Multi‐period optimal bidding strategy with energy storage

Abstract

Abstract We consider a setting where a wind power producer (WPP) bids in a multi‐period ahead electricity market. The new elements we take into account are (i) the integration of electricity storage devices, (ii) the extension from single‐period to multi‐period optimal bidding, (iii) the implementation of a short‐sighted strategy versus a far‐sighted strategy, and (iv) the influence of information on the WPP's ability to manage risk effectively. The main contribution of this paper is that we derive explicit formulas for optimal bids under various decision‐making strategies and perform quantitative analyses of these strategies. We quantify the differences in expected profits between the far‐sighted and short‐sighted strategies and demonstrate that access to additional information on the storage level enables more precise and informed bidding behavior. We conclude the paper with numerical analyses for illustration purposes.