Use of the PAR(p) model in the stochastic dual dynamic programming optimization scheme used in the operation planning of the Brazilian hydropower system

In September 2000, the Brazilian system dispatch and spot prices were calculated twice, using different inflow forecasts for that month, as in the last 5 days of August the inflows to the reservoirs in the South and Southeast regions changed 200%. The first run used a smaller forecasted energy inflow and the second used a higher energy inflow. Contrary to expectations, the spot price in the second run, with the higher energy inflow, was higher than the one found in the first run. This paper describes the problem, presents the special features of the PAR (p) model that allow the described behavior, and shows the solution taken to avoid the problem.