Chance-Constrained Energy Storage Pricing for Social Welfare Maximization
For power system operators, this provides a method to set default storage bids or benchmark market power, addressing fairness and efficiency in electricity markets with high renewable penetration.
This paper introduces a chance-constrained framework for pricing energy storage in economic dispatch to maximize social welfare. Simulations on an ISO-NE test system show the approach reduces electricity payments by 17.4% and system costs by 3.9%.
This paper proposes a novel framework to price energy storage in economic dispatch with a social welfare maximization objective. This framework can be utilized by power system operators to generate default bids for storage or to benchmark market power in bids submitted by storage participants. We derive a theoretical framework based on a two-stage chance-constrained formulation which systematically incorporates system balance constraints and uncertainty considerations. We present tractable reformulations for the joint chance constraints. Analytical results show that the storage opportunity cost is convex and increases with greater net load uncertainty. We also show that the storage opportunity prices are bounded and are linearly coupled with future energy and reserve prices. We demonstrate the effectiveness of the proposed approach on an ISO-NE test system and compare it with a price-taker storage profit-maximizing bidding model. Simulation results show that the proposed market design reduces electricity payments by an average of 17.4% and system costs by 3.9% while reducing storage's profit margins, and these reductions scale up with the renewable and storage capacity.