Joint Optimization of Forward Contract and Operating Rules for Cascade Hydropower Reservoirs
Publication: Journal of Water Resources Planning and Management
Volume 148, Issue 2
Abstract
Forward contract is a useful tool for hydropower producers to hedge revenue uncertainty sourced from varied spot prices. However, few studies have been explored to jointly derive the optimal forward contract and operating rules to guide hydropower operations. To address this issue, the following steps for cascade reservoirs are proposed: (1) a two-layer nested approach is used to derive optimal contract targets coordinated with operation trajectory (saying reservoir water level time series) by inputting deterministic inflows, (2) the forms of the operating rules are then identified based on the optimal operation trajectory from the first step, and (3) a simulation-based optimization approach is used to jointly refine the optimal contract and operating rules with the forms identified in the second step. With China’s Hubei Province as the market boundary, the Qing River cascade reservoir system was selected as the case study. The results show that (1) the two-layer nested approach could find the optimal deterministic operation together with contract targets; (2) the total cascade output is related to both available energy and spot price, with the coefficients of determination for each month mostly greater than 0.5; and (3) the refined operating rules and contract effectively improved the annual hydropower revenue by 3.65% ($14.15 million) compared to that of the conventional operating rules. The proposed method to jointly derive forward contract and operating rules is helpful for gaining more revenue under long-term hydropower operations.
Get full access to this article
View all available purchase options and get full access to this article.
Data Availability Statement
All data, models, or code generated or used during the study are available from the corresponding author by request.
Acknowledgments
This study was supported by the National Natural Science Foundation of China (U1865201; 51861125102) and Hubei Qingjiang Hydroelectric Development Co. Ltd. (ENQJ-TD1-FW-2019185). Sincere gratitude is extended to the editor and anonymous reviewers for their professional comments and corrections, which greatly improved the presentation of the paper.
References
Arvaniti, N. V., and J. Rosing. 1970. “Composite representation of a multireservoir hydroelectric power system.” IEEE Trans. Power Appar. Syst. 89 (2): 319–326. https://doi.org/10.1109/TPAS.1970.292595.
Bhaskar, N. R., and E. E. Whitlatch Jr. 1980. “Derivation of monthly reservoir release policies.” Water Resour. Res. 16 (6): 987–993. https://doi.org/10.1029/WR016i006p00987.
Bjorgan, R., C.-C. Liu, and J. Lawarree. 1999. “Financial risk management in a competitive electricity market.” IEEE Trans. Power Syst. 14 (4): 1285–1291. https://doi.org/10.1109/59.801886.
Campo, R. A. 2002. “Probabilistic optimality in long-term energy sales.” IEEE Trans. Power Syst. 17 (2): 237–242. https://doi.org/10.1109/TPWRS.2002.1007887.
Carrion, M., A. J. Conejo, and J. M. Arroyo. 2007. “Forward contracting and selling price determination for a retailer.” IEEE Trans. Power Syst. 22 (4): 2105–2114. https://doi.org/10.1109/TPWRS.2007.907397.
Celeste, A. B., and M. Billib. 2009. “Evaluation of stochastic reservoir operation optimization models.” Adv. Water Resour. 32 (9): 1429–1443. https://doi.org/10.1016/j.advwatres.2009.06.008.
Celeste, A. B., and M. Billib. 2012. “Improving implicit stochastic reservoir optimization models with long-term mean inflow forecast.” Water Resour. Manage. 26 (9): 2443–2451. https://doi.org/10.1007/s11269-012-0025-1.
Chang, Y.-T., L.-C. Chang, and F.-J. Chang. 2005. “Intelligent control for modeling of real-time reservoir operation, part II: Artificial neural network with operating rule curves.” Hydrol. Processes 19 (7): 1431–1444. https://doi.org/10.1002/hyp.5582.
Chatzigiannis, D. I., G. A. Dourbois, P. N. Biskas, and A. G. Bakirtzis. 2016. “European day-ahead electricity market clearing model.” Electr. Power Syst. Res. 140 (Nov): 225–239. https://doi.org/10.1016/j.epsr.2016.06.019.
Conejo, A. J., R. Garcia-Bertrand, M. Carrion, A. Caballero, and A. de Andres. 2008. “Optimal involvement in futures markets of a power producer.” IEEE Trans. Power Syst. 23 (2): 703–711. https://doi.org/10.1109/TPWRS.2008.919245.
Deb, K., A. Pratap, S. Agarwal, and T. A. M. T. Meyarivan. 2002. “A fast and elitist multiobjective genetic algorithm: NSGA-II.” IEEE Trans. Evol. Comput. 6 (2): 182–197. https://doi.org/10.1109/4235.996017.
El Khatib, S., and F. D. Galiana. 2007. “Negotiating bilateral contracts in electricity markets.” IEEE Trans. Power Syst. 22 (2): 553–562. https://doi.org/10.1109/TPWRS.2007.894858.
Fang, D., J. Wu, and D. Tang. 2012. “A double auction model for competitive generators and large consumers considering power transmission cost.” Int. J. Electr. Power Energy Syst. 43 (1): 880–888. https://doi.org/10.1016/j.ijepes.2012.05.041.
Feng, Z.-K., W.-J. Niu, C.-T. Cheng, and X.-Y. Wu. 2018. “Optimization of large-scale hydropower system peak operation with hybrid dynamic programming and domain knowledge.” J. Cleaner Prod. 171 (Jan): 390–402. https://doi.org/10.1016/j.jclepro.2017.09.257.
Gabriel, S. A., A. J. Conejo, M. A. Plazas, and S. Balakrishnan. 2006. “Optimal price and quantity determination for retail electric power contracts.” IEEE Trans. Power Syst. 21 (1): 180–187. https://doi.org/10.1109/TPWRS.2005.860920.
Gernaat, D. E. H. J., P. W. Bogaart, D. P. van Vuuren, H. Biemans, and R. Niessink. 2017. “High-resolution assessment of global technical and economic hydropower potential.” Nat. Energy 2 (10): 821–828. https://doi.org/10.1038/s41560-017-0006-y.
Giuliani, M., A. Castelletti, F. Pianosi, E. Mason, and P. M. Reed. 2016. “Curses, tradeoffs, and scalable management: Advancing evolutionary multiobjective direct policy search to improve water reservoir operations.” J. Water Resour. Plann. Manage. 142 (2): 04015050. https://doi.org/10.1061/(ASCE)WR.1943-5452.0000570.
Gong, Y., P. Liu, B. Ming, W. Xu, K. Huang, and X. Li. 2021. “Deriving pack rules for hydro-photovoltaic hybrid power systems considering diminishing marginal benefit of energy.” Appl. Energy 304 (1): 11785.
Guariso, G., and M. Sangiorgio. 2020. “Performance of implicit stochastic approaches to the synthesis of multireservoir operating rules.” J. Water Resour. Plann. Manage. 146 (6): 04020034. https://doi.org/10.1061/(ASCE)WR.1943-5452.0001200.
Han, J.-C., G.-H. Huang, H. Zhang, Y.-S. Zhuge, and L. He. 2012. “Fuzzy constrained optimization of eco-friendly reservoir operation using self-adaptive genetic algorithm: A case study of a cascade reservoir system in the Yalong River, China.” Ecohydrology 5 (6): 768–778. https://doi.org/10.1002/eco.267.
He, S., S. Guo, K. Chen, L. Deng, Z. Liao, F. Xiong, and J. Yin. 2019a. “Dataset for reservoir impoundment operation coupling parallel dynamic programming with importance sampling and successive approximation.” Data Brief 26 (Oct): 104440. https://doi.org/10.1016/j.dib.2019.104440.
He, S., S. Guo, K. Chen, L. Deng, Z. Liao, F. Xiong, and J. Yin. 2019b. “Optimal impoundment operation for cascade reservoirs coupling parallel dynamic programming with importance sampling and successive approximation.” Adv. Water Resour. 131 (Sep): 103375. https://doi.org/10.1016/j.advwatres.2019.07.005.
He, S. K., S. L. Guo, J. B. Yin, Z. Liao, H. Li, and Z. J. Liu. 2022. “A novel impoundment framework for a mega reservoir system in the upper Yangtze River basin.” Appl. Energy 305 (1): 117792.
Hubei Provincial Development and Reform Commission. 2017. “Notice on printing and distributing the 13th five year plan for energy development in Hubei Province.” Accessed October 28, 2017. http://fgw.hubei.gov.cn/fbjd/zc/gfwj/gf/201711/t20171113_1543925.shtml.
Hubei Provincial Development and Reform Commission. 2019. “Notice of the adjustment of electricity price from hydropower.” Accessed June 28, 2019. http://fgw.hubei.gov.cn/fbjd/zc/zcwj/tz/201907/t20190711_3763851.shtml.
Jamasb, T., and M. G. Pollitt. 2015. “Why and how to subsidise energy R + D: Lessons from the collapse and recovery of electricity innovation in the UK.” Energy Policy 83 (Aug): 197–205. https://doi.org/10.1016/j.enpol.2015.01.041.
Ji, C.-M., T. Zhou, and H.-T. Huang. 2014. “Operating rules derivation of jinsha reservoirs system with parameter calibrated support vector regression.” Water Resour. Manage. 28 (9): 2435–2451. https://doi.org/10.1007/s11269-014-0610-6.
Kelman, R., L. A. N. Barroso, and M. F. Pereira. 2001. “Market power assessment and mitigation in hydrothermal systems.” IEEE Trans. Power Syst. 16 (3): 354–359. https://doi.org/10.1109/59.932268.
Koutsoyiannis, D., and A. Economou. 2003. “Evaluation of the parameterization-simulation-optimization approach for the control of reservoir systems.” Water Resour. Res. 39 (6): 1–17. https://doi.org/10.1029/2003WR002148.
Labadie, J. W. 2004. “Optimal operation of multireservoir systems: State-of-the-art review.” J. Water Resour. Plann. Manage. 130 (2): 93–111. https://doi.org/10.1061/(ASCE)0733-9496(2004)130:2(93).
Lei, X., J. Zhang, H. Wang, M. Wang, S.-T. Khu, Z. Li, and Q. Tan. 2018. “Deriving mixed reservoir operating rules for flood control based on weighted non-dominated sorting genetic algorithm II.” J. Hydrol. 564 (Sep): 967–983. https://doi.org/10.1016/j.jhydrol.2018.07.075.
Li, H., P. Liu, S. Guo, L. Cheng, F. Huang, M. Feng, S. He, and B. Ming. 2021. “Deriving adaptive long-term complementary operating rules for a large-scale hydro-photovoltaic hybrid power plant using ensemble Kalman filter.” Appl. Energy 301 (1): 117482.
Li, L., P. Liu, D. E. Rheinheimer, C. Deng, and Y. Zhou. 2014. “Identifying explicit formulation of operating rules for multi-reservoir systems using genetic programming.” Water Resour. Manage. 28 (6): 1545–1565. https://doi.org/10.1007/s11269-014-0563-9.
Li, X., P. Liu, Z. Gui, B. Ming, Z. Yang, K. Xie, and X. Zhang. 2020. “Reducing lake water-level decline by optimizing reservoir operating rule curves: A case study of the Three Gorges Reservoir and the Dongting Lake.” J. Cleaner Prod. 264 (Aug): 121676. https://doi.org/10.1016/j.jclepro.2020.121676.
Liu, H., C. Jiang, and Y. Zhang. 2009. “Portfolio management of hydropower producer via stochastic programming.” Energy Convers. Manage. 50 (10): 2593–2599. https://doi.org/10.1016/j.enconman.2009.06.010.
Liu, P., S. Guo, L. Xiong, W. Li, and H. Zhang. 2006. “Deriving reservoir refill operating rules by using the proposed DPNS model.” Water Resour. Manage. 20 (3): 337–357. https://doi.org/10.1007/s11269-006-0322-7.
Liu, P., S. Guo, X. Xu, and J. Chen. 2011. “Derivation of aggregation-based joint operating rule curves for cascade hydropower reservoirs.” Water Resour. Manage. 25 (13): 3177–3200. https://doi.org/10.1007/s11269-011-9851-9.
Liu, P., L. Li, G. Chen, and D. E. Rheinheimer. 2014. “Parameter uncertainty analysis of reservoir operating rules based on implicit stochastic optimization.” J. Hydrol. 514 (Jun): 102–113. https://doi.org/10.1016/j.jhydrol.2014.04.012.
Lund, J. R., and J. Guzman. 1999. “Derived operating rules for reservoirs in series or in parallel.” J. Water Resour. Plann. Manage. 125 (3): 143–153. https://doi.org/10.1061/(ASCE)0733-9496(1999)125:3(143).
Ming, B., P. Liu, T. Bai, R. Tang, and M. Feng. 2017a. “Improving optimization efficiency for reservoir operation using a search space reduction method.” Water Resour. Manage. 31 (4): 1173–1190. https://doi.org/10.1007/s11269-017-1569-x.
Ming, B., P. Liu, J. Chang, Y. Wang, and Q. Huang. 2017b. “Deriving operating rules of pumped water storage using multiobjective optimization: Case study of the Han to Wei interbasin water transfer project, China.” J. Water Resour. Plann. Manage. 143 (10): 05017012. https://doi.org/10.1061/(ASCE)WR.1943-5452.0000828.
Ming, B., P. Liu, S. Guo, X. Zhang, M. Feng, and X. Wang. 2017c. “Optimizing utility-scale photovoltaic power generation for integration into a hydropower reservoir by incorporating long- and short-term operational decisions.” Appl. Energy 204 (Oct): 432–445. https://doi.org/10.1016/j.apenergy.2017.07.046.
Mo, B., A. Gjelsvik, and A. Grundt. 2001. “Integrated risk management of hydro power scheduling and contract management.” IEEE Trans. Power Syst. 16 (2): 216–221. https://doi.org/10.1109/59.918289.
National Development and Reform Commission. 2020. “Reply to recommendation No. 8689 of the third session of the 13th National People's Congress.” Accessed October 13, 2020. https://www.ndrc.gov.cn/xxgk/jianyitianfuwen/qgrddbjyfwgk/202107/t20210708_1289939.html?code=&state=123.
National Energy Administration. 2015. “Notice on printing and distributing supporting materials for power system reform.” Accessed November 31, 2015. http://www.nea.gov.cn/2015-11/30/c_134867851.htm.
Oliveira, R., and D. P. Loucks. 1997. “Operating rules for multireservoir systems.” Water Resour. Res. 33 (4): 839–852. https://doi.org/10.1029/96WR03745.
Palamarchuk, S. I. 2007. “Bilateral contracts for electricity delivery: Scheduling and arrangement.” In Vol. 1–5 of Proc., 2007 IEEE Lausanne Power Tech, 843–848. New York: IEEE.
Prabavathi, M., and R. Gnanadass. 2015. “Energy bidding strategies for restructured electricity market.” Int. J. Electr. Power Energy Syst. 64 (Jan): 956–966. https://doi.org/10.1016/j.ijepes.2014.08.018.
Saad, M., A. Turgeon, P. Bigras, and R. Duquette. 1994. “Learning disaggregation technique for the operation of long-term hydroelectric power-systems.” Water Resour. Res. 30 (11): 3195–3202. https://doi.org/10.1029/94WR01731.
Sahu, R. K., and D. B. McLaughlin. 2018. “An ensemble optimization framework for coupled design of hydropower contracts and real-time reservoir operating rules.” Water Resour. Res. 54 (10): 8401–8419. https://doi.org/10.1029/2018WR022753.
Sangiorgio, M., and G. Guariso. 2018. “NN-based implicit stochastic optimization of multi-reservoir systems management.” Water 10 (3): 303. https://doi.org/10.3390/w10030303.
Shrestha, G. B., B. K. Pokharel, T. T. Lie, and S. E. Fleten. 2005. “Medium term power planning with bilateral contracts.” IEEE Trans. Power Syst. 20 (2): 627–633. https://doi.org/10.1109/TPWRS.2005.846239.
State Grid Hubei Electric Power. 2020. “Annual reports on power supply information (2008-2019).” Accessed April 24, 2020. http://www.hb.sgcc.com.cn/html/main/col2753/column_2753_1.html.
Terry, L. A., M. V. F. Pereira, T. A. Araripe Neto, L. F. C. A. Silva, and P. R. H. Sales. 1986. “Coordinating the energy generation of the brazilian national hydrothermal electrical generating-system.” Interfaces 16 (1): 16–38. https://doi.org/10.1287/inte.16.1.16.
Tilmant, A., D. Pinte, and Q. Goor. 2008. “Assessing marginal water values in multipurpose multireservoir systems via stochastic programming.” Water Resour. Res. 44 (12): W12431. https://doi.org/10.1029/2008WR007024.
Turgeon, A. 1981. “A decomposition method for the long-term scheduling of reservoirs in series.” Water Resour. Res. 17 (6): 1565–1570. https://doi.org/10.1029/WR017i006p01565.
Xu, W., P. Liu, L. Cheng, Y. Zhou, X. Xia, Y. Gong, and Y. Liu. 2021. “Multi-step wind speed prediction by combining a WRF simulation and an error correction strategy.” Renewable Energy 163 (1): 772–782.
Yi, J., J. W. Labadie, and S. Stitt. 2003. “Dynamic optimal unit commitment and loading in hydropower systems.” J. Water Resour. Plann. Manage. 129 (5): 388–398. https://doi.org/10.1061/(ASCE)0733-9496(2003)129:5(388).
Zhang, J., Z. Li, X. Wang, X. Lei, P. Liu, M. Feng, S. Khu, and H. Wang. 2019. “A novel method for deriving reservoir operating rules based on flood classification-aggregation-decomposition.” J. Hydrol. 568 (Jan): 722–734. https://doi.org/10.1016/j.jhydrol.2018.10.032.
Zhang, W., P. Liu, X. Chen, L. Wang, X. Ai, M. Feng, D. Liu, and Y. Liu. 2016. “Optimal operation of multi-reservoir systems considering time-lags of flood routing.” Water Resour. Manage. 30 (2): 523–540. https://doi.org/10.1007/s11269-015-1175-8.
Zhong, P., W. Zhang, and B. Xu. 2013. “A risk decision model of the contract generation for hydropower generation companies in electricity markets.” Electr. Power Syst. Res. 95 (Feb): 90–98. https://doi.org/10.1016/j.epsr.2012.06.016.
Zhou, Y., S. Guo, P. Liu, C.-Y. Xu, and X. Zhao. 2016. “Derivation of water and power operating rules for multi-reservoirs.” Hydrol. Sci. J. 61 (2): 359–370. https://doi.org/10.1080/02626667.2015.1035656.
Information & Authors
Information
Published In
Journal of Water Resources Planning and Management
Volume 148 • Issue 2 • February 2022
Copyright
© 2021 American Society of Civil Engineers.
History
Received: Mar 22, 2021
Accepted: Oct 14, 2021
Published online: Nov 30, 2021
Published in print: Feb 1, 2022
Discussion open until: Apr 30, 2022
ASCE Technical Topics:
- Business management
- Case studies
- Contracts and subcontracts
- Energy engineering
- Energy sources (by type)
- Engineering fundamentals
- Financial management
- Hydraulic engineering
- Hydraulic structures
- Hydro power
- Joints
- Methodology (by type)
- Practice and Profession
- Pricing
- Renewable energy
- Research methods (by type)
- Reservoirs
- Revenues
- Structural engineering
- Structural members
- Structural systems
- Water and water resources
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.
Cited by
- Zhanxing Xu, Li Mo, Jianzhong Zhou, Xin Zhang, Optimal dispatching rules of hydropower reservoir in flood season considering flood resources utilization: A case study of Three Gorges Reservoir in China, Journal of Cleaner Production, 10.1016/j.jclepro.2023.135975, 388, (135975), (2023).
- Kangdi Huang, Pan Liu, Jong-Suk Kim, Weifeng Xu, Yu Gong, Qian Cheng, Yong Zhou, A model coupling current non-adjustable, coming adjustable and remaining stages for daily generation scheduling of a wind-solar-hydro complementary system, Energy, 10.1016/j.energy.2022.125737, 263, (125737), (2023).
- Mengfei Xie, Suzhen Feng, Jinwen Wang, Maolin Zhang, Cheng Chen, Impacts of Yield and Seasonal Prices on the Operation of Lancang Cascaded Reservoirs, Energies, 10.3390/en15093247, 15, 9, (3247), (2022).
- Kangdi Huang, Peng Luo, Pan Liu, Jong Suk KIM, Yintang Wang, Weifeng Xu, He Li, Yu Gong, Improving complementarity of a hybrid renewable energy system to meet load demand by using hydropower regulation ability, Energy, 10.1016/j.energy.2022.123535, 248, (123535), (2022).