An approach for portfolio optimization of energy contracts in the brazilian electric sector

Abstract

Currently in the Brazilian electric sector, the decision about investments in new plants is under the responsibility of private investors, individually or in partnership with state companies. After investing in a plant, the objective of the investor is to maximize its profit which depends on the strategy of energy commercialization: trading energy in the spot market, through bilateral contracts or part in the spot market and part through a mix of contracts. The value of the energy in the spot market changes over time. The price of the contracted energy is fixed during the validity of the contract This paper presents a model for the problem of portfolio optimization of energy contracts under point of view of a generating company. The dynamic of the problem is taken into account, adjusting the portfolio over time on basis of trend of the spot price and possibility of future contracts agreement.