Impact of Optimal Storage Allocation on Price Volatility in Energy-Only Electricity Markets

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

21 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)1903-1914
Journal / PublicationIEEE Transactions on Power Systems
Volume33
Issue number2
Online published14 Jul 2017
Publication statusPublished - Mar 2018
Externally publishedYes

Abstract

Recent studies show that the fast growing expansion of wind power generation may lead to extremely high levels of price volatility in wholesale electricity markets. Storage technologies, regardless of their specific forms, e.g., pump-storage hydro, large-scale, or distributed batteries, are capable of alleviating the extreme price volatility levels due to their energy usage time shifting, fast-ramping, and price arbitrage capabilities. In this paper, we propose a stochastic bilevel optimization model to find the optimal nodal storage capacities required to achieve a certain price volatility level in a highly volatile energy-only electricity market. The decision on storage capacities is made in the upper level problem and the operation of strategic/regulated generation, storage, and transmission players is modeled in the lower level problem using an extended stochastic (Bayesian) Cournot-based game. The South Australia (SA) electricity market, which has recently experienced high levels of price volatility, and a 30-bus IEEE system are considered as the case studies. Our numerical results indicate that 50% price volatility reduction in the SA electricity market can be achieved by installing either 430-MWh regulated storage or 530-MWh strategic storage. In other words, regulated storage firms are more efficient in reducing the price volatility than strategic storage firms.

Research Area(s)

  • Bi-level optimization model, electricity market, Price volatility, storage technologies, strategic and regulated firms

Citation Format(s)

Impact of Optimal Storage Allocation on Price Volatility in Energy-Only Electricity Markets. / Masoumzadeh, Amin; Nekouei, Ehsan; Alpcan, Tansu; Chattopadhyay, Deb.

In: IEEE Transactions on Power Systems, Vol. 33, No. 2, 03.2018, p. 1903-1914.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review