Battery investment by a strategic wind producer: A scenario-based decomposition approach

Abstract This paper develops an investment decision-making tool for a strategic wind producer, who desires to expand its portfolio by investing in battery systems. This enables the wind producer to better manage its production profile, which eventually yields an increased profit. The long-run decisions are strategic siting, sizing, and depth of discharge tuning of the battery system, and the short-run decisions are strategic offers to the market in terms of price and quantity. In this setup, we linearly model the technical characteristics of battery systems, e.g., depth of discharge, and then evaluate its impacts on the battery systems’ number of cycles. The wind power uncertainty is modeled by a set of scenarios. The resulting model is a stochastic bi-level problem, which can be recast as a stochastic mixed-integer and linear model. However, this problem is generally hard-to-solve or even computationally intractable if many scenarios are considered. Hence, we use a scenario-based decomposition technique via progressive hedging algorithm to make the model scalable. An upper bound is then derived as a benchmark to assess the quality of results. Two case studies based on a six-bus and the IEEE 24-bus reliability test systems are used to evaluate the performance of the proposed approach.