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Optimal strategies for operating energy storage in an arbitrage market

Author

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  • Flatley, Lisa

    (Mathematics Institute, University of Warwick)

  • Mackay, Robert

    (Mathematics Institute, University of Warwick)

  • Waterson, Michael

    (Department of Economics, University of Warwick)

Abstract

We characterise profit-maximising operating strategies, over some time horizon, for an energy store which is trading in an arbitrage market. Our theory allows for leakage, operating inefficiencies and general cost functions. In the special case where the operating cost of a store depends only on its instantaneous power ouput (or input), we present an algorithm to determine the optimal strategies. A key feature is that this algorithm is localised in time, in the sense that the action of the store at a time only requires information about electricity prices over some subinterval of time.creation-date: 2014

Suggested Citation

  • Flatley, Lisa & Mackay, Robert & Waterson, Michael, 2014. "Optimal strategies for operating energy storage in an arbitrage market," The Warwick Economics Research Paper Series (TWERPS) 1048, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1048
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2014/twerp_1048_waterson.pdf
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    References listed on IDEAS

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    1. Grünewald, Philipp & Cockerill, Tim & Contestabile, Marcello & Pearson, Peter, 2011. "The role of large scale storage in a GB low carbon energy future: Issues and policy challenges," Energy Policy, Elsevier, vol. 39(9), pages 4807-4815, September.
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    Cited by:

    1. Monica Giulietti, Luigi Grossi, Elisa Trujillo Baute, and Michael Waterson, 2018. "Analyzing the Potential Economic Value of Energy Storage," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).

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