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Industrial Flexibility Investment Under Uncertainty: A Multi-Stage Stochastic Framework Considering Energy and Reserve Market Participation

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  • Amund Norland
  • Lasse Skare
  • Ole Jakob Viken
  • Stian Backe

Abstract

The global energy transition toward net-zero emissions by 2050 is expected to increase the share of variable renewable energy sources (VRES) in the energy mix. As a result, industrial actors will encounter more complex market conditions, characterized by volatile electricity prices, rising carbon costs, and stricter regulations. This situation calls for the industry to capitalize on opportunities in both spot-price arbitrage and reserve market participation, while also meeting future regulatory demands. This paper presents a multi-stage optimization framework that supports investment decisions in flexible assets and enables reserve market participation by delivering ancillary services. The framework incorporates investment decisions, spot- and reserve-market bidding, and real-time operation. Uncertainty in market prices and operational conditions is handled through a nodal formulation. A case study of a large industrial site in Norway is performed, comparing the investment decisions with future technology- and carbon pricing scenarios under varying market conditions.

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  • Amund Norland & Lasse Skare & Ole Jakob Viken & Stian Backe, 2025. "Industrial Flexibility Investment Under Uncertainty: A Multi-Stage Stochastic Framework Considering Energy and Reserve Market Participation," Papers 2506.08638, arXiv.org.
    • Handle: RePEc:arx:papers:2506.08638
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    References listed on IDEAS

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    1. Ottesen, Stig Ødegaard & Tomasgard, Asgeir & Fleten, Stein-Erik, 2018. "Multi market bidding strategies for demand side flexibility aggregators in electricity markets," Energy, Elsevier, vol. 149(C), pages 120-134.
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