Wind energy allocation strategies for long-term contracts in open energy markets

Electricity deregulation and the increase of renewable energy penetration are playing an important role in developed countries. In this work, a study of the decision-making process of energy traders is presented. We develop a theoretical solution for the sourcing trade-off, that a utility company faces when designing its long-term energy allocation strategy. The market mechanism of long-term contracts, where power producers and retailers engage, is presented and analyzed through a game theoretic approach. By introducing the concept of indistinguishable players and binary games, we construct a non-cooperative game. Nash equilibrium and Expected Utility theory are used to determine the optimal strategies for utility companies to minimize their purchasing costs. We devise an energy portfolio, for a utility company, to hedge against intermittent electricity production and secondly an energy price negotiation scheme for bilateral contracts with intermittent energy producers.