Virtual storage plant offering strategy in the day-ahead electricity market

Abstract

Energy storage is gaining an important role in modern power systems with high share of renewable energy sources. Specifically, large-scale battery storage units (BSUs) are an attractive solution due to their modularity, fast response and ongoing cost reduction.This paper aims to formulate, analyze and clarify the role of merchant-owned BSUs in the day-ahead electricity market. It defines virtual storage plant (VSP) as a set of BSUs distributed across the network. A VSP offering model is formulated as a bilevel program in which the upper-level problem represents the VSP profit maximization and operation, while the lower-level problem simulates market clearing and price formation. This mathematical problem with equilibrium constraints (MPEC) is converted into a mixed-integer linear program (MILP). This is afterwards expanded to a game of multiple VSPs formulating an equilibrium problem with equilibrium constraints (EPEC), which is solved using the diagonalization procedure.The proposed model is applied to an updated IEEE RTS-96 system. We evaluate the impact VSPs have on the locational marginal prices and compare the coordinated approach (all BSUs operated under a single VSP), i.e. the MPEC formulation, to the competitive approach (multiple VSPs competing for profit), i.e. the EPEC formulation.