Energy Storage Participation in Wholesale Markets: The Impact of State-of-Energy Management
Shubhrajit Bhattacharjee, Ramteen Sioshansi, Hamidreza Zareipour
Abstract
Wholesale electricity markets are undergoing reforms to allow greater participation of energy storage. These reforms raise questions regarding the roles of market operators in energy-storage management and the design of market-participation models and offer parameters for energy storage. This paper examines the market implications of energy-storage participation models and state-of-energy (SOE) management. To this end, we develop a bi-level stochastic optimization model, wherein the upper level represents a profit-maximizing energy-storage firm offering into a wholesale market. Lower-level problems represent market clearing under different uncertain operating conditions. Using complementarity theory and binary expansion, this model is recast as a single-level mixed-integer linear optimization problem, which can be solved using off-the-shelf software packages. We apply the model to an illustrative example and a comprehensive case study. We demonstrate that with uncertainty, self scheduling energy storage is suboptimal for the energy-storage firm. Relying on only the energy-storage firm to manage SOE can yield strategic behavior, whereby infeasible offers are submitted to affect dispatch and market prices. These findings can guide ongoing market-design reforms.