Optimal Control of an Energy Storage Facility Under a Changing Economic Environment and Partial Information

  • In this paper, we consider an energy storage optimization problem in finite time in a model with partial information that allows for a changing economic environment. The state process consists of the storage level controlled by the storage manager and the energy price process, which is a diffusion process the drift of which is assumed to be unobservable. We apply filtering theory to find an alternative state process which is adapted to our observation filtration. For this alternative state process, we derive the associated Hamilton–Jacobi–Bellman equation and solve the optimization problem numerically. This results in a candidate for the optimal policy for which it is a priori not clear whether the controlled state process exists. Hence, we prove an existence and uniqueness result for a class of time-inhomogeneous stochastic differential equations with discontinuous drift and singular diffusion coefficient. Finally, we apply our result to prove admissibility of the candidate optimal control.

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Metadaten
Author: Anton Shardin, Michaela Szölgyenyi
DOI:https://doi.org/10.1142/S0219024916500266
ISSN:0219-0249
ISSN:1793-6322
Title of the source (English):International Journal of Theoretical and Applied Finance
Document Type:Scientific journal article peer-reviewed
Language:English
Year of publication:2016
Tag:Energy storage optimization; degenerate diffusion; discontinuous drift; hidden Markov model; stochastic differential equation
Volume/Year:19
Issue number:4
First Page:1650026
Faculty/Chair:Fakultät 1 MINT - Mathematik, Informatik, Physik, Elektro- und Informationstechnik / FG Wirtschaftsmathematik
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