Title: Added value of scenario tree based stochastic optimization in long and medium term planning of hydro power systems
Speaker: Dr. Georg Ostermaier
Affiliation:
Location: Room 217 Huxley Building
Time: 11:00am
Abstract. The changes in the dynamics of power prices in Germany within the last few years have implied significant decreases of revenues of pumped storage hydro systems. The earnings from daily peak/offpeak price spreads have declined whereby at the same time long term management of large reservoirs has become even more difficult due hardly predictable power price and inflow evolutions. Stochastic Optimization has been applied for hydro system management for a long time already, but only recently operators expect additional benefits given the changed and even more uncertain power market situation. Besides stochastic dual dynamic programming, scenario tree based methods are meanwhile applied, which so far have hardly been used for complex hydro systems due to the curse of dimensionality in stochastic programming. We apply efficient discretization methods for the generation of multi-dimensional scenario trees of power prices and inflows, based on moment matching and multinomial distributions. Furthermore, by using increased hardware efficiency it is meanwhile possible to set up and solve scenario tree based stochastic optimization models for even complex pumped storage systems. Ex post analyses have shown that outperformance over deterministic optimization in the range of 1-5 percent is achievable.
About the speaker. Georg Ostermaier is founder, owner and managing director of Decision Trees GmbH, a Munich based firm focussing on the practical application of mathematical and stochastic programming in the European Energy industry. Georg received his graduate degree in Electrical Engineering from the Technical University of Munich and his PhD in Operations Research from the University of St.Gallen, Switerland. Since 2006 he and his team have been developing stochastic optimization software systems for thermal power generation portfolios, hydro power generation systems, gas storage and gas contract valuation and gas procurment portfolio optimisation. Decision Trees GmbH has today a solid customer base in Germany, Austria, Switzerland, Norway and the United Kingdom and has proven to contribute to enhanced profits for energy producers in practice through stochastic optimization.