Managing Power Contracts Under Uncertainty: Comparing Deterministic Equivalent (DEQ) and Stochastic Dual Dynamic Programming (PDDE)

This work addresses the stochastic optimization of the contract portfolio of an electric energy trader, considering purchase and sale decisions under uncertainty and exposure to the short-term market. Two solution approaches are compared: the deterministic equivalent formulation (DEQ) and the Stochastic Dual Dynamic Programming (PDDE). The evaluation, carried out through computational experiments, indicates that the DEQ has scalability limitations due to the growth of the scenario tree and the high memory consumption. On the other hand, the PDDE is more suitable for larger instances, with greater stability and computational efficiency.