Impact of Strategic Behavior and Ownership of Energy Storage on Provision of Flexibility

Energy storage systems (ESS) are expected to provide additional flexibility to managed variable power flows in future power systems. It is believed that the business case for ESS as an alternative to traditional network reinforcements can be improved, if the assets are able to access additional revenue streams by participating in energy and ancillary services markets. To enable this, the storage may need to be operated by private merchants to circumvent the unbundling principle applied in electricity markets today. However, it is not clear if the right incentives are in place for these entities to operate the ESS in a way that provides the required flexibility and supports the wider system benefits sought by the system operator (SO). This work seeks to evaluate the impact of strategic behavior of an independent trader operating ESS in a nodal electricity market. The results indicated that a strategic bidder operating ESS tends to underuse the assets leading to suboptimal solution in terms of market welfare, as well as congestion and curtailment reduction, removing some of the potential benefits the ESS can provide to the power system.