Locational Marginal Value of Storage Under Risk of Supply-Side Disruption

Electricity storage enhances the resilience of distribution systems against electricity supply disruptions. Although recent insurance models with load shedding payouts have been proposed to mitigate outage impacts and pay for technologies such as storage, it remains unclear whether such payouts (penalties) are necessary or if accurate outage probability estimates suffice. In this work, we model a profit-maximizing electricity retailer that invests in distributed storage under the risk of an interruption of bulk power supply during peak demand. We find that incorporating outage scenarios can reduce storage investments unless a load shedding penalty is imposed. We further demonstrate that proximity to demand, differences in net demand, and the relationship between wholesale and retail prices impact the locational marginal value of storage. Without alignment of retailer profits and outage prevention, consumers are exposed to less protection from outages even as that risk increases.