Why market rules matter: Optimizing pumped hydroelectric storage when compensation rules differ

Nathan Paine, Frances R. Homans, Melisa Pollak, Jeffrey M. Bielicki, Elizabeth J. Wilson

Research output: Contribution to journalArticlepeer-review

29 Scopus citations

Abstract

Policies, markets, and technologies interact to create the modern electrical system. Integrating large amounts of electricity generated by variable renewable resources, such as from wind and sunlight, into electricity systems may require energy storage technologies to synchronize electricity production with electricity demand. Electricity markets compensate the performance of these energy storage technologies for the services they provide, and these markets are often operated by regional independent system operators (ISOs) that specify the market rules for this compensation. To examine how different ISO rules can affect the operation and profitability an energy storage technology, we develop a dynamic programming model of pumped hydroelectric storage (PHES) facility operation under the market rules from the Midcontinent ISO and ISO-New England. We present how differences in rules between these ISOs produced different operational strategies and profits, and how important they are for PHES profitability.

Original languageEnglish (US)
Pages (from-to)10-19
Number of pages10
JournalEnergy Economics
Volume46
DOIs
StatePublished - Nov 1 2014

Bibliographical note

Publisher Copyright:
© 2014.

Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.

Keywords

  • Electricity markets
  • Energy market rules
  • Energy storage
  • Independent system operator
  • Pumped hydro
  • Reliability services

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