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

TL;DR

This paper introduces a multi-stage stochastic optimization framework for industrial investment in flexible assets, considering energy and reserve market participation amidst market volatility and regulatory changes, demonstrated through a Norwegian case study.

Contribution

It develops a novel multi-stage stochastic model integrating investment, operation, and market participation decisions under uncertainty for industrial flexibility.

Findings

Optimal investment strategies vary with market scenarios.

Participation in reserve markets enhances profitability.

The framework effectively manages uncertainty in energy markets.

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.