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An increasing number of retail energy markets exhibit price fluctuations and provide customers such as data centers and residential users the opportunity to buy energy at lower than average prices. Such cost savings however are hard to obtain in practice because they require users to observe the price fluctuations and shift their consumption to low price periods. The authors propose to use energy storage to allow users to satisfy demand at times when prices are high with energy previously bought during low-price periods. They investigate how to control the battery to minimize energy costs, subject to fluctuating prices and user demand. They formulate this problem as a Markov Decision Process and show that the optimal policy has a threshold structure.
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