TY - GEN
T1 - Price and capacity competition in zero-mean storage and demand response markets
AU - Taylor, Joshua A.
AU - Mathieu, Johanna L.
AU - Callaway, Duncan S.
AU - Poolla, Kameshwar
PY - 2012
Y1 - 2012
N2 - Non-generating resources (NGRs) such as energy storage and demand response can absorb intermittency from the steadily rising number of wind and solar installations. While there is clear advantage in drawing reserves jointly from NGRs and conventional power sources, there are marked differences between the two, which necessitate new market formats specifically tailored to the characteristics of NGRs. Salient differences from traditional ancillary markets include reduced output duration and faster start-up requirements. In line with the numerous game theoretic analyses of competition in primary generation markets, we analyze strategic behavior between NGRs providing fast regulation in reserve markets. We apply a two-stage framework in which firms first declare capacities and then engage in price bidding; the latter stage is commonly known as Bertrand-Edgeworth competition. We obtain new theoretical results pertaining to equilibrium uniqueness when the demand, in this case energy, is random. By applying the model to energy storage competition, we obtain direct comparisons between two representative market formats based on capacity and energy payments. We find that energy payments may lead to slightly more predictable NGR capacity commitment and reduced regulation energy prices.
AB - Non-generating resources (NGRs) such as energy storage and demand response can absorb intermittency from the steadily rising number of wind and solar installations. While there is clear advantage in drawing reserves jointly from NGRs and conventional power sources, there are marked differences between the two, which necessitate new market formats specifically tailored to the characteristics of NGRs. Salient differences from traditional ancillary markets include reduced output duration and faster start-up requirements. In line with the numerous game theoretic analyses of competition in primary generation markets, we analyze strategic behavior between NGRs providing fast regulation in reserve markets. We apply a two-stage framework in which firms first declare capacities and then engage in price bidding; the latter stage is commonly known as Bertrand-Edgeworth competition. We obtain new theoretical results pertaining to equilibrium uniqueness when the demand, in this case energy, is random. By applying the model to energy storage competition, we obtain direct comparisons between two representative market formats based on capacity and energy payments. We find that energy payments may lead to slightly more predictable NGR capacity commitment and reduced regulation energy prices.
UR - http://www.scopus.com/inward/record.url?scp=84875701391&partnerID=8YFLogxK
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U2 - 10.1109/Allerton.2012.6483370
DO - 10.1109/Allerton.2012.6483370
M3 - Conference contribution
AN - SCOPUS:84875701391
SN - 9781467345385
T3 - 2012 50th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2012
SP - 1316
EP - 1323
BT - 2012 50th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2012
T2 - 2012 50th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2012
Y2 - 1 October 2012 through 5 October 2012
ER -