Energy storage in electricity markets

Unlike in vertically integrated power systems, where energy storage is coordinated with the rest of the system to minimize the overall generation cost [1], operations of energy storage in systems with electricity markets are driven by preferences of their owners [2]. The owners are typically profit-seeking entities that aim to collect the maximum profit possible for given system conditions. These preferences of the storage owners do not necessarily lead to the minimization of the overall generation cost in the system. Generally, merchant storage devices will provide services that can be monetized and that are most profitable. These include energy arbitrage, frequency regulation, reserve provision, voltage support, etc. [3, 4]. On the other hand, energy storage may be beneficial to the system in terms of deferred investment in transmission lines or generating units, reduced cycling of thermal units, reduced curtailment of renewable generation, etc. [5]. However, since energy storage does not always receive a payment for providing these services, they are merely consequences of an energy storage providing services for which it receives remuneration.