Optimal scheduling for profit maximization of energy storage merchants considering market impact based on dynamic programming

Liu, Jian; Bo, Rui; Wang, Siyuan; Chen, Haotian

doi:10.1016/j.cie.2021.107212

Optimal scheduling for profit maximization of energy storage merchants considering market impact based on dynamic programming

Journal Article · Wed Mar 03 04:00:00 EST 2021 · Computers and Industrial Engineering

DOI:https://doi.org/10.1016/j.cie.2021.107212· OSTI ID:1839422

Liu, Jian ^[1]; Bo, Rui ^[2]; Wang, Siyuan ^[2]; Chen, Haotian ^[2]

Missouri Univ. of Science and Technology, Rolla, MO (United States); Missouri University of Science and Technology
Missouri Univ. of Science and Technology, Rolla, MO (United States)

This paper analyzes how electricity merchants' market impact affects merchants' profit. Energy storage has long been studied for its role in maximizing profit, and merchant decisions are assumed to have no impact on market prices. However, the trading decisions of large-scale energy storage merchants (e.g., pumped storage hydro) will affect the market prices. This paper employs dynamic programming theory to investigate merchants' optimal economic dispatch considering the market impact and physical characteristics of storage systems. Our findings show that the State-of-Charge (SOC) based analytical solution significantly facilitates energy storage merchants' decision-making. The SOC range is segmented into three regions by two optimal SOC reference points, which depend on the available energy in storage, given prices, and market impact. By comparing the current storage SOC with the reference points, the merchant can get the corresponding optimal actions. We analytically show that if the merchant neglects the market impact on the power market, she will exaggerate her expected profit when the price-taker and price-maker merchants have the same generating and pumping upper limits offered to Independent System Operators (ISOs). Furthermore, the profit-maximizing merchant must, therefore, assay to balance the trade-off correctly between the intensity of market impact and the dispatched power. Our findings are verified by numerical simulation, and results demonstrate the ramifications for electricity merchants in energy arbitrage decisions.

View Accepted Manuscript (DOE)

Research Organization:: Missouri Univ. of Science and Technology, Rolla, MO (United States)

Sponsoring Organization:: USDOE Office of Energy Efficiency and Renewable Energy (EERE), Renewable Power Office. Water Power Technologies Office

Grant/Contract Number:: EE0008781

OSTI ID:: 1839422

Alternate ID(s):: OSTI ID: 1782266

Journal Information:: Computers and Industrial Engineering, Journal Name: Computers and Industrial Engineering Vol. 155; ISSN 0360-8352

Publisher:: ElsevierCopyright Statement

Country of Publication:: United States

Language:: English

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25 ENERGY STORAGE
29 ENERGY PLANNING, POLICY, AND ECONOMY
Dynamic programming
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Market impact
Power market

Optimal scheduling for profit maximization of energy storage merchants considering market impact based on dynamic programming

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