Risk mitigation using forward contract in power market

Spot price volatility in a competitive electricity market has exposed the suppliers to a considerable uncertainty. This uncertainty may be reduced by selling the energy in forward markets at conservative prices, but this will preclude them from potential benefits should the future spot prices turn hogher. Hence, the suppliesrs have to decide how much energy to sell in the spot market and how much to sell forward in order to minimize the risk and maximize the profits. In this paper, a method of maximizing the income of the suppliers for an acceptable level of risk has been proposed.