We propose a solution to a new problem that is faced by steelworks, who own private thermal power-plants and plan to use batteries to absorb fluctuations in power demand. A major challenge is in controlling both the power generation and the use of batteries under such fluctuations. We formulate a Markov decision process (MDP) and design the states of the MDP so that it has a periodic structure to avoid the explosion of its state space. We then develop a policy iteration algorithm that exploits the periodic structure for computational efficiency. Numerical experiments suggest that the combination of the proposed MDP and the policy iteration allows us to find a control policy that can significantly reduce the electricity cost.
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