Option Portfolio Arbitrage Strategy for Gas Power Generator under the Context of Carbon Neutrality

doi:10.12204/j.issn.1000-7229.2022.04.002

Abstract

Abstract:

In the context of carbon neutrality, fast response natural gas power generators and new energy storage systems, such as power-to-gas (P2G) and batteries, will play a crucial role in the power system. However, due to the high fuel cost of natural gas power generators, they will face financial risks in the electricity market. The purpose of this paper is to design an approach to apply the financial options, especially short put options, long put options and short call options, energy storage devices involving P2G and battery to earn extra monetary benefits during the idle hours of a gas-fired power generators in an electricity market and to also hedge the risk of electricity price fluctuations. For short put with the energy storage devices, it has considered the P2G and the battery. To determine the optimal weight of the three types of options to invest, they will be arranged into a portfolio by using the mean-variance theory. Case studies results verify that the risk management strategy proposed in this paper can help natural gas power generators play a better role in the low-carbon transformation of the power system.

Key words: gas-fired generator, short put options, long put options, short call options, portfolio optimization, power to gas(P2G), financial derivatives, risk management

CLC Number:

TM619

GU Weide, LENG Yuan, LAI Shuying, QIU Jing, TAO Yuechuan, ZHAO Junhua. Option Portfolio Arbitrage Strategy for Gas Power Generator under the Context of Carbon Neutrality[J]. ELECTRIC POWER CONSTRUCTION, 2022, 43(4): 10-19.

Figures/Tables 13

Fig.1 The relationship between the time slot and the time period

Fig.2 Operation mechanism of general short put options

Table 1 Comparisons between P2G and battery

Fig.3 Operation mechanism of general long put options

Fig.4 Operation mechanism of general short call options

Fig.5 Distribution of the electricity price in three years

Fig.6 Profit and cost of short put for every 30 minutes

Fig.7 Elationship between energy storage and electricity price

Fig.8 Profit and cost of long put for every 30 minutes

Fig.9 Profit and cost of short call for every 30 minutes

Table 2 Simulation results of profits, returns and risks for three years

Fig.10 Mean-variance diagram

Fig.11 Optimal portfolio weights among three types of options

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