Incentive Bidding Strategies for the Participation of Battery Energy Storage in the Electricity Market

The high penetration of renewable energy into the grid is an important characteristic of future power systems. Renewable energy sources, represented by wind and solar power, exhibit intermittency and variability, making it increasingly challenging to maintain the rigid balance between electricity generation and consumption in traditional power systems. Battery energy storage (BES) has the potential to enable the spatial and temporal transfer and conversion of energy, thus becoming a crucial enabling technology for the new power systems. However, both theory and practice have shown that the prevalent marginal price clearing mechanism adopted in foreign electricity markets fails to adequately capture the market value of energy storage. To meet the requirements of individual rationality and incentive compatibility for energy storage units under the constraint of minimizing market clearing costs, the Vickrey-Clarke-Groves (VCG) mechanism design theory is applied. A market clearing model is established for energy storage participating in the day-ahead joint electrical energy and frequency regulation ancillary services market. Using a 2-node system and a modified IEEE 39-node system as examples, the basic characteristics of the market clearing electricity price mechanism for energy storage bidding for electrical energy and frequency regulation ancillary services are illustrated. Simulation results demonstrate that the VCG pricing mechanism satisfies the requirements of incentive compatibility and individual rationality for energy storage.