IDEAS home Printed from https://ideas.repec.org/a/spr/orspec/v41y2019i1d10.1007_s00291-018-0527-1.html
   My bibliography  Save this article

A general storage model with applications to energy systems

Author

Listed:
  • A. Lust

    (Karlsruhe Institute of Technology (KIT))

  • K.-H. Waldmann

    (Karlsruhe Institute of Technology (KIT))

Abstract

We consider a general storage system with applications to energy systems. Energy inflow, energy demand and costs interact with an environmental process. In each period, a limited amount of energy can be purchased from a supplementary source of energy at a cost per unit lower than a penalty cost for unmet demand. Sufficient conditions are found for the optimality of a zone-based release rule with critical numbers depending on the current state of the environment. There one buffer is needed to build up a storage level in the usual sense and a second one to protect against possible losses due to the variability in the randomly varying costs for unmet demand. The great versatility of our model is shown within the context of reservoir, hybrid energy and natural gas storage systems.

Suggested Citation

  • A. Lust & K.-H. Waldmann, 2019. "A general storage model with applications to energy systems," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 41(1), pages 71-97, March.
    • Handle: RePEc:spr:orspec:v:41:y:2019:i:1:d:10.1007_s00291-018-0527-1
    DOI: 10.1007/s00291-018-0527-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00291-018-0527-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00291-018-0527-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. C. Bradley Russell, 1972. "An Optimal Policy for Operating a Multipurpose Reservoir," Operations Research, INFORMS, vol. 20(6), pages 1181-1189, December.
    2. Guoming Lai & Mulan X. Wang & Sunder Kekre & Alan Scheller-Wolf & Nicola Secomandi, 2011. "Valuation of Storage at a Liquefied Natural Gas Terminal," Operations Research, INFORMS, vol. 59(3), pages 602-616, June.
    3. John D. C. Little, 1955. "The Use of Storage Water in a Hydroelectric System," Operations Research, INFORMS, vol. 3(2), pages 187-197, May.
    4. Lamond, Bernard F. & Monroe, Susan L. & Sobel, Matthew J., 1995. "A reservoir hydroelectric system: Exactly and approximately optimal policies," European Journal of Operational Research, Elsevier, vol. 81(3), pages 535-542, March.
    5. Nicola Secomandi, 2010. "Optimal Commodity Trading with a Capacitated Storage Asset," Management Science, INFORMS, vol. 56(3), pages 449-467, March.
    6. Deepti Rani & Maria Moreira, 2010. "Simulation–Optimization Modeling: A Survey and Potential Application in Reservoir Systems Operation," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 24(6), pages 1107-1138, April.
    7. J. Michael Harrison & Sidney I. Resnick, 1976. "The Stationary Distribution and First Exit Probabilities of a Storage Process with General Release Rule," Mathematics of Operations Research, INFORMS, vol. 1(4), pages 347-358, November.
    8. P. Mujumdar & B. Nirmala, 2007. "A Bayesian Stochastic Optimization Model for a Multi-Reservoir Hydropower System," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 21(9), pages 1465-1485, September.
    9. Matt Thompson & Matt Davison & Henning Rasmussen, 2009. "Natural gas storage valuation and optimization: A real options application," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(3), pages 226-238, April.
    10. Marano, Vincenzo & Rizzo, Gianfranco & Tiano, Francesco Antonio, 2012. "Application of dynamic programming to the optimal management of a hybrid power plant with wind turbines, photovoltaic panels and compressed air energy storage," Applied Energy, Elsevier, vol. 97(C), pages 849-859.
    11. Jae Ho Kim & Warren B. Powell, 2011. "Optimal Energy Commitments with Storage and Intermittent Supply," Operations Research, INFORMS, vol. 59(6), pages 1347-1360, December.
    12. Md. Hossain & A. El-shafie, 2013. "Intelligent Systems in Optimizing Reservoir Operation Policy: A Review," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(9), pages 3387-3407, July.
    13. Hinderer, K. & Waldmann, K. -H., 2001. "Cash management in a randomly varying environment," European Journal of Operational Research, Elsevier, vol. 130(3), pages 468-485, May.
    14. Gordon Pye, 1966. "A Markov Model of the Term Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(1), pages 60-72.
    15. Guoming Lai & François Margot & Nicola Secomandi, 2010. "An Approximate Dynamic Programming Approach to Benchmark Practice-Based Heuristics for Natural Gas Storage Valuation," Operations Research, INFORMS, vol. 58(3), pages 564-582, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yangfang (Helen) Zhou & Alan Scheller‐Wolf & Nicola Secomandi & Stephen Smith, 2019. "Managing Wind‐Based Electricity Generation in the Presence of Storage and Transmission Capacity," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 970-989, April.
    2. Guoming Lai & Mulan X. Wang & Sunder Kekre & Alan Scheller-Wolf & Nicola Secomandi, 2011. "Valuation of Storage at a Liquefied Natural Gas Terminal," Operations Research, INFORMS, vol. 59(3), pages 602-616, June.
    3. Daniel R. Jiang & Warren B. Powell, 2015. "Optimal Hour-Ahead Bidding in the Real-Time Electricity Market with Battery Storage Using Approximate Dynamic Programming," INFORMS Journal on Computing, INFORMS, vol. 27(3), pages 525-543, August.
    4. Anna Maria Gambaro & Nicola Secomandi, 2021. "A Discussion of Non‐Gaussian Price Processes for Energy and Commodity Operations," Production and Operations Management, Production and Operations Management Society, vol. 30(1), pages 47-67, January.
    5. Nadarajah, Selvaprabu & Secomandi, Nicola, 2023. "A review of the operations literature on real options in energy," European Journal of Operational Research, Elsevier, vol. 309(2), pages 469-487.
    6. Nicola Secomandi, 2015. "Merchant Commodity Storage Practice Revisited," Operations Research, INFORMS, vol. 63(5), pages 1131-1143, October.
    7. Secomandi, Nicola & Seppi, Duane J., 2014. "Real Options and Merchant Operations of Energy and Other Commodities," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 6(3-4), pages 161-331, July.
    8. Lin Zhao & Sweder van Wijnbergen, 2015. "Asset Pricing in Incomplete Markets: Valuing Gas Storage Capacity," Tinbergen Institute Discussion Papers 15-104/VI/DSF95, Tinbergen Institute.
    9. Löhndorf, Nils & Wozabal, David, 2021. "Gas storage valuation in incomplete markets," European Journal of Operational Research, Elsevier, vol. 288(1), pages 318-330.
    10. Owen Q. Wu & Derek D. Wang & Zhenwei Qin, 2012. "Seasonal Energy Storage Operations with Limited Flexibility: The Price-Adjusted Rolling Intrinsic Policy," Manufacturing & Service Operations Management, INFORMS, vol. 14(3), pages 455-471, July.
    11. Thompson, Matt, 2016. "Natural gas storage valuation, optimization, market and credit risk management," Journal of Commodity Markets, Elsevier, vol. 2(1), pages 26-44.
    12. Trigeorgis, Lenos & Tsekrekos, Andrianos E., 2018. "Real Options in Operations Research: A Review," European Journal of Operational Research, Elsevier, vol. 270(1), pages 1-24.
    13. Nicola Secomandi & Guoming Lai & François Margot & Alan Scheller-Wolf & Duane J. Seppi, 2015. "Merchant Commodity Storage and Term-Structure Model Error," Manufacturing & Service Operations Management, INFORMS, vol. 17(3), pages 302-320, July.
    14. Sripad K. Devalkar & Ravi Anupindi & Amitabh Sinha, 2011. "Integrated Optimization of Procurement, Processing, and Trade of Commodities," Operations Research, INFORMS, vol. 59(6), pages 1369-1381, December.
    15. Selvaprabu Nadarajah & François Margot & Nicola Secomandi, 2015. "Relaxations of Approximate Linear Programs for the Real Option Management of Commodity Storage," Management Science, INFORMS, vol. 61(12), pages 3054-3076, December.
    16. Jiao Wang & Lima Zhao & Arnd Huchzermeier, 2021. "Operations‐Finance Interface in Risk Management: Research Evolution and Opportunities," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 355-389, February.
    17. Alain Bensoussan & Benoit Chevalier-Roignant & Alejandro Rivera, 2022. "A model for wind farm management with option interactions," Post-Print hal-04325553, HAL.
    18. Mojtaba Moravej & Seyed-Mohammad Hosseini-Moghari, 2016. "Large Scale Reservoirs System Operation Optimization: the Interior Search Algorithm (ISA) Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(10), pages 3389-3407, August.
    19. Weitzel, Timm & Glock, Christoph H., 2018. "Energy management for stationary electric energy storage systems: A systematic literature review," European Journal of Operational Research, Elsevier, vol. 264(2), pages 582-606.
    20. Majid Al‐Gwaiz & Xiuli Chao & H. Edwin Romeijn, 2016. "Capacity expansion and cost efficiency improvement in the warehouse problem," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(5), pages 367-373, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:orspec:v:41:y:2019:i:1:d:10.1007_s00291-018-0527-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.