Supply chain design for transactive energy operations in the nexus of manufacturing, microgrid and climate

Abstract

Manufacturing and supply chain sectors are undergoing a paradigm change driven by the growing use of distributed renewable energy. Under demand and generation uncertainty, this paper aims to allocate wind turbine, solar photovoltaics and energy storage units in a three-tier supply chain network to achieve eco-friendly operations with minimum cost. We propose a mixed-integer stochastic programming model that involves the production-inventory and microgrid capacity decisions along with the hourly energy transactions to meet the electrical loads of factories, warehouse, and retail stores. Our study advances existing supply chain design methods by explicitly incorporating transactive energy, materials, information and cash flows into a holistic optimization framework. The performance and scalability of the model is tested in two network instances with various facility locations, machine capacity, and climate conditions. Results show that onsite renewable generation enables large industrial consumers to achieve environmental sustainability as well as to create new revenue stream through the participation in transactive energy market. The study also indicates that feed-in tariff, time-of-use rate, two-way energy trading can lower the utility cost and accelerate the adoption of variable generation technology.