A VCG Payment Scheme for Energy Storages in the Spot Market Considering Levelized-Cost-of-Storage

Energy storages are considered as a key solution in the novel energy system with high penetration of renewables. However, the current power markets are not designed for the participation of energy storage as it has a variable cost. This paper investigates an efficient mechanism in which the energy storage submits his levelized cost of storage, then the storage receives a Vickrey-Clark-Grove payment equal to the increase in social welfare attributable to his presence. This mechanism can encourage the storage to truthfully submit the true operating cost and thus help to optimize the system operation. Moreover, the increments of the storage’s own interests and the social welfare are coincidental, so it is incentive compatible. Numerical tests show the advantages of the proposed mechanism over the marginal pricing mechanism.