The impact of wind uncertainty on the strategic valuation of distributed electricity storage

Crespo Del Granado, Pedro and Wallace, Stein William and Pang, Zhan (2016) The impact of wind uncertainty on the strategic valuation of distributed electricity storage. Computational Management Science, 13 (1). pp. 5-27. ISSN 1619-697X

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Abstract

The intermittent nature of wind energy generation has introduced a new degree of uncertainty to the tactical planning of energy systems. Short-term energy balancing decisions are no longer (fully) known, and it is this lack of knowledge that causes the need for strategic thinking. But despite this observation, strategic models are rarely set in an uncertain environment. And even if they are, the approach used is often inappropriate, based on some variant of scenario analysis—what-if analysis. In this paper we develop a deterministic strategic model for the valuation of electricity storage (a battery), and ask: “Though leaving out wind speed uncertainty clearly is a simplification, does it really matter for the valuation of storage?”. We answer this question by formulating a stochastic programming model, and compare its valuation to that of its deterministic counterpart. Both models capture the arbitrage value of storage, but only the stochastic model captures the battery value stemming from wind speed uncertainty. Is the difference important? The model is tested on a case from Lancaster University’s campus energy system where a wind turbine is installed. From our analysis, we conclude that considering wind speed uncertainty can increase the estimated value of storage with up to 50 % relative to a deterministic estimate. However, we also observe cases where wind speed uncertainty is insignificant for storage valuation.

Item Type:
Journal Article
Journal or Publication Title:
Computational Management Science
Additional Information:
The final publication is available at Springer via http://dx.doi.org/10.1007/s10287-015-0235-0
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1700/1710
Subjects:
ID Code:
78857
Deposited By:
Deposited On:
31 Mar 2016 09:28
Refereed?:
Yes
Published?:
Published
Last Modified:
04 Apr 2020 03:37