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2253. Generalized Optimal Stopping for Decision Making in Energy Markets
Contributed abstract in session WD-57: Real Option Analysis, stream Real Option Analysis.
Wednesday, 14:30-16:00Room: S06 (building: 101)
Authors (first author is the speaker)
| 1. | Frank Heinz
|
| E.ON Energy Research Center, RWTH Aachen University | |
| 2. | Reinhard Madlener
|
| School of Business and Economics / E.ON Energy Research Center, RWTH Aachen University |
Abstract
This article presents a generalized method for multi-dimensional optimal stopping, tailored to problems that arise in electricity markets, when addressing decisions under uncertainty. Electricity markets are highly transparent, and considerable research is available that is dealing with the impact of the ongoing energy transition. However, this class of problems does not fit well to established methods for optimal stopping, and therefore, we propose an alternative, generalized approach.
We derive a general form of the Hamilton-Jacobi-Bellman equation and set up an example which represents the retrofit of an electrolyzer to an offshore wind farm under the conditions of a transitioning day-ahead market for electricity. We demonstrate the functionality of this approach by solving the optimal stopping problem numerically and show that the method supports decision making well on such an irreversible investment under uncertainty.
Keywords
- Programming, Dynamic
- Decision Theory
- Electricity Markets
Status: accepted
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