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Optimal Energy Commitments with Storage and Intermittent Supply

Author

Listed:
  • Jae Ho Kim

    (Department of Electrical Engineering, Princeton University, Princeton, New Jersey 08540)

  • Warren B. Powell

    (Department of Operations Research and Financial Engineering, Princeton University, Princeton, New Jersey 08540)

Abstract

We formulate and solve the problem of making advance energy commitments for wind farms in the presence of a storage device with conversion losses, mean-reverting price process, and an autoregressive energy generation process from wind. We derive an optimal commitment policy under the assumption that wind energy is uniformly distributed. Then, the stationary distribution of the storage level corresponding to the optimal policy is obtained, from which the economic value of the storage as the relative increase in the expected revenue due to the existence of storage is obtained.

Suggested Citation

  • Jae Ho Kim & Warren B. Powell, 2011. "Optimal Energy Commitments with Storage and Intermittent Supply," Operations Research, INFORMS, vol. 59(6), pages 1347-1360, December.
    • Handle: RePEc:inm:oropre:v:59:y:2011:i:6:p:1347-1360
    DOI: 10.1287/opre.1110.0971
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    References listed on IDEAS

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