The value of storage in electricity distribution: The role of markets
This addresses a regulatory inefficiency for electricity distribution companies in deregulated markets, though it is incremental as it builds on existing optimization methods.
The authors tackled the problem of battery storage sitting idle in deregulated electricity markets due to regulatory constraints, by developing an optimization framework to model market participation. They found that market participation delivers similar savings as peak demand reduction and could incentivize deployment beyond local needs at low costs.
Electricity distribution companies deploy battery storage to defer grid upgrades by reducing peak demand. In deregulated jurisdictions, such storage often sits idle because regulatory constraints bar participation in electricity markets. Here, we develop an optimization framework that, to our knowledge, provides the first formal model of market participation constraints within storage investment and operation planning. Applying the framework to a Massachusetts case study, we find that market participation delivers similar savings as peak demand reduction. Under current conditions, market participation does not increase storage investment, but at very low storage costs, could incentivize deployment beyond local distribution needs. This might run contrary to the separation of distribution from generation in deregulated markets. Our framework can mitigate this concern by identifying investment levels appropriate for local distribution needs.