assumed to be available.
The values used here are given in the Appendix. The hourly
standard deviations are selected such that the mean-absolute er-
rors of the hourly forecasts are within the ranges reported in the
literature [11], [26].
Similarly, the wind power ramping rate is assumed to follow
normal distribution whose mean and standard deviation are as-
sumed to be known from historical wind data. In this work, the
expected ramp rate is assumed to be zero and the standard de-
viation is assumed to be 12.5% of installed capacity (25 MW).
These statistics in percentage were derived from publicly avail-
able wind plant data in the Pacic Northwest [27].
Using the wind forecast and ramping rate, a set of
wind power scenarios is generated. The sce-
narios are generated and processed using the technique
explained in Section II. The last 3% of the rearranged scenarios
scenarios are eliminated.
For the energy spot market prices and imbalance prices, the
ARIMA models used in this work are identical to those sug-
gested in [7]. The data used to t these models are taken from
the electricity market of the Iberian Peninsula for the period Jan-
uaryMarch of 2008 [28]. The rst four days of January and the
weekends are excluded; the former to avoid the fact that the new
years data might be outliers, while the latter to avoid any pos-
sible weekly seasonality. Using those ARIMA models, a set of
4000 scenarios was generated for energy prices and another set
of 4000 scenarios was generated for imbalance prices.
The total number of scenarios in the scenario tree is .
The problem as such is too large to be solved using any of
the existing mixed integer programming solvers. Hence, the
number of scenarios must be reduced. The method proposed in
[20] is used to reduce wind, energy price, and imbalance price
scenarios to 5 each, i.e., the reduced scenario tree comprises
scenarios.
For risk control, the condence level used to calculate
is . This is a commonly used value [7].
The model is implemented using CPLEX 12.1, which is
called from the OPL modeling language [29]. The average
computational time of the optimal risk-averse coordinated
bidding strategy is 306 s on a PC with an AMD Phenom
Quad-Core 2.20-GHz CPU and 6 GB of RAM.
V. SIMULATION RESULTS
Several tests are performed on the proposed algorithm. These
include risk-neutral and risk-averse optimization. For compar-
ison, the coordinated and uncoordinated bidding strategies are
shown.
TABLE I
EXPECTED PROFITS OF RISK-NEUTRAL COORDINATED VERSUS
UNCOORDINATED BIDDING STRATEGIES
TABLE II
COMMITMENT SCHEDULE FOR UNCOORDINATED THERMAL
BIDDING,
TABLE III
COMMITMENT SCHEDULE FOR COORDINATED THERMAL
BIDDING,
A. Risk-Neutral Optimization
In this case, the optimization problem is solved with
for uncoordinated wind, uncoordinated thermal, and coordi-
nated wind-thermal bidding strategies. A comparison on the ex-
pected prots of each case is shown in Table I. These results
show a coordination gain as high as 1.81%.
Tables II and III show the thermal unit commitment results
for both uncoordinated and coordinated cases. For comparison,
the differing commitment status due to coordination is shown in
bold. These tables show that coordination results in having Unit
1 committed more often than in the uncoordinated case.
Although Unit 1 is a relatively expensive unit, it is very ex-
ible; it can ramp from 0 MW to full capacity in one hour and its
. Therefore, it is suitable for wind balancing. However,
Unit 1 is not the only unit affected by coordination. Figs. 1 and
2 show the different bidding curves for hours 14 and 21, respec-
tively, for the uncoordinated and coordinated cases for the wind
and thermal plants. Note that in hours 14 and 21, coordination
did not result in any changes in the commitment schedule of any
unit as seen in Tables II and III. As can be observed in both g-
ures, coordination changed the bid thermal quantities substan-
tially.
Another interesting observation is that uncoordinated wind
bid volume is not a function of the energy price. This can be
seen by considering the objective function given in (33). If the
thermal prot term (PFT) is excluded from the objective func-
tion and is set to zero, the energy price can be eliminated
from all the remaining terms; i.e., the optimal solution is not a
function of the energy price. This has been reported in [7] as
well.
284 IEEE TRANSACTIONS ON SUSTAINABLE ENERGY, VOL. 2, NO. 3, JULY 2011
Fig. 1. Bidding curves for hour 14, .
Fig. 2. Bidding curves for hour 21, .
TABLE IV
COMMITMENT SCHEDULE FOR UNCOORDINATED THERMAL
BIDDING,
TABLE V
COMMITMENT SCHEDULE FOR COORDINATED THERMAL
BIDDING,
B. Incorporating Risk Management
In this case, the uncoordinated and coordinated optimization
problems are run with . Table IVshows the commitment
schedules of the thermal units without coordination. Bold digits
in Table IV represent the cases where unit commitment status
differs from that of risk-neutral uncoordinated thermal bidding
strategies (Table II). These results show that the thermal units
tend to be decommitted more often to avoid risky scenarios, thus
improving CVaR.
Table IV shows the commitment schedules of the thermal
units with coordination. Underlined digits in Table V repre-
sent cases where the unit commitment status differs from that
of risk-averse uncoordinated thermal (Table IV).
Fig. 3. Bidding curves for hour 14, .
Fig. 4. Bidding curves for hour 21, .
Comparison of risk-averse uncoordinated and coordinated
thermal commitment schedules shows again that coordination
causes thermal units to be committed more often to balance
wind mismatch. Also, comparing Table V with Table III
(risk-neutral coordinated), it is observed that the thermal units
tend to be decommitted more often to reduce risk.
Figs. 3 and 4 show the risk-averse bidding curves
for hours 14 and 21, respectively, for the uncoordinated and co-
ordinated cases for the wind and thermal plants. As can be seen
in both gures, coordination changed the bid thermal quanti-
ties substantially. Here, however, uncoordinated wind bid is a
function of the energy price. This is due to the fact that with
the CVaR term, energy price can no longer be eliminated
from all the terms in the objective function.
To study the effect of risk-aversion on the optimal bids more
closely, Figs. 5 and 6 show the different bids with and without
risk aversion for hours 14 and 21, respectively. These two g-
ures indicate that risk-averse bid volumes are always less than
or equal to risk-neutral bid volumes. This is expected as the
wind plant tends to reduce its bid to avoid running short and
the thermal units tend to be decommitted more often to avoid
periods of nonprotable operation.
To investigate further the impact of risk aversion, the ex-
pected prots and CVaR for different values of are shown in
Figs. 7 and 8 for individual wind and individual thermal bid-
ding strategies, respectively. As expected, when increases,
the CVaR increases and the expected prots decreases. For in-
dividual wind bidding, increasing from 0 to 0.7 increases the
CVaR by more than 53% for a reduction in expected prots of
only 3%. For individual thermal bidding and the same range of
, CVaR increases by as much as 190% for a reduction of only
2% in expected prots.
AL-AWAMI AND EL-SHARKAWI: COORDINATED TRADING OF WIND AND THERMAL ENERGY 285
Fig. 5. Bidding curves for hour 14, and .
Fig. 6. Bidding curves for hour 21, and .
Fig. 7. Expected prots and CVaR for uncoordinated wind bidding.
Fig. 8. Expected prots and CVaR for uncoordinated thermal bidding.
Next, a comparison in prots and CVaR between the coordi-
nated bids and the sum of uncoordinated bids is carried out for
different values of . As shown in Fig. 9, the set of points be-
longing to coordinated bids are higher and mostly to the right of
the uncoordinated bids. Fig. 10 shows coordination gains in ex-
pected prots and CVaRas percentages of uncoordinated prots
and CVaR for different values of . The value of coordination is
very noticeable in the gure. At , for example, prot gains
are 1.8% and CVaR gains are higher than 30%. In addition, co-
ordination gains in prots can be higher than 4% for almost the
same CVaR of the sum of uncoordinated bids (see the case of
). These results are among the main contributions of
this paper.
Fig. 9. Expected prots and CVaR for coordinated and uncoordinated bidding.
Fig. 10. Gains on expected prots and CVaR due to coordination.
VI. DISCUSSION
In this work, it is assumed that both the wind and thermal
plants are connected to the same bus, exposed to the same en-
ergy price, and owned by one producer. However, if some or all
of these units are connected to different buses and exposed to
different market prices, then coordination can still be possible
should the market regulations allow. Also, if the generators are
owned by more than one producer, these producers can form
a coalition if market regulations allow, as discussed in [12]. In
that case, coordination benets should be distributed among the
different participants in the coalition in a fair and transparent
manner, as discussed in [12].
Performing a longer-term study to examine the benets of
coordination in terms of both expected prots and risk control
seems to be an important future research direction. A cost-ben-
et feasibility analysis of installing new thermal units for an
existing wind plant participating in the spot market to mitigate
risks associated with wind uncertainty is another relevant re-
search point. The formulation presented in this paper forms the
basis for these studies. Note that such applications would require
286 IEEE TRANSACTIONS ON SUSTAINABLE ENERGY, VOL. 2, NO. 3, JULY 2011
TABLE VI
THERMAL UNITS DATA
TABLE VII
HOURLY EXPECTED VALUE AND STANDARD DEVIATION OF DAY-AHEAD WIND POWER FORECAST
substantially more processing time than the single-day simula-
tion presented in this work. This should not be considered a lim-
itation, though, as these planning studies are conducted ofine.
In addition, some systems have intraday markets, which give
market participants the opportunity to adjust their day-ahead
schedules a few hours before real-time. Adjustment markets
help wind plants mitigate wind uncertainty risks [7]. Studying
the benets of wind-thermal coordination in a system having an
adjustment market can be another interesting research direction.
VII. CONCLUSION
Coordinated bidding among wind plants and thermal units
has been proposed as a risk control mechanism. The objective is
to maximize the expected prots while avoiding the risks asso-
ciated with periods of high wind imbalance or lowwind/thermal
revenues. The CVaR is used as a risk management metric.
Simulation results show the following:
Wind-thermal coordination can cause the combined ex-
pected prots to increase while substantially improving the
combined CVaR.
Coordination results in the thermal units being committed
more often to help balance any possible wind imbalance.
Risk-averse bidding volumes are always less than or
equal to risk-neutral bidding volumes. This is because
wind plants are encouraged to reduce their bids to avoid
high under-generation penalties and thermal units are
decommitted more often to avoid periods of nonprotable
operation.
APPENDIX
The data corresponding to the thermal units considered in this
paper are given in Table VI. The hourly wind power forecast
data are given in Table VII.
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Ali T. Al-Awami (S08) received the B.Sc. and
M.Sc. degrees in electrical engineering from King
Fahd University of Petroleum and Minerals, Saudi
Arabia, in 2000 and 2005, respectively. He is now
working towards the Ph.D. degree at the University
of Washington, Seattle, WA.
In 2000, he joined the Saudi Electricity Company
as a control engineer in the System Operation
Department. In 2002, he joined the Electrical En-
gineering Department at KFUPM as a Graduate
Assistant, where he is currently a Lecturer. He
authored and coauthored several papers and book chapter in his research areas.
His research interests include power system operation and optimization and the
integration of renewable energy sources into the power grid.
Mohamed A. El-Sharkawi (S76M80SM83
F95) received the Ph.D. degree in electrical engi-
neering from the University of British Columbia in
1980.
In 1980, he joined the University of Washington,
Seattle, WA, as a faculty member where he is
presently a Professor of Electrical Engineering. He
also served as the Associate Chair and the Chairman
of Graduate Studies and Research. He has been
the Founding Chairman of numerous IEEE task
forces and working groups and subcommittees and
published over 200 papers and book chapters in his research areas. He authored
two textbooks on Fundamentals of Electric Drives and Electric Energy: An
Introduction. He also authored and coauthored ve research books in the area
of intelligent systems and power systems. He holds ve licensed patents in
the area of renewable energy VAR management and minimum arc sequential
circuit breaker switching.