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...

Merchant energy trading companies operate energy conversion facilities and infrastructure via direct or contractual ownership. Portfolio-based control algorithms are a real option approach that practitioners use to manage these assets. To avoid potential model error, this approach represents the...

Electricity cannot yet be stored on a large scale, but technological advances leading to cheaper and more efficient industrial batteries make grid-level storage of electricity surpluses a natural choice. Because electricity prices can be negative, it is unclear how the presence of negative...

Commodity merchants use various heuristics to value leasing contracts on storage facilities as real options and make inventory trading decisions. Two prominent heuristics sequentially reoptimize simple models, leading to the so called rolling intrinsic (RI) policy and rolling basket of spread...

Least squares Monte Carlo (LSM) is an approximate dynamic programming (ADP) technique commonly used for the valuation of high dimensional financial and real options, but has broader applicability. It is known that the regress-later version of this method is an approximate linear programming...

A typical strategy for dealing with commodity surpluses is to store them for future sale; in particular, this is true of electricity. However, because electricity prices can be negative, there exists another potential strategy: To buy and dispose of electricity surpluses at negative prices. It is...