Risk Assessment of User Aggregators in Demand Bidding Markets

Abstract

This paper mainly discusses the demand bidding and risk management of user aggregators by considering profit and risk. The covariance matrix of demand price was used to analyze the risk model under an uncertain demand price. By considering revenue and cost, the demand bidding strategy of user aggregators was derived to obtain the maximum profit. By using a risk-tolerance parameter β, a new demand bidding model for the user aggregators that takes both risk and profit into consideration was formulated. We simulated the risk posed by fluctuating demand prices for user aggregators using this model. Finally, this paper proposes Feasible Particle Swarm Optimization (FPSO) to solve the demand bidding model of user aggregators. Through the dynamic adjustment of control factor parameters in the FPSO, we changed the behavioral characteristics of various types of particles, improved the search efficiency and stability of particles in high-dimensional space, and sought the optimal solution for the system as a whole. This paper provides a parameter adjustment mechanism, improves the capability of algorithm implementation, and increases the probability of finding the optimal solution. The simulation results suggest that a tradeoff between profit and risk needs to be considered in the search process. By doing so, enterprises’ abilities in terms of operation and management control can be enhanced, and effective demand management can be achieved.

Keywords

• demand bidding
• risk management
• covariance matrix
• particle swarm optimization