EURO 2024 Copenhagen
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1571. Impact of storage flexibility in energy markets under risk aversion

Invited abstract in session MB-14: Flexibility in future energy systems, stream Energy Markets.

Monday, 10:30-12:00
Room: 16 (building: 116)

Authors (first author is the speaker)

1. Sining Liu
Laboratory for Energy Systems Analysis, Paul Scherrer Institute; Department of Mechanical and Process Engineering, ETH Zurich,
2. Martin Densing
Energy Economics, PSI
3. Russell McKenna
Laboratory for Energy Systems Analysis, Paul Scherrer Institute
4. Giovanni Sansavini
ETH

Abstract

In this study, we explore the role of storage in multi-period risk-averse energy markets. We consider market agents, namely energy producers and consumers, optimising profits across both energy spot and derivative markets. Each agent acts as a price-taker in the environment where the prices are endogenously determined. The energy producers have storage devices and manage energy flows through charging/discharging. We use coherent risk measurement in its dynamic form to model risk aversion. To solve the agents’ stochastic optimisation problems, we adopt ADMM (alternating direction method of multipliers) algorithm through decomposition and extend the algorithm to the multi-market framework. A case study is conducted involving conventional power plants, pumped hydropower and consumption, with the focus on peak and based load scenarios. Specifically, we investigate how storage flexibility, encompassing charge/discharge and boundary conditions in storage and capacity constraints, influence agents’ behaviours and market outcomes. The relationship between optimal storage strategies and hedging activities in the derivative markets is also examined. Furthermore, we analyse how varying levels of risk aversion affect decision-making processes, along with their effects on prices and profitability.

Keywords

Status: accepted

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