The operational economics of compressed air energy storage systems under uncertainty

A Compressed Air Energy Storage System is a means of storing energy which can then be used when the demand for energy increases. In this system, air is compressed in a cavern when power prices are low, and this air is used to run a natural gas-fired turbine to generate power when prices go up, with the aim of profiting from the price difference. This type of system can independently compress air, generate electricity, or do both. However, the prices of electricity and natural gas fluctuate, which directly impacts the amount of revenue that can be made, and this requires the calculating of estimates to optimize operation strategies and maximize profit. For these reasons, this is a crucial energy storage technology that requires economic analyses to justify investment decisions in power markets. In this paper, a mixed integer programming method is developed to schedule the operation of the system for forward market prices that are estimated using a markov-based probabilistic model. Then an algorithm that includes two separate modules in a simulation is employed to optimize the annual operation of the system. The paper presents a case study for Turkey as well as economic analyses based on probabilistic forward prices and the profits obtained from the optimization module. (C) 2013 Elsevier Ltd. All rights reserved.