Risk-aware stochastic scheduling of multi-market energy storage systems

TL;DR

This paper presents a risk-aware stochastic scheduling method for energy storage systems under price uncertainty, balancing expected profit and risk using a two-stage approach with CVaR, tested on hydrogen and battery systems.

Contribution

It introduces a novel two-stage stochastic risk-constrained optimization framework for energy storage scheduling that explicitly incorporates risk tolerance levels.

Findings

Higher risk aversion increases installed capacity and capital costs.

Risk-averse strategies reduce expected profits but significantly decrease potential losses.

The approach effectively manages uncertainties, providing a flexible tool for operators.

Abstract

Energy storage promotes the integration of renewables by operating with charge and discharge policies that balance an intermittent power supply. A key challenge in this emerging sector is how to optimize the operation of storage assets given future price uncertainties and the need to recover the costs of project finance while ensuring an attractive return on equity and hedging against downside risk. This study investigates the scheduling of energy storage assets under price uncertainty, with a focus on electricity markets. A two-stage stochastic risk-constrained approach is employed, whereby electricity price trajectories or specific power markets are observed, allowing for recourse in the schedule. Conditional value-at-risk is used to quantify risk in the optimization problems; this allows for explicit specification of a probabilistic risk limit. The proposed approach is tested in an integrated hydrogen system (IHS) and a battery energy storage system (BESS). In the joint design and operation context for the IHS, the risk constraint results in large installed unit capacities, increasing capital cost but enabling more inventory to buffer price uncertainty. In both case studies, there is an operational trade-off between risk and expected reward; this is reflected in higher expected costs (or lower expected profits) with increasing risk aversion. Despite the decrease in expected reward (up to 500\$k), both systems exhibit substantial benefits of increasing risk aversion (up to 1.5\$mn) with respect to risk-neutral settings. This work provides a general method to address uncertainties in energy storage scheduling, allowing operators to input their level of risk tolerance on asset decisions.