Ornstein-Uhlenbeck-Lévy Electricity Portfolios with Wind Energy Contracting: A Theoretical Approach

Genaro Longoria, Alan Davy, Lei Shi

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)


To leverage the potential of integrating renewable sources into electricity portfolios the risk and cost trade-off of intermittency needs to be assessed. From the perspective of a Load Serving Entity (LSE), this work present the theoretical implications of energy allocation from two type of markets: bilateral long-term contracts and real-time trading. The purchasing of energy on both markets and from two different sources: wind energy and conventional generation is formulated with a stochastic procurement model (SPM). The unexpected jumps of spot market prices are modeled with a mean-reverting Lévy process. The wind energy availability is modeled with multiplicative Brownian motion transformed to a Rayleigh probability density function. The risk assessment is defined by the efficient frontier and a user defined risk level. The SPM is tested numerically. The contracted share of wind power is found to range between 8% and 16%. Moreover, the analysis shows the convergence of SPM to an optimal portfolio irrespectively of the wind farm autocorrelation decay rate.

Original languageEnglish
Article number16
JournalTechnology and Economics of Smart Grids and Sustainable Energy
Issue number1
Publication statusPublished - 01 Dec 2018


  • Contract management
  • Electricity portfolio
  • Renewable energy sources
  • Risk analysis
  • Strategic planning


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