Comparative Withholding Behavior Analysis of Historical Energy Storage Bids in California
Neal Ma, Ningkun Zheng, Ning Qi, Bolun Xu
TL;DR
The paper addresses how growing CAISO battery energy storage capacity influences bidding strategies and market efficiency, focusing on economic withholding. It analyzes CAISO bid data from 2023-07-01 to 2024-10-01, computing weighted average bids $\overline{v}$ and bid spread $\overline{v}_{spread}$, and compares actual bids to hindsight-optimal bids generated through a dynamic programming approach that accounts for storage SoC and opportunity value. The results reveal a pronounced daily bidding cycle with inflated discharge bids during price spikes, and a significant divergence from hindsight-optimal values, indicating systematic withholding that can reduce dispatch efficiency and raise system costs. The findings underscore potential market inefficiencies and call for regulatory measures to address storage market power and to incentivize day-ahead participation as BESS capacity expands, with implications for emissions and system economics.
Abstract
The rapid growth of battery energy storage in wholesale electricity markets calls for a deeper understanding of storage operators' bidding strategies and their market impacts. This study examines energy storage bidding data from the California Independent System Operator (CAISO) between July 1, 2023, and October 1, 2024, with a primary focus on economic withholding strategies. Our analysis reveals that storage bids are closely aligned with day-ahead and real-time market clearing prices, with notable bid inflation during price spikes. Statistical tests demonstrate a strong correlation between price spikes and capacity withholding, indicating that operators can anticipate price surges and use market volatility to increase profitability. Comparisons with optimal hindsight bids further reveal a clear daily periodic bidding pattern, highlighting extensive economic withholding. These results underscore potential market inefficiencies and highlight the need for refined regulatory measures to address economic withholding as storage capacity in the market continues to grow.