Published in: Proceedings of PMAPS 2016 (Beijing, China, 16-20 Oct. 2016)
Publisher: IEEE (Institute of Electrical and Electronics Engineers)
Pages: 6
Conference Location: Beijing, China
Year: 2016
Link: Link DOI: 10.1109/PMAPS.2016.7764181

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This article offers a comparative view of applied risk management in market-based operation of the next generation power grid, based on the principles and lessons of risk management developed in the financial sector. It argues that the dual signatures of public and private goods on electricity products and services in wholesale power markets are the roots of many fundamental challenges including risk management, and due to the symbiotic public and private goods properties of electricity products, the general risk management framework should be more appropriate to support the decisions under uncertainty, instead of the classic ones for complete market environments. Further, we overview the subjective and objective aspects of risk management followed by explanation of three managing philosophies concerning ontological attitude. Based on the conceptual discussions, we show the importance of in-depth understanding of characteristics of the next generation power grid to risk management. In addition, the unique features of risk analysis in power system and market operations are discussed, comparing to those in the financial sector. Finally, some lessons learned from practices in financial sectors as well as the challenges to the power industry are summarized.

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