Strengthening Retailer Resilience: Robust Optimization for Profit Maximization and Risk Mitigation in the Nordic Electricity Market

Due to environmental and economic incentives in the electricity sector, various energy sources are transitioning toward electrification more rapidly than ever before. Consequently, the electricity market serves as the economic foundation for diverse energy types in the future, introducing greater complexity to market modeling. This complexity necessitates accurate and holistic electricity market modeling that integrates multiple sources of uncertainty and risk. Furthermore, addressing these uncertainties and risks requires practical methods for the decision-making process. In this paper, supply, demand, and regulation market uncertainties are modeled through residual supply curve scenarios, price elasticity scenarios, and price difference scenarios, respectively. Additionally, Conditional Value at Risk (CVaR) and Independent System Operator (ISO) penalty risks are considered. Finally, a robust-stochastic model is developed to hedge risks and enhance retailers’ decision-making capabilities. As a result, energy prices are reduced significantly, and the effects of different demand collaboration levels in Demand Response Programs (DRP) are demonstrated.