Impacts of Energy Storage Systems on Market Power in a Day-Ahead Market with a Dominant Producer

This paper studies the effects of energy storage on market power in an imperfectly competitive day-ahead market. In the proposed model, the generation sector includes one dominant producer, a number of price-taking producers, and the energy storage that is considered to be price-taker. The dominant producer offers through a bi-level optimization problem. In the upper-level, the dominant producer maximizes its profit, subject to operational limits. The lower-level model includes the market clearing conditions. We convert this bi-level optimization problem into a mathematical program with equilibrium constraints (MPEC). Then the MPEC is recast as a mixed-integer linear programming problem using linearization techniques. Different case studies are provided to highlight some impacts of energy storage on market power, profit of dominant producer and social welfare in this market.