Dynamic sizing of energy storage for hedging wind power forecast uncertainty

In market conditions where program responsible parties are penalized for deviations from proposed bids, energy storage can be used for compensating the energy imbalances induced by limited predictability of wind power. The energy storage capacity necessary for performing this task will differ between delivery periods, according to the magnitude and the evolution of forecast errors in each delivery period. A methodology is presented for the assessment of the necessary storage capacity for each delivery period, based on the degree of risk that the power producer accepts to be exposed to. This approach leads to a dynamic assessment of the energy storage capacity for different delivery periods. In such a context, energy storage is used as a means of risk hedging against penalties from the regulation market. The application of the algorithm on real data (both measurements and forecasts) of the yearly output of a wind farm shows that the application of a dynamic daily sizing of the necessary storage leads to a significant reduction of the storage capacity used, without affecting the producer's profit significantly. The method proposed here may provide the basis for the introduction of storage as an independent market entity, where each producer may rent the necessary daily storage capacity for hedging the risk of the wind power limited predictability.