We investigate the management of a merchant wind energy farm co-located with a grid-level storage facility and connected to a market through a transmission line. We formulate this problem as a Markov decision process (MDP) with stochastic wind speed and electricity prices. Consistent with most...

Practitioners use the basket of spread options (BSO) heuristic to model merchant energy storage as a portfolio of spread options and spot/forward sales. This method solves a linear program to obtain the composition of this portfolio and its associated BSO policy. Sequential reoptimization of...