Capacity tariff mechanism design for grid-side energy storage in China: A Stackelberg game approach

In recent years, China has been developing large-scale grid-side energy storage facilities. However, the deployment of grid-side energy storage has primarily depended on government subsidies. This paper proposes a capacity tariff mechanism for grid-side energy storage using a Stackelberg game framework, where the grid operator acts as the leader and storage operators act as followers. The results demonstrate that the proposed capacity tariff method effectively balances the storage revenue with grid operational costs, ensuring fair capacity tariffs. Compared to traditional capacity tariff methods, this approach enhances renewable energy use and reduces grid costs, supporting energy transition and sustainable development. • Proposes a capacity tariff mechanism for grid-side energy storage using Stackelberg game theory. • A bi-level model capturing the interaction between grid operator and storage operators is developed. • Reveals the impact of capacity tariffs on the optimal allocation and market behavior of energy storage systems.