Optimizing profits from hydroelectricity production

This paper presents a deterministic and a stochastic mathematical model for maximizing the profits obtained by selling electricity produced through a cascade of dams and reservoirs in a deregulated market. The first model is based on deterministic electricity prices while the other integrates price stochasticity through the management of a tree of potential price scenarios. Numerical results based on historical data demonstrate the superiority of the stochastic model over the deterministic one. It is also shown that price volatility impacts the profits obtained by the stochastic model.

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