Minimization of imbalance cost trading wind power on the short term power market

Present power markets are designed for trading conventional generation. For wind generation to participate in short-term energy market lengthy (up to 36 hours) wind power production forecasts are required. Although wind speed forecasting techniques are constantly improving, wind speed forecasts are never perfect and resulting wind power forecast errors imply imbalance costs for wind farm owners. This paper presents a method for minimization of imbalance costs. Stochastic programming is used to generate optimal wind power production bids for short term power market. Wind power forecast error is represented as stochastic parameter. The imbalance costs resulting from this strategy are then compared to the case when wind power production bids on short term power market are based only on wind speed forecast.