Optimal Day-Ahead Bidding of a Risk-Averse Pulp and Paper Mill in the Energy and Reserve Market

Due to increased use of variable renewable energy sources, more capacity for reserves is required. Non-generating resources such as large industrial consumers can arbitrage energy prices and provide reserve capacity by exploiting the inherent flexibility in selected industrial processes. A large enough industrial consumer can capitalize on this flexibility through optimized bidding in electricity markets. In this work, the day-ahead cost minimization of a risk-averse pulp and paper mill (PPM) is formulated as a two-stage stochastic problem, considering thermodynamic and electrical constraints of the PPM. The bids in the energy and reserve markets are optimized subject to price uncertainty. The results of a case study in Sweden display a significant economic benefit in exploiting the flexibility of PPM. The expected cost of the pulp and paper mill resulting from different strategies are compared and the risk adversity of the PPM is investigated. We show that reserve offers can significantly improve the profitability of the PPM.QC 20200604