Bidding behavior; Market design; Market power; OR in energy; Storage operations; Day ahead market; Market Power; Monopolistics; Storage systems; System costs; System operator; Computer Science (all); Modeling and Simulation; Management Science and Operations Research; Information Systems and Management; Industrial and Manufacturing Engineering; General Computer Science
Abstract :
[en] The rapid growth of the share of energy generated via renewable sources highly challenges grid stability. Flexibility is key to balance the electricity supply and demand. As a relatively new player in the energy market, the Energy Storage System (ESS) is capable of providing such flexibility, acting as both a consumer and producer. Since the Directive (EU) 2019/944 of the European Union requires ESSs to be operated by an independent market player, ESSs are becoming an important player in different electricity markets. Crucially, it is difficult for, e.g., market-monitoring authorities, to compare the bid cost functions to the true opportunity costs of an ESS. Motivated by this, in this paper we elaborate on the potential of an ESS to exercise market power in a liberalized electricity market. In particular, we analyze how a monopolistic ESS operator may influence short-run market outcomes, e.g., prices and system costs, depending on different market designs including a nodal, a zonal, and a uniform pricing system. For this purpose, we propose a four-stage Stackelberg game where the monopolistic ESS operator first decides on its day-ahead market bids (level 1), followed by day-ahead market clearing (level 2), after which the ESS submits bids to the real-time balancing market (level 3), which is then cleared (level 4). Relying on a widely used case study, we illustrate that some market designs may be more favorable for the ESS operator, whereas other ones may be more attractive from the regulator's point of view of minimizing the overall system costs.
Research center :
Interdisciplinary Centre for Security, Reliability and Trust (SnT) > FINATRAX - Digital Financial Services and Cross-organizational Digital Transformations
Disciplines :
Computer science Management information systems
Author, co-author :
Bjørndal, Endre; NHH Norwegian School of Economics, Department of Business and Management Science, Bergen, Norway
Bjørndal, Mette Helene; NHH Norwegian School of Economics, Department of Business and Management Science, Bergen, Norway
Coniglio, Stefano ; University of Bergamo, Department of Economics, Bergamo, Italy
Körner, Marc-Fabian ; FIM Research Center, Bayreuth, Germany ; Branch Business & Information Systems Engineering of the Fraunhofer FIT, Germany ; University of Bayreuth, Germany
Leinauer, Christina; FIM Research Center, Bayreuth, Germany ; Branch Business & Information Systems Engineering of the Fraunhofer FIT, Germany ; University of Bayreuth, Germany
WEIBELZAHL, Martin ✱; University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT) > FINATRAX ; FIM Research Center, Bayreuth, Germany ; Branch Business & Information Systems Engineering of the Fraunhofer FIT, Germany ; University of Bayreuth, Germany
✱ These authors have contributed equally to this work.
External co-authors :
yes
Language :
English
Title :
Energy storage operation and electricity market design: On the market power of monopolistic storage operators
Bundesministerium fur Bildung und Forschung Dienststelle Bonn
Funding text :
The authors gratefully acknowledge the financial support of the KopernikusProject “SynErgie” by the Federal Ministry of Education and Research of Germany (BMBF) and the project supervision by the project management organization Projektträger Jülich (PtJ). The authors thank the Graduate School of the Bavarian Center for Battery Technology (BayBatt) for ongoing support. The authors are also grateful for the comments made by two anonymous reviewers, which helped them to improve the quality of the paper.The authors gratefully acknowledge the financial support of the KopernikusProject “SynErgie” by the Federal Ministry of Education and Research of Germany (BMBF) and the project supervision by the project management organization Projektträger Jülich (PtJ). The authors thank the Graduate School of the Bavarian Center for Battery Technology (BayBatt) for ongoing support. The authors are also grateful for the comments made by two anonymous reviewers, which helped them to improve the quality of the paper.
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