Miguel A. Ortega-Vazquez

Jesus E. Contreras-Ocaña, Miguel A. Ortega-Vazquez, Baosen Zhang · uw

We study competition and cooperation among a group of storage units. We show that as the number of storages increases, the profit of storages approaches zero under Nash competition. We propose two ways in which storages can achieve non-zero profit and show that they are optimal in the sense that storages achieve the maximum possible profit. The first is a decentralized approach in which storages are exposed to artificial cost functions that incentivize them to behavior as a coalition. No private information needs to be exchanged between the storages to calculate the artificial function. The second is a centralized approach in which an aggregator coordinates and splits profits with storages in order to achieve maximum profit. We use Nash's axiomatic bargaining problem to model and predict the profit split between aggregator and storages.

Jesus E. Contreras-Ocana, Miguel A. Ortega-Vazquez, Baosen Zhang

An important function of aggregators is to enable the participation of small energy storage units in electricity markets. This paper studies two generally overlooked aspects related to aggregators of energy storage: i) the relationship between the aggregator and its constituent storage units and ii) the aggregator's effect on system welfare. Regarding i), we show that short-term outcomes can be Pareto-inefficient: all players could be better-off. In practice, however, aggregators and storage units are likely to engage in long rather than short-term relationships. Using Nash Bargaining Theory, we show that aggregators and storage units are likely to cooperate in the long-term. A rigorous understanding of the aggregator-storage unit relationship is fundamental to model the aggregator's participation in the market. Regarding ii), we first show that a profit-seeking energy storage aggregator is always beneficial to the system when compared to a system without storage, regardless of size or market power the aggregator may have. However, due to market power, a monopolist aggregator may act in a socially suboptimal manner. We propose a pricing scheme designed to mitigate market power abuse by the aggregator. This pricing scheme has several important characteristics: its formulation requires no private information, it incentivizes a rational aggregator to behave in a socially optimal manner, and allows for regulation of the aggregator's profit.