A Risk Averse Stochastic Resource Allocation Strategy for a DisCo for Optimal Energy Procurement from Day Ahead and Intraday Markets

Portfolio optimization is an important tool used by a distribution company (DisCo) to minimize the total cost of energy procurement. The power exchanges, which offer a competitive platform, is one of the options for buying or selling energy. There are two major markets in the power exchanges- day ahead market (DAM) and real time market (RTM)- with different prices and uncertainty. A major challenge for DisCo is to decide the proportion in which it should buy or sell in DAM and RTM. This paper proposes a risk-averse stochastic resource allocation methodology for the DisCo to decide the portfolio of energy procurement from the DAM and RTM markets for the next day considering the power exchange price uncertainty. Also, a metric is proposed to evaluate the optimal window size for estimating the covariance matrix. Moreover, an efficient frontier is obtained for each time block to aid the DisCo in deciding the split based on its risk appetite. The results are shown for the price data from IEX, India's dominant power exchange.