Energy Storage Valuation

A gas storage, a swing contract, a hydro reservoir, a battery and a producing field are the same problem. Each has an inventory, a price that moves and returns to its season, a rate the physics or the contract allows, and a value that is solved backward in time. The best fixed plan on today’s forward curve is a floor you can lock in; everything above it is the right to change the plan.

This book writes that problem once and solves it every way that matters. It derives the storage equation and proves when its value is the one you can trade, then computes it: linear programmes and rolling intrinsic, monotone schemes, regression with dual bounds that certify it, switching and impulse control. It carries the frame to swing rights and take-or-pay contracts, to the water values of a reservoir chain and stochastic dual dynamic programming, to batteries with losses and wear, and to the delta hedge with forwards.

One picture runs through every chapter: the marginal value of inventory, and where the price crosses it. Every main result is proved, and every algorithm is set out step by step.

Torbjørn Kvalvik is a Norwegian mathematician who has spent thirty years on the commercial side of the North Sea, valuing what it is worth to be able to wait.