Journal
IEEE TRANSACTIONS ON SMART GRID
Volume 10, Issue 2, Pages 1171-1183Publisher
IEEE-INST ELECTRICAL ELECTRONICS ENGINEERS INC
DOI: 10.1109/tsg.2017.2736787
Keywords
Energy storage; aggregators; market power; bargaining
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Funding
- University of Washington Clean Energy Institute
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An important function of aggregators is to enable the participation of small energy storage units in electricity markets. This paper studies two generally overlooked aspects related to aggregators of energy storage: 1) the relationship between the aggregator and its constituent storage units and 2) the aggregator's effect on system welfare. Regarding 1), we show that short-term outcomes can be Pareto-inefficient: all players could be better-off. In practice, however, aggregators and storage units are likely to engage in long rather than short-term relationships. Using Nash bargaining theory, we show that aggregators and storage units are likely to cooperate in the long-term. A rigorous understanding of the aggregator-storage unit relationship is fundamental to model the aggregator's participation in the market. Regarding 2), we first show that a profit-seeking energy storage aggregator is always beneficial to the system when compared to a system without storage, regardless of size or market power the aggregator may have. However, due to market power, a monopolist aggregator may act in a socially suboptimal manner. We propose a pricing scheme designed to mitigate market power abuse by the aggregator. This pricing scheme has several important characteristics: its formulation requires no private information, it incentivizes a rational aggregator to behave in a socially optimal manner, and allows for regulation of the aggregator's profit.
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