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Virtual Linking Bids for Market Clearing with Non-Merchant Storage

Eléa Prat, Jonas Bodulv Broge, Richard M. Lusby

TL;DR

The paper addresses the challenge of integrating non-merchant energy storage into market clearing without look-ahead by introducing virtual linking bids that remember charging prices across successive clearings. It models storage as a combination of intra-storage arbitrage and inter-storage transfers, with inter-storage entries $S_v$ that create automated, price-tagged linking bids for future markets. The key contributions are (i) a MCP with VLBs that guarantees cost recovery for non-merchant storage over cycles, even under uncertainty, and (ii) a comparative analysis showing potential social-welfare gains relative to standard MCP, along with a discussion of limitations and sensitivity to end-state choices. The approach preserves market properties while providing a tractable extension (no extra nonlinearity) and points to future work on end-state selection, network constraints, and degradation effects to further enhance practical applicability.

Abstract

In the context of energy market clearing, non-merchant assets are assets that do not submit bids but whose operational constraints are included. Integrating energy storage systems as non-merchant assets can maximize social welfare. However, the disconnection between consecutive market clearings poses challenges for market properties, and this is not well studied yet. We contribute to the literature on market clearing with non-merchant storage by proposing a market-clearing procedure that preserves desirable market properties, even under uncertainty. This approach is based on a novel representation of storage systems in which the energy available is discretized to reflect the different prices at which the storage system was charged. These prices are then included as virtual bids, establishing a link between different market clearings. We show that market clearing with such virtual linking bids has the advantage of guaranteeing cost recovery for market participants and can outperform traditional approaches in terms of social welfare.

Virtual Linking Bids for Market Clearing with Non-Merchant Storage

TL;DR

The paper addresses the challenge of integrating non-merchant energy storage into market clearing without look-ahead by introducing virtual linking bids that remember charging prices across successive clearings. It models storage as a combination of intra-storage arbitrage and inter-storage transfers, with inter-storage entries that create automated, price-tagged linking bids for future markets. The key contributions are (i) a MCP with VLBs that guarantees cost recovery for non-merchant storage over cycles, even under uncertainty, and (ii) a comparative analysis showing potential social-welfare gains relative to standard MCP, along with a discussion of limitations and sensitivity to end-state choices. The approach preserves market properties while providing a tractable extension (no extra nonlinearity) and points to future work on end-state selection, network constraints, and degradation effects to further enhance practical applicability.

Abstract

In the context of energy market clearing, non-merchant assets are assets that do not submit bids but whose operational constraints are included. Integrating energy storage systems as non-merchant assets can maximize social welfare. However, the disconnection between consecutive market clearings poses challenges for market properties, and this is not well studied yet. We contribute to the literature on market clearing with non-merchant storage by proposing a market-clearing procedure that preserves desirable market properties, even under uncertainty. This approach is based on a novel representation of storage systems in which the energy available is discretized to reflect the different prices at which the storage system was charged. These prices are then included as virtual bids, establishing a link between different market clearings. We show that market clearing with such virtual linking bids has the advantage of guaranteeing cost recovery for market participants and can outperform traditional approaches in terms of social welfare.
Paper Structure (21 sections, 1 theorem, 5 equations, 3 figures, 9 tables)

This paper contains 21 sections, 1 theorem, 5 equations, 3 figures, 9 tables.

Table of Contents

  1. Introduction
  2. Market clearing with non-merchant storage
  3. Standard market clearing procedure
  4. Approaches to avoid myopic decisions
  5. Limitations on an illustrative example
  6. Market clearing with virtual linking bids
  7. Inter- and intra-storage
  8. Overview
  9. Model
  10. Update of the inter-storage
  11. Discharge of an inter-storage
  12. Net charge of the intra-storage
  13. Study of market properties
  14. Cost recovery
  15. Social welfare
  16. ...and 6 more sections

Key Result

Theorem 1

Assuming the existence of a cycle, the MCP with VLBs, represented by prob:mc_vos and update of the inter-storage as described in Sect. sec:update, ensures cost recovery for the non-merchant storage system.

Figures (3)

  • Figure 1: Storage system at the beginning of a market clearing, with previously charged quantities in red and their respective price in parentheses
  • Figure 2: Examples of net charge (a) and net discharge (b), for a fictional market clearing of 3 time periods of one hour each. Quantities are in MW.
  • Figure 3: MCP with VLBs between two market clearings $\mathcal{T}_1$ and $\mathcal{T}_2$

Theorems & Definitions (3)

  • Definition 1: Cycle and cost recovery for non-merchant storage
  • Theorem 1
  • proof