Strategic Storage Operation in Wholesale Electricity Markets: A Game Theoretic Analysis

To investigate the impact of the strategic operation of large-scale energy storage systems on wholesale electricity markets, we construct a Cournot competition model where multiple merchant storage owners and the market maker (social planner) move simultaneously. Each merchant storage owner seeks to maximize its own profit whereas the market maker makes the centralized generation dispatch and power network rebalancing decisions to maximize the social welfare. We show the existence and uniqueness of the Cournot equilibrium. We further show that the social welfare achieved at the Cournot equilibrium is always no less than that achieved in a market without energy storage. Numerical experiments are conducted on the IEEE RTS-24 bus test system to validate established results.