Day-ahead bidding at Nord Pool using stochastic programming

From the point of view of a price-taking hydropower producer participating in the day-ahead power market, market prices are highly uncertain. The paper provides a model for determining optimal bidding strategies taking this uncertainty into account. In particular, market price scenarios are generated and a stochastic mixed-integer linear programming model that involves both hydropower production and physical trading aspects is developed. The idea is to explore the effects of including uncertainty explicitly into optimization by comparing the stochastic approach to a deterministic approach. The model is illustrated with data from a Norwegian hydropower producer and the Nordic power market at Nord Pool.