Demand Side Management and the Participation in Consecutive Energy Markets - A Multistage Stochastic Optimization Approach

Abstract

The integration of fluctuating renewable energies leads to higher price fluctuations in day-ahead markets, consequently the incentives for the activation of flexible loads increase. Even if relative forecasting errors decrease, the absolute forecasting error of renewable power production is expected to increase, therefore the demand for reserve power will rise. To fully exploit the economic potential of evolving energy markets through the utilization of production process flexibility, multiple markets need to be considered at the same time. Production planning and the participation in the reserve markets can be formulated as a multistage Stochastic Mixed-Integer Linear Programming (SMILP) problem that minimizes the expected total costs, which consists of cost for purchasing power subtracted by the revenues from offering reserve energy. The presented approach incorporates a production process model which considers uncertainties of spot and reserve market prices in terms of a stochastic process.