Risky power forward contracts for wind aggregation

Risky power contracts are introduced for enabling wind power aggregation. First, the problem of optimal risky and firm power contract offering in the forward market is formulated in the single wind farm setting. Analytical solutions are obtained, and the concepts of fair price of wind power and price of unitized risk are introduced. The more general setting of two wind farms both trading risky and firm power is studied, in which both wind farms seek to benefit from wind aggregation. The problem of a contract offering game in the forward market is formulated. Analytical solutions are obtained for the best responses that reveal clear insights into the optimal firm and risky contract offering for each wind farm. Complete characterization of the equilibria of the game is then obtained analytically. A generalization of the fair price to the two wind farm setting is derived, which characterizes the value of wind aggregation. With the generalized fair prices, all equilibria are also efficient, namely, they achieve the same total profit as forming a coalition of the two wind farms.