Optimal Storage, Investment and Management under Uncertainty: It is Costly to Avoid Outages!

Abstract

We show how electricity storage is operated optimally when the load net of renewable output is uncertain. We estimate a diurnal Markov-process representation of how Germany's residual load changed from hour to hour and design a simple dynamic stochastic electricity system model with non-intermittent generation technologies and storage. We derive the optimal storage, generator output and capacity levels. If storage capacity replaces some generation capacity, the optimal storage strategy must balance arbitrage (between periods of high and low marginal cost) against precautionary storage to ensure energy is available throughout a long peak in net demand. Solving the model numerically under uncertainty (only the transition probabilities to future loads are known), we compare the results to perfect foresight findings. The latter overestimate the cost-saving potential of energy storage by 27%, as storage can take up arbitrage opportunities that would not be chosen if there was a need for precautionary storage.

On current and future economics of electricity storage

“…In general, economic research on electricity storage is still very limited. However, it has increased in recent years 14–22 …”

“…However, it has increased in recent years. [14][15][16][17][18][19][20][21][22] The major new contributions of this paper are as follows: (i) It serves as a primer on the economics of storage; (ii) it provides a very comprehensive survey and literature review; (iii) it considers all different economic perspectives of central and decentralized storage; (iv) it analyzes all relevant storage technologies; (v) in addition, we also analyze the economic future perspectives for these technologies considering the long-term learning effects regarding the investment costs of the investigated technologies.…”

Europe Beyond Coal - An Economic and Climate Impact Assessment

“…Phasing out coal can also reduce emissions of other local and regional pollutants such as NOx, SO2 and particles, and hence reduce the health and environmental damages from such pollution (Šcasný et al, 2015). On the other hand, phasing out coal in Europe may increase the reliance on imported gas, which has long been an energy security issue in several European countries (Aune et al, 2017), and increased share of intermittent electricity technologies may lead to challenges with regards to grid stability (Geske and Green, 2020). These benefits and costs are not incorporated in our analysis.…”

Stochastic Optimization of Microgrid Operation With Renewable Generation and Energy Storages

“…Dispatchable generators can adjust the generation between zero and maximum generation continuously (7), while the VRES generators have uncertain time varying upper bounds given by weather conditions (8). The demand is uncertain and load shedding can be applied if the system has insufficient capacity (9). Power can be injected and withdrawn from the EES at constant efficiency (10a), but the SOC limits must be respected (10b) and the charge and discharge power must stay within their limits (10c) and (10d).…”

“…In power systems with a high share of VRES where some of the dispatchable capacity is replaced by EES, the EES must contribute to secure the supply of the peak demand. The operation of these systems can be considered as balancing dispatchable generation costs against the risk of scarcity [9]. The system's EES must be operated in such a way that they have sufficient high state-of-charge (SOC) for periods with high demand, and they should also have sufficient low SOC upfront periods with high VRES generation to minimize generation curtailment.…”