The role of co-located storage for wind power producers in conventional electricity markets

In this paper we study the problem of optimizing contract offerings for an independent wind power producer (WPP) participating in conventional day-ahead forward electricity markets for energy. As wind power is an inherently variable source of energy and is difficult to predict, we explore the extent to which co-located energy storage can be used to improve expected profit and mitigate the the financial risk associated with shorting on the offered contracts. Using a simple stochastic model for wind power production and a model for the electricity market, we show that the problem of determining optimal contract offerings for a WPP with co-located energy storage can be solved using convex programming.