A Methodology to Assess the Economic Impact of Power Storage Technologies

49 Pages Posted: 18 Sep 2015 Last revised: 2 Jul 2016

See all articles by Laila El-Ghandour

Laila El-Ghandour

Heriot-Watt University - Department of Actuarial Mathematics and Statistics

Timothy C. Johnson

Heriot-Watt University - Maxwell Institute for Mathematical Sciences

Date Written: July 1, 2016

Abstract

We present a methodology for assessing the economic impact of power storage technologies. The methodology is founded on classical approaches to the optimal stopping of stochastic processes but involves an innovation that circumvents the need to, \emph{ex ante}, identify the form of the driving process; the approach works directly on observed data and so avoids model risks. Power storage is regarded as a complement to the variable output of of renewable energy generators, and is therefore important in contributing to the reduction of carbon intensive power generation. Our aim is to present a methodology suitable for use by policy makers that is simple to maintain, adaptable to different technologies and easy to interpret the results. The approach is shown to have benefits over standard techniques and is able to identify a viable optimal strategy for a fictitious storage facility operating in the UK power market.

Keywords: optimal stopping, energy storage, policy

JEL Classification: C61, G38, Q48

Suggested Citation

El-Ghandour, Laila and Johnson, Timothy C., A Methodology to Assess the Economic Impact of Power Storage Technologies (July 1, 2016). Available at SSRN: https://ssrn.com/abstract=2662063 or http://dx.doi.org/10.2139/ssrn.2662063

Laila El-Ghandour

Heriot-Watt University - Department of Actuarial Mathematics and Statistics ( email )

Edinburgh, Scotland EH14 4AS
United Kingdom

Timothy C. Johnson (Contact Author)

Heriot-Watt University - Maxwell Institute for Mathematical Sciences ( email )

Edinburgh, Scotland EH14 4AS
United Kingdom

HOME PAGE: http://www.ma.hw.ac.uk/~timj/

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