An Efficient and Incentive-Compatible Mechanism for Energy Storage Markets

TL;DR

This paper proposes a market-based mechanism enabling efficient and incentive-compatible integration of electric vehicle batteries into the power grid, addressing strategic behavior and randomness in EV usage to enhance renewable energy storage.

Contribution

It introduces a novel market mechanism that ensures efficient, incentive-compatible energy storage integration of strategic EVs with random usage patterns into the power grid.

Findings

The mechanism effectively aligns EV operators' incentives with grid efficiency.

It minimizes the cost of integrating EVs for energy storage.

The approach accounts for EV usage randomness and strategic behavior.

Abstract

A key obstacle to increasing renewable energy penetration in the power grid is the lack of utility-scale storage capacity. Transportation electrification has the potential to overcome this obstacle since Electric Vehicles (EVs) that are not in transit can provide battery storage as a service to the grid. This is referred to as EV-Power grid integration, and could potentially be a key milestone in the pathway to decarbonize the electricity and the transportation sectors. We first show that if EV-Power grid integration is not done carefully, then contrary to improving the cost efficiency of operating the grid, it could in fact be counterproductive to it. This fundamentally occurs due to two phenomena operating in tandem - the randomness of EV usage patterns and the possibility of strategic behavior by EV operators. We present a market-based solution to address this issue. Specifically, we develop a mechanism for energy storage markets using which the system operator can efficiently integrate a fleet of strategic EVs with random usage patterns into the grid, utilize them for storage, and satisfy the demand at minimum possible cost.