IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v242y2022ics0360544221032758.html

Strategic bidding of an energy storage agent in a joint energy and reserve market under stochastic generation

Author

Listed:
  • Dimitriadis, Christos N.
  • Tsimopoulos, Evangelos G.
  • Georgiadis, Michael C.

Abstract

This work presents a bi-level optimization model for a price-maker energy storage agent, to determine the optimal hourly offering/bidding strategies in pool-based markets, under wind power generation uncertainty. The upper-level problem aims at maximizing storage agent's expected profits, whereas at the lower-level problem, a two-stage sequential market clearing procedure takes place. The first stage refers to a jointly cleared energy and reserve day-ahead market, deriving the optimal quantities for energy dispatch and reserve procurement, while at the second stage, a real-time energy-only market settlement is realized, considering plausible wind power generation scenarios. Real-time decisions include activated upward and downward reserves, already procured in the day-ahead market. The bi-level model is initially transformed into a mathematical program with equilibrium constraints -by recasting the lower-level problem using its Karush-Kuhn-Tucker optimality conditions-, which is further reduced into a mixed integer linear program. The proposed mathematical framework is applied to a 6-bus power grid, incurred by network transmission constraints. Numerical simulations illustrate an explicit perspective of the potential arbitrage opportunities for the storage agent, when acting strategically in energy and reserve markets, under wind generation increment scenarios and plausible transmission line congestions.

Suggested Citation

  • Dimitriadis, Christos N. & Tsimopoulos, Evangelos G. & Georgiadis, Michael C., 2022. "Strategic bidding of an energy storage agent in a joint energy and reserve market under stochastic generation," Energy, Elsevier, vol. 242(C).
    • Handle: RePEc:eee:energy:v:242:y:2022:i:c:s0360544221032758
    DOI: 10.1016/j.energy.2021.123026
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544221032758
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2021.123026?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Nojavan, Sayyad & Najafi-Ghalelou, Afshin & Majidi, Majid & Zare, Kazem, 2018. "Optimal bidding and offering strategies of merchant compressed air energy storage in deregulated electricity market using robust optimization approach," Energy, Elsevier, vol. 142(C), pages 250-257.
    2. Sioshansi, Fereidoon P., 2008. "Competitive Electricity Markets: Questions Remain about Design, Implementation, Performance," The Electricity Journal, Elsevier, vol. 21(2), pages 74-87, March.
    3. Steven A. Gabriel & Antonio J. Conejo & J. David Fuller & Benjamin F. Hobbs & Carlos Ruiz, 2013. "Complementarity Modeling in Energy Markets," International Series in Operations Research and Management Science, Springer, edition 127, number 978-1-4419-6123-5, May.
    4. Shahmohammadi, Ali & Sioshansi, Ramteen & Conejo, Antonio J. & Afsharnia, Saeed, 2018. "Market equilibria and interactions between strategic generation, wind, and storage," Applied Energy, Elsevier, vol. 220(C), pages 876-892.
    5. Christos N. Dimitriadis & Evangelos G. Tsimopoulos & Michael C. Georgiadis, 2021. "A Review on the Complementarity Modelling in Competitive Electricity Markets," Energies, MDPI, vol. 14(21), pages 1-27, November.
    6. Gomes, I.L.R. & Pousinho, H.M.I. & Melício, R. & Mendes, V.M.F., 2017. "Stochastic coordination of joint wind and photovoltaic systems with energy storage in day-ahead market," Energy, Elsevier, vol. 124(C), pages 310-320.
    7. McConnell, Dylan & Forcey, Tim & Sandiford, Mike, 2015. "Estimating the value of electricity storage in an energy-only wholesale market," Applied Energy, Elsevier, vol. 159(C), pages 422-432.
    8. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas & Weiss, Jurgen, 2009. "Estimating the value of electricity storage in PJM: Arbitrage and some welfare effects," Energy Economics, Elsevier, vol. 31(2), pages 269-277, March.
    9. Tsimopoulos, Evangelos G. & Georgiadis, Michael C., 2021. "Nash equilibria in electricity pool markets with large-scale wind power integration," Energy, Elsevier, vol. 228(C).
    10. Antonio J. Conejo & Miguel Carrión & Juan M. Morales, 2010. "Decision Making Under Uncertainty in Electricity Markets," International Series in Operations Research and Management Science, Springer, number 978-1-4419-7421-1, May.
    11. Shafiee, Soroush & Zamani-Dehkordi, Payam & Zareipour, Hamidreza & Knight, Andrew M., 2016. "Economic assessment of a price-maker energy storage facility in the Alberta electricity market," Energy, Elsevier, vol. 111(C), pages 537-547.
    12. Green, Richard & Vasilakos, Nicholas, 2010. "Market behaviour with large amounts of intermittent generation," Energy Policy, Elsevier, vol. 38(7), pages 3211-3220, July.
    13. Khaloie, Hooman & Abdollahi, Amir & Shafie-khah, Miadreza & Anvari-Moghaddam, Amjad & Nojavan, Sayyad & Siano, Pierluigi & Catalão, João P.S., 2020. "Coordinated wind-thermal-energy storage offering strategy in energy and spinning reserve markets using a multi-stage model," Applied Energy, Elsevier, vol. 259(C).
    14. Drury, Easan & Denholm, Paul & Sioshansi, Ramteen, 2011. "The value of compressed air energy storage in energy and reserve markets," Energy, Elsevier, vol. 36(8), pages 4959-4973.
    15. Vega-Redondo,Fernando, 2003. "Economics and the Theory of Games," Cambridge Books, Cambridge University Press, number 9780521772518.
    16. Juan M. Morales & Antonio J. Conejo & Henrik Madsen & Pierre Pinson & Marco Zugno, 2014. "Integrating Renewables in Electricity Markets," International Series in Operations Research and Management Science, Springer, edition 127, number 978-1-4614-9411-9, May.
    17. Nasiri, Nima & Zeynali, Saeed & Ravadanegh, Sajad Najafi & Marzband, Mousa, 2021. "A hybrid robust-stochastic approach for strategic scheduling of a multi-energy system as a price-maker player in day-ahead wholesale market," Energy, Elsevier, vol. 235(C).
    18. Zou, Peng & Chen, Qixin & Xia, Qing & He, Guannan & Kang, Chongqing & Conejo, Antonio J., 2016. "Pool equilibria including strategic storage," Applied Energy, Elsevier, vol. 177(C), pages 260-270.
    19. Tsimopoulos, Evangelos G. & Georgiadis, Michael C., 2019. "Optimal strategic offerings for a conventional producer in jointly cleared energy and balancing markets under high penetration of wind power production," Applied Energy, Elsevier, vol. 244(C), pages 16-35.
    20. Wang, Jian & Xin, Hao & Xie, Ning & Wang, Yong, 2022. "Equilibrium models of coordinated electricity and natural gas markets with different coupling information exchanging channels," Energy, Elsevier, vol. 239(PA).
    21. Baringo, L. & Conejo, A.J., 2011. "Wind power investment within a market environment," Applied Energy, Elsevier, vol. 88(9), pages 3239-3247.
    22. Khojasteh, Meysam & Faria, Pedro & Vale, Zita, 2022. "A robust model for aggregated bidding of energy storages and wind resources in the joint energy and reserve markets," Energy, Elsevier, vol. 238(PB).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pareek, Parikshit & Sampath, L.P. Mohasha Isuru & Singh, Anshuman & Goel, Lalit & Gooi, Hoay Beng & Nguyen, Hung Dinh, 2024. "Degradation-infused energy portfolio allocation framework: Risk-averse fair storage participation," Energy, Elsevier, vol. 313(C).
    2. Fan, Wei & Tan, Zhongfu & Li, Fanqi & Zhang, Amin & Ju, Liwei & Wang, Yuwei & De, Gejirifu, 2023. "A two-stage optimal scheduling model of integrated energy system based on CVaR theory implementing integrated demand response," Energy, Elsevier, vol. 263(PC).
    3. Zwickl-Bernhard, Sebastian & Oitzinger, Maximilian & Fischer, Helen Anais & Backe, Stian, 2025. "Strategic solar module stockpiling in the EU: A scenario-based analysis of costs and benefits beyond 2030," Energy Policy, Elsevier, vol. 203(C).
    4. Yan, Jie & Tan, Dingchang & Yan, Yamin & Zhang, Haoran & Han, Shuang & Liu, Yongqian, 2025. "Techno-economic feasible region of electrochemical energy storage participating in the day-ahead electricity market trading," Energy, Elsevier, vol. 314(C).
    5. Aldaadi, Mohsen & Pantoš, Miloš & Riaz, Shariq & Chapman, Archie C. & Verbič, Gregor, 2025. "A novel production cost model for provision of capacity firming by prosumer batteries," Energy, Elsevier, vol. 321(C).
    6. Yu, Chenxi & Wang, Bao & Zheng, Shumin, 2025. "The evolution of low-temperature lithium metal batteries: Materials, mechanisms, and applications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 224(C).
    7. Khojasteh, Meysam & Faria, Pedro & Lezama, Fernando & Vale, Zita, 2023. "A hierarchy model to use local resources by DSO and TSO in the balancing market," Energy, Elsevier, vol. 267(C).
    8. Xiao, Xiangsheng & Wang, JianXiao & Hill, David J., 2022. "Impact of Large-scale concentrated solar power on energy and auxiliary markets," Applied Energy, Elsevier, vol. 318(C).
    9. Dimitriadis, Christos N. & Tsimopoulos, Evangelos G. & Georgiadis, Michael C., 2024. "Co-optimized trading strategy of a renewable energy aggregator in electricity and green certificates markets," Renewable Energy, Elsevier, vol. 236(C).
    10. Li, Jinhang & Chen, Heng & Li, Jingjia & Zhang, Yixi & Pan, Peiyuan & Bian, Jiayu & Yu, Zhiyong, 2025. "Bi-level optimization model of hydrogen-blended gas units and multi-type energy storage system considering low-carbon operation," Energy, Elsevier, vol. 314(C).
    11. Dimitriadis, Christos N. & Tsimopoulos, Evangelos G. & Georgiadis, Michael C., 2023. "Optimal bidding strategy of a gas-fired power plant in interdependent low-carbon electricity and natural gas markets," Energy, Elsevier, vol. 277(C).
    12. Kim, Jun-Hyeok & Hwang, Jin Sol & Kim, Yun-Su, 2024. "An IGDT-WDRCC based optimal bidding strategy of VPP aggregators in new energy market considering multiple uncertainties," Energy, Elsevier, vol. 313(C).
    13. Wang, Jian & Ilea, Valentin & Bovo, Cristian & Wang, Yong, 2024. "Two-stage coordinated scheduling of hydrogen-integrated multi-energy virtual power plant in joint capacity, energy, and ancillary service markets," Renewable Energy, Elsevier, vol. 235(C).
    14. Han, Rushuai & Hu, Qinran & Cui, Hantao & Chen, Tao & Quan, Xiangjun & Wu, Zaijun, 2022. "An optimal bidding and scheduling method for load service entities considering demand response uncertainty," Applied Energy, Elsevier, vol. 328(C).
    15. Dong, Wei & Chen, Chaofan & Fang, Xiaolun & Zhang, Fan & Yang, Qiang, 2024. "Enhanced integrated energy system planning through unified model coupling multiple energy and carbon emission flows," Energy, Elsevier, vol. 307(C).
    16. Zhu, Yanmei & Zhou, Yerong & Tao, Xiangming & Chen, Shijun & Huang, Weibin & Ma, Guangwen, 2024. "A new clearing method for cascade hydropower spot market," Energy, Elsevier, vol. 289(C).
    17. Shama Naz Islam, 2024. "A Review of Peer-to-Peer Energy Trading Markets: Enabling Models and Technologies," Energies, MDPI, vol. 17(7), pages 1-18, April.
    18. Lan, Liuhan & Zhang, Xingping & Zhang, Youzhong, 2023. "Low carbon and efficiency oriented day-ahead joint electrical energy and ancillary services market clearing model for generation-side in China," Energy Economics, Elsevier, vol. 121(C).
    19. Zhang, Zhi & Chen, Yanbo & Ma, Tianyang & Tian, Haoxin & Liu, Jingyu & Zhou, Ming & Wang, Wei, 2025. "Multi-type energy storage expansion planning: A review for high-penetration renewable energy integration," Renewable and Sustainable Energy Reviews, Elsevier, vol. 219(C).
    20. Zhang, Mingze & Li, Weidong & Yu, Samson Shenglong & Wen, Kerui & Muyeen, S.M., 2023. "Day-ahead optimization dispatch strategy for large-scale battery energy storage considering multiple regulation and prediction failures," Energy, Elsevier, vol. 270(C).
    21. Zare, Alireza & Shafie-khah, Miadreza & Siano, Pierluigi & Lazaroiu, George Cristian, 2026. "A systematic review of Virtual Power Plant configurations and their interaction with electricity, carbon, and flexibility markets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 226(PD).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christos N. Dimitriadis & Evangelos G. Tsimopoulos & Michael C. Georgiadis, 2021. "A Review on the Complementarity Modelling in Competitive Electricity Markets," Energies, MDPI, vol. 14(21), pages 1-27, November.
    2. Akbari, Ebrahim & Hooshmand, Rahmat-Allah & Gholipour, Mehdi & Parastegari, Moein, 2019. "Stochastic programming-based optimal bidding of compressed air energy storage with wind and thermal generation units in energy and reserve markets," Energy, Elsevier, vol. 171(C), pages 535-546.
    3. Antweiler, Werner, 2021. "Microeconomic models of electricity storage: Price Forecasting, arbitrage limits, curtailment insurance, and transmission line utilization," Energy Economics, Elsevier, vol. 101(C).
    4. Huang, Qisheng & Xu, Yunjian & Courcoubetis, Costas, 2020. "Stackelberg competition between merchant and regulated storage investment in wholesale electricity markets," Applied Energy, Elsevier, vol. 264(C).
    5. McConnell, Dylan & Forcey, Tim & Sandiford, Mike, 2015. "Estimating the value of electricity storage in an energy-only wholesale market," Applied Energy, Elsevier, vol. 159(C), pages 422-432.
    6. Hosseini, Seyyed Ahmad & Toubeau, Jean-François & De Grève, Zacharie & Vallée, François, 2020. "An advanced day-ahead bidding strategy for wind power producers considering confidence level on the real-time reserve provision," Applied Energy, Elsevier, vol. 280(C).
    7. Liu, Zhouding & Nazari-Heris, Morteza, 2023. "Optimal bidding strategy of multi-carrier systems in electricity markets using information gap decision theory," Energy, Elsevier, vol. 280(C).
    8. Prakash, Abhijith & Bruce, Anna & MacGill, Iain, 2025. "The scheduling role of future pricing information in electricity markets with rising deployments of energy storage: An Australian National Electricity Market case study," Energy Economics, Elsevier, vol. 142(C).
    9. Ikechi Emmanuel, Michael & Denholm, Paul, 2022. "A market feedback framework for improved estimates of the arbitrage value of energy storage using price-taker models," Applied Energy, Elsevier, vol. 310(C).
    10. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2016. "Valuation of energy storage in energy and regulation markets," Energy, Elsevier, vol. 115(P1), pages 1109-1118.
    11. Khaloie, Hooman & Abdollahi, Amir & Shafie-khah, Miadreza & Anvari-Moghaddam, Amjad & Nojavan, Sayyad & Siano, Pierluigi & Catalão, João P.S., 2020. "Coordinated wind-thermal-energy storage offering strategy in energy and spinning reserve markets using a multi-stage model," Applied Energy, Elsevier, vol. 259(C).
    12. Barbry, Adrien & Anjos, Miguel F. & Delage, Erick & Schell, Kristen R., 2019. "Robust self-scheduling of a price-maker energy storage facility in the New York electricity market," Energy Economics, Elsevier, vol. 78(C), pages 629-646.
    13. Rangarajan, Arvind & Foley, Sean & Trück, Stefan, 2023. "Assessing the impact of battery storage on Australian electricity markets," Energy Economics, Elsevier, vol. 120(C).
    14. Alanazi, Khalid & Shah, Nilay & Mittal, Shivika & Hawkes, Adam, 2026. "Competition and equilibrium in future global renewable hydrogen trade: A game-theoretic analysis," Applied Energy, Elsevier, vol. 402(PB).
    15. Mercier, Thomas & Olivier, Mathieu & De Jaeger, Emmanuel, 2023. "The value of electricity storage arbitrage on day-ahead markets across Europe," Energy Economics, Elsevier, vol. 123(C).
    16. Zafirakis, Dimitrios & Chalvatzis, Konstantinos J. & Baiocchi, Giovanni & Daskalakis, Georgios, 2016. "The value of arbitrage for energy storage: Evidence from European electricity markets," Applied Energy, Elsevier, vol. 184(C), pages 971-986.
    17. Turk, Ana & Wu, Qiuwei & Zhang, Menglin & Østergaard, Jacob, 2020. "Day-ahead stochastic scheduling of integrated multi-energy system for flexibility synergy and uncertainty balancing," Energy, Elsevier, vol. 196(C).
    18. Dimitriadis, Christos N. & Tsimopoulos, Evangelos G. & Georgiadis, Michael C., 2023. "Optimal bidding strategy of a gas-fired power plant in interdependent low-carbon electricity and natural gas markets," Energy, Elsevier, vol. 277(C).
    19. Lak, Omidreza & Rastegar, Mohammad & Mohammadi, Mohammad & Shafiee, Soroush & Zareipour, Hamidreza, 2021. "Risk-constrained stochastic market operation strategies for wind power producers and energy storage systems," Energy, Elsevier, vol. 215(PB).
    20. Mauricio B. C. Salles & Junling Huang & Michael J. Aziz & William W. Hogan, 2017. "Potential Arbitrage Revenue of Energy Storage Systems in PJM," Energies, MDPI, vol. 10(8), pages 1-19, July.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:242:y:2022:i:c:s0360544221032758. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.