Scalable Planning for Energy Storage in Energy and Reserve Markets

Bolun Xu, Yishen Wang, Yury Dvorkin, Ricardo Fernandez-Blanco, Cesar A. Silva-Monroy, Jean Paul Watson, Daniel S. Kirschen

Research output: Contribution to journalArticlepeer-review


Energy storage can facilitate the integration of renewable energy resources by providing arbitrage and ancillary services. Jointly optimizing energy and ancillary services in a centralized electricity market reduces the system's operating cost and enhances the profitability of energy storage systems. However, achieving these objectives requires that storage be located and sized properly. We use a bilevel formulation to optimize the location and size of energy storage systems, which perform energy arbitrage and provide regulation services. Our model also ensures the profitability of investments in energy storage by enforcing a rate of return constraint. Computational tractability is achieved through the implementation of a primal decomposition and a subgradient-based cutting-plane method. We test the proposed approach on a 240-bus model of the Western Electricity Coordinating Council system and analyze the effects of different storage technologies, rate of return requirements, and regulation market policies on energy storage participation on the optimal storage investment decisions. We also demonstrate that the proposed approach outperforms exact methods in terms of solution quality and computational performance.

Original languageEnglish (US)
Article number7879307
Pages (from-to)4515-4527
Number of pages13
JournalIEEE Transactions on Power Systems
Issue number6
StatePublished - Nov 2017


  • ancillary services
  • arbitrage
  • cutting-plane method
  • energy storage (ES)
  • power system planning
  • primal decomposition

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering


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