Optimal Control of End-User Energy Storage

An increasing number of retail energy markets show price fluctuations, providing users with the opportunity to buy energy at lower than average prices. We propose to temporarily store this inexpensive energy in a battery, and use it to satisfy demand when energy prices are high, thus allowing users to exploit the price variations without having to shift their demand to the low-price periods. We study the battery control policy that yields the best performance, i.e., minimizes the total discounted costs. The optimal policy is shown to have a threshold structure, and we derive these thresholds in a few special cases. The cost savings obtained from energy storage are demonstrated through extensive numerical experiments, and we offer various directions for future research.