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3655. Extending Least-Squares Monte Carlo to a System-Oriented Study on Storage Operation

Invited abstract in session MA-9: Modelling and Economics of Storage Technologies in Energy Markets, stream Energy Markets.

Monday, 8:30-10:00
Room: 10 (building: 116)

Authors (first author is the speaker)

1. Benjamin Böcker
House of Energy Markets and Finance, University of Duisburg-Essen
2. Maike Spilger
Universität Duisburg-Essen
3. Christoph Weber
University Duisburg-Essen

Abstract

In energy systems dominated by renewables, the high share of volatile and uncertain electricity generation raises the need for flexibility for balancing supply and demand. Operating a substantial share of energy storage capacities increases the smoothing impacts on electricity prices. Therefore, a system-oriented approach considering uncertainties as well as endogenous price effects is crucial to optimize the operation of energy storage systems in renewable-dominated energy systems.
The valuation of energy storage systems under consideration of uncertainties is usually solved by determining optimal operating decisions for given price realizations. Current state-of-the-art approaches, such as least squares Monte Carlo, approximate value functions to recursively determine a dynamic decisions considering the uncertainty of exogenous electricity prices.
Our work introduces a hybrid model that combines a least squares Monte Carlo approach with a fundamental model for determining endogenous electricity prices based on a piecewise linear merit order. Here, interactions between storage operations on price determination are explicitly depicted. The developed model thus enables the stochastic valuation of storage operation in the system context and considers the uncertainties of renewable energies, electricity demand, and the technical availability of generation capacities.

Keywords

Status: accepted

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