Risk-based bidding and offering strategies of the compressed air energy storage using downside risk constraints

The compressed air energy storage (CAES) can be participated independently in the power markets to buy and sell the electricity. Therefore, the electricity price's uncertainty is a critical challenge for CAES operators to contribute in the day-ahead market. In this paper, stochastic optimization is modeled for a CAES to model the uncertain parameters and obtain the bid-offer curves to contribute to the energy markets. The risk-based bid-offer curves, including the risk-neutral and risk-averse strategies, are derived from the new risk-measure called downside risk constraints (DRC) method. The DRC method is used along with the stochastic problems to manage the uncertain parameters' imposed risks. The proposed DRC's main advantage is introducing a scenario independent strategy in the stochastic problems with equal risk over all scenarios. In other words, by using the DRC in the stochastic problems, the CAES operator can obtain a strategy that has the same profit in all scenarios. As represents the results, the expected profit of the stochastic problem is $ 9585. By implementing the DRC, the profit of the proposed strategy by DRC is $ 8845, which shows a 7.2% fall in the expected profit while the risk-in-profit is reduced by 100%. (c) 2021 Elsevier Ltd. All rights reserved.