Implications of bid structures on the offering strategies of merchant energy storage systems

Abstract

Energy storage Systems (ESS) may play a pivotal role in the cost-efficient integration of renewable energy sources. Integrating large volumes of grid-scale energy storage into electricity markets, however, raises questions related to their profitability and impact on electricity prices. This paper explores the implications of different bid structures on the strategic behavior of a storage owner that participates in the wholesale market and is able to influence prices to maximize its profits. We conduct a comparative analysis on four bid structures present in existing markets and the scientific literature: (i) simple quantity-based bids, (ii) simple price-based bids, (iii) price-quantity pairs bids and (iv) complex bidding in which the ESS owner provides full information of its technical characteristics through the bids. The decision problem of the ESS owner is formulated as a bilevel programming model, where the upper-level problem represents the profit maximization of the ESS and the lower-level problem simulates possible market clearing outcomes. These bilevel models are reformulated as equivalent mixed-integer linear programming problems by means of the Karush-Kuhn-Tucker optimality conditions, the strong duality theorem and the Big-M method. In a case study, we show that when the ESS owner is uncertain about the market clearing outcome, the bid structure affects the ESS's profitability and, to a lesser extent, the market's efficiency and the system's generation costs.

Multiobjective optimization of hybrid wind-photovoltaic plants with battery energy storage system: Current situation and possible regulatory changes

“…Currently, the main form of contracting energy in Brazil is through auctions in the Regulated Market, using the lowest tariff criterion. However, Pérez-Arriaga and Knittel [98] and Vivero-Serrano et al [99] reinforce that conventional bidding structures may have to be revised to reflect resources' operational constraints. In addition, the creation of the electricity storage agent figure would allow for the generation of multiple revenues, avoid double taxation of storage activity, and allow the creation of clear rules for broad competition in the storage market.…”

Coordinated wind-thermal-energy storage offering strategy in energy and spinning reserve markets using a multi-stage model

“…In the context of the virtual power plant's offering strategy, the application of robust optimization and bi-level scheduling have been analyzed in [32] and [33], respectively. A dynamic programming-based offering strategy for a wind-battery system has been provided in [34], while the investigation of bid structures on the offering strategy of large-scale energy storage systems has been conducted in [35]. In [36] and [37] two different SS structures for an electricity retailer and aggregators of prosumers have been developed, respectively, while the proposed model in [37] can dramatically decrease the costs of both prosumers and aggregators in comparison with routinely introduced frameworks by retailers.…”

Strategic Participation of Merchant Energy Storage in Joint Energy-Reserve and Balancing Markets

“…it offers, both in charging (c) and (d) discharging mode. These offers are constrained by (1b)-(1f), which ensure the feasibility of the non-negative energy and reserve offers considering the ESS's (dis)charging power capacity C and D, and by LL problem (2). Constraint (1b) ensures that downward reserves offers in discharging mode (i.e.…”

“…Energy Storage Systems (ESS) may play a pivotal role in the transition to power systems with high shares of intermittent electricity generation from renewable energy sources (RES) [1]. This drives a growing interest on, i.a., ESS' participation in electricity markets [2], business models [3], ESS siting & sizing [4], ownership structures [5] and distributed ESS [6].…”