Market Equilibria With Energy Storage as Flexibility Resources

Uncertain and variable real-time availability of renewable generation can increase the need for supply-side flexibility in power systems. Energy storage is a potential source of such flexibility. This paper examines the participation of multiple competing strategic profit-maximizing energy storage in a spot electricity market and its impact on consumers, producers, and market equilibria. To this end, we develop a two-stage stochastic bi-level model that has each energy-storage firm determine its market offers at the upper level to maximize its expected profit. The lower level represents market clearing under scenarios with different flexibility needs. We recast the bi-level model as a single-level optimization. A small illustrative example and larger case study show that energy storage can increase market efficiency and reduce renewable-energy curtailment. We show that energy-storage firms neglecting uncertainty in optimizing their market offers can yield profit losses.