Equilibrium assessment of storage technologies in a power market with capacity remuneration

Abstract

A linear complementarity model is developed and presented for two different electricity market designs comprising an energy-only as well as a capacity market. In addition, storage units are implemented, assessing the impact of the market design on these units. Results of a case study for northern Europe show that the availability of storage units can have a significant impact on the optimal generation mix to reduce the need for mid-merit and peaking thermal generation capacity. Given a capacity market, the derating of storage technologies creates a bias towards conventional thermal units and has a significant negative impact on the profitability and hence incentive to invest in energy storage units. Furthermore, due to the vastly different cost characteristics and round-cycle efficiencies, it is found that batteries and pumped hydro energy storage complement each other in the power system instead of reducing each other’s business opportunities.

Equilibrium assessment of storage technologies in a power market with capacity remuneration