EAO – A Framework for Optimizing Decentralized Portfolios and Green Supply

Background and target:The optimization of single assets or a portfolio of assets is a ubiquitous task in energy and commodity trading. Assets may be of various types, such as storage facilities (e.g. batteries or water reservoirs for power, heat or gas storage), decentralized or large power plants to produce or convert a commodity, transport via shipping or pipeline as well as sourcing or supply contracts partly with terms such as minimum or maximum offtake. Implementation for a specific problem of the above class is typically done using linear programming, mixed integer programs or dynamic programming. The problem setting is well known and there are many publications on specific applications as well as commercial software solutions. However, for some problems commercial software packages do not provide enough flexibility to model all relevant features properly and implementation work must be invested to solve such problems adequately. Hence we have seen people repeatedly working on seemingly different problem settings which could probably be solved with much less effort using a modular framework. The aim of this technical report is to formulate a unifying way of describing such tasks and to discuss a modular framework that enables practitioners to optimize single assets as well as simple or complex portfolios without the need to resort to specific (and often expensive) software applications or the need to implement the mathematics themselves. We believe that the solution presented here and implemented in the Python package EAO can be useful in many real life setups - from building a virtual power plant from decentralized assets to scaling power purchase agreements (PPA) in green power supply or optimizing a portfolio of sector-coupling assets.Green power supply as an illustration:In this report we explore a problem setting that we have been facing recently: In decentralized power, wind and photovoltaic (PV) assets are combined with new storage solutions such as batteries and diverse small scale CHP (combined heat and power) units with local heat demand. As more and more companies work on minimizing their carbon footprint, they ask suppliers to deliver power directly from green sources without detours via certificates. Since volatile renewable generation typically does not match load profiles, the challenge for suppliers is to create and steer a cost optimal portfolio of renewable sources, flexible sources and storage that guarantees a certain fraction of green power for the client