Emissions reduction by dynamic optimization of distributed energy storage under aggregator's control

35 Pages Posted: 7 Sep 2017 Last revised: 1 Oct 2018

See all articles by Santtu Karhinen

Santtu Karhinen

Government of the Republic of Finland - Finnish Environment Institute; University of Oulu - Department of Economics

Hannu Huuki

University of Oulu - Department of Economics; Government of the Republic of Finland - Finnish Environment Institute

Enni Ruokamo

University of Oulu - Department of Economics

Date Written: September 5, 2017

Abstract

Residential sector has a large underutilized potential for demand response in its electricity consumption optimization. In this study residential electric hot water heaters (EHWH) are considered as distributed energy storage providing demand response in electricity markets. Heating optimization is conducted with a dynamic optimization model describing the water heating characteristics in Finland. Cost and CO2 emissions minimizing optimal heating controls are solved for an individual household and for a pool of EHWHs controlled by an aggregator. Water heating costs under fully dynamic and static electricity pricing contracts are compared. Our main contribution is to provide important insights of complex market dynamics related to the demand response resource aggregation, different electricity pricing contracts and increasing wind power generation. There are three main results. First, households benefit from adopting dynamic electricity pricing and allowing load control in terms of heating cost savings. Secondly, the optimal number of controlled EHWHs depend on the viewpoint. Lastly, cost minimization yields relatively good solution from environmental perspective when compared with the emissions minimization target.

Keywords: electric hot water heater, demand response, dynamic pricing, wind power value, emission reduction

JEL Classification: C61, L94, Q41

Suggested Citation

Karhinen, Santtu and Huuki, Hannu and Ruokamo, Enni, Emissions reduction by dynamic optimization of distributed energy storage under aggregator's control (September 5, 2017). Available at SSRN: https://ssrn.com/abstract=3032327 or http://dx.doi.org/10.2139/ssrn.3032327

Santtu Karhinen (Contact Author)

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Hannu Huuki

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

Enni Ruokamo

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

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