A Mixed Integer Quadratic Program for Valuing the Impact of Price and Forecast Uncertainty for Wind Generators

Wind plant owners face financial risk in wholesale markets: a wind shortfall may force repurchase at a higher real-time price, but reducing the day-ahead offer can be read by regulators as physical withholding. We formulate and solve a mixed-integer quadratic program that prices the uncertain portion of a generator’s forecast to hedge this risk while addressing withholding concerns, exploit the structure of the MIQP inputs to add constraints that improve computation time, and simulate a real-world application for a wind farm in New York using historical forecasts and NYISO prices.