Optimizing Trading Decisions for Hydro Storage Systems using Approximate Dual Dynamic Programming

Löhndorf, Nils and Wozabal, David and Minner, Stefan (2013) Optimizing Trading Decisions for Hydro Storage Systems using Approximate Dual Dynamic Programming. Operations Research, 61 (4). 810-823 . ISSN 1526-5463


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We propose a new approach to optimize operations of hydro storage systems with multiple connected reservoirs whose operators participate in wholesale electricity markets. Our formulation integrates short-term intraday with long-term interday decisions. The intraday problem considers bidding decisions as well as storage operation during the day and is formulated as a stochastic program. The interday problem is modeled as a Markov decision process of managing storage operation over time, for which we propose integrating stochastic dual dynamic programming with approximate dynamic programming. We show that the approximate solution converges towards an upper bound of the optimal solution. To demonstrate the efficiency of the solution approach, we fit an econometric model to actual price and in inflow data and apply the approach to a case study of an existing hydro storage system. Our results indicate that the approach is tractable for a real-world application and that the gap between theoretical upper and a simulated lower bound decreases sufficiently fast. (authors' abstract)

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version may require a subscription.
Keywords: OR in energy / stochastic programming / Markov decision processes / approximate dynamic programming
Divisions: Departments > Informationsverarbeitung u Prozessmanag. > Informationswirtschaft > Produktionsmanagement
Version of the Document: Draft
Depositing User: ePub Administrator
Date Deposited: 02 Dec 2013 12:16
Last Modified: 13 Jun 2017 07:05
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/62501/
URI: https://epub.wu.ac.at/id/eprint/4041


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