Title: An exact solution approach for the inventory routing problem with time windows

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Title: Energy operations management for renewable power producers in electricity markets by Ece Çiğdem Karakoyun, Ph.D in Industrial Engineering

Advisor: Assoc. Prof. Ayşe Selin Kocaman

Co-Advisor: Asst. Prof. Emre Nadar

Date & Time: May 31, 2023, Wednesday 13:30

Place: EA-409

Abstract: Motivated by the recent trends of paired renewable energy generators and storage units, we study the energy commitment, generation and storage problem of a wind power producer who owns a battery and participates in a spot market operating with hourly commitments and settlements. We formulate the wind power producer's problem as a Markov decision process by taking into account the uncertainties in wind speed and electricity price.

In the first part, we consider two different problem settings: In the first setting, the producer may choose to deviate from her commitments based on the latest available information, using the battery to support such deviations. In the second setting, the producer is required to fulfill her commitments, using the battery as a back-up source. We numerically examine the effects of system components, imbalance pricing parameters, and negative prices on the producer's profits, curtailment decisions, and imbalance tendencies in each problem setting. We provide managerial insights to renewable power producers in their assessment of energy storage adoption decisions and to power system operators in their understanding of the producers' behavior in the market with their storage capabilities.

In the second part, we establish several multi-dimensional structural properties of the optimal profit function such as supermodularity and joint concavity. This enables us to prove the optimality of a state-dependent threshold policy for the storage and commitment decisions under the assumptions of a perfectly efficient system and positive electricity prices. Leveraging this policy structure, we construct two heuristic solution methods for solving the more general problem in which the battery and transmission line can be imperfectly efficient and the price can also be negative. Numerical experiments with data-calibrated instances have revealed the high efficiency and scalability of our solution procedure. In the third part, we characterize the optimal policy structure by taking into account the battery and transmission line efficiency losses and showing the joint concavity of the optimal profit function. In the last part, we consider an alternative problem setting that allows for real-time trading without making any advance commitment. We analytically compare the total cash flows of this setting to those of our original problem setting. We conclude with a numerical investigation of the effect of advance commitment decisions on the producer's energy storage and generation decisions.

You can find detailed information here about the 16th Supply Chain and Logistics Workshop, which was held on Friday, June 2, 2023, with the participation of many participants from the industry and academia.

Advisor: Assoc. Prof. Ayşe Selin Kocaman

Co-Advisor: Asst. Prof. Emre Nadar

Date & Time: May 31, 2023, Wednesday 13:30

Place: EA-409

Abstract: Motivated by the recent trends of paired renewable energy generators and storage units, we study the energy commitment, generation and storage problem of a wind power producer who owns a battery and participates in a spot market operating with hourly commitments and settlements. We formulate the wind power producer's problem as a Markov decision process by taking into account the uncertainties in wind speed and electricity price.

In the first part, we consider two different problem settings: In the first setting, the producer may choose to deviate from her commitments based on the latest available information, using the battery to support such deviations. In the second setting, the producer is required to fulfill her commitments, using the battery as a back-up source. We numerically examine the effects of system components, imbalance pricing parameters, and negative prices on the producer's profits, curtailment decisions, and imbalance tendencies in each problem setting. We provide managerial insights to renewable power producers in their assessment of energy storage adoption decisions and to power system operators in their understanding of the producers' behavior in the market with their storage capabilities.

In the second part, we establish several multi-dimensional structural properties of the optimal profit function such as supermodularity and joint concavity. This enables us to prove the optimality of a state-dependent threshold policy for the storage and commitment decisions under the assumptions of a perfectly efficient system and positive electricity prices. Leveraging this policy structure, we construct two heuristic solution methods for solving the more general problem in which the battery and transmission line can be imperfectly efficient and the price can also be negative. Numerical experiments with data-calibrated instances have revealed the high efficiency and scalability of our solution procedure. In the third part, we characterize the optimal policy structure by taking into account the battery and transmission line efficiency losses and showing the joint concavity of the optimal profit function. In the last part, we consider an alternative problem setting that allows for real-time trading without making any advance commitment. We analytically compare the total cash flows of this setting to those of our original problem setting. We conclude with a numerical investigation of the effect of advance commitment decisions on the producer's energy storage and generation decisions.

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