Auction-Based Allocation of Shared Electricity Storage Resources Through Physical Storage Rights

21 Pages Posted: 8 Apr 2016

See all articles by Tom Brijs

Tom Brijs

Johns Hopkins University

Daniel Huppmann

International Institute for Applied Systems Analysis (IIASA)

Sauleh Siddiqui

Johns Hopkins University

Ronnie Belmans

KU Leuven

Date Written: March 2016

Abstract

This article proposes a new electricity storage business model based on multiple simultaneously considered revenue streams, which can be attributed to different market activities and players. These players thus share electricity storage resources and compete to obtain the right to use them in a dynamic allocation mechanism. It is based on the design of anew periodically organized auction to allocate shared storage resources through physical storage rights between different market players and ac-companying applications. Through such a flexibility platform owners of flexible resources can commercialize their flexible capacity over different applications, while market players looking for additional flexibility can obtain this through a pay-per-use principle and thus not having to make long-term investment commitments. As such, they can quickly adapt their portfolio according to the market situation. Alternatively, through such an allocation mechanism players can effectively share storage re-sources. Players may be incentivized to participate as they can share the investment cost, mitigate risk, exploit economies of scale, overcome regulatory barriers, and merge time-varying and player-dependent flexibility needs. The mechanism allocates the limited storage resources to the most valuable application for each market-clearing, based on the competing players' willingness-to-pay. An illustrative case study is provided in which three players share storage resources that are allocated through a daily auction with hourly market-clearings.

Keywords: electricity storage, shared storage resources, auction-based allocation, (Generalized) Nash Equilibrium, Mixed Complementarity Problem

JEL Classification: D44, D47, L94, Q41

Suggested Citation

Brijs, Tom and Huppmann, Daniel and Siddiqui, Sauleh and Belmans, Ronnie, Auction-Based Allocation of Shared Electricity Storage Resources Through Physical Storage Rights (March 2016). DIW Berlin Discussion Paper No. 1566, Available at SSRN: https://ssrn.com/abstract=2759796 or http://dx.doi.org/10.2139/ssrn.2759796

Tom Brijs

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Daniel Huppmann (Contact Author)

International Institute for Applied Systems Analysis (IIASA) ( email )

Schlossplatz 1
Laxenburg, A-2361
Austria

Sauleh Siddiqui

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Ronnie Belmans

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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