Impact of Local Transmission Congestion on Energy Storage Arbitrage Opportunities

TL;DR

This paper investigates how transmission congestion influences energy storage arbitrage profitability, considering market competition levels and using detailed simulations on a standard test system.

Contribution

It introduces a comprehensive analysis of congestion effects on storage arbitrage, incorporating market competition models and realistic simulation of a full year's operation.

Findings

Congestion can both enhance and limit arbitrage profits.

Market power dynamics significantly impact arbitrage opportunities.

Transmission congestion effects vary with market competition assumptions.

Abstract

Reduced installation and operating costs give energy storage systems an opportunity to participate actively and profitably in electricity markets. In addition to providing ancillary services, energy storage systems can also arbitrage temporal price differences. Congestion in the transmission network often accentuates these price differences and will under certain circumstances enhance the profitability of arbitrage. On the other hand, congestion may also limit the ability of a given storage device to take advantage of arbitrage opportunities. This paper analyzes how transmission congestion affects the profitability of arbitrage by storage devices in markets with perfect and imperfect competition. Imperfect competition is modeled using a bilevel optimization where the offers and bids submitted by the storage devices can alter the market outcome. Price-taker and price-maker assumptions are also investigated through market price duration curves. This analysis is based on simulating an entire year of market operation on the IEEE Reliability Test system.