Optimal allocation of energy storage in a co-optimized electricity market: Benefits assessment and deriving indicators for economic storage ventures

This paper presents a framework for optimally allocating storage technologies in a power system. This decision support tool helps in quantitatively answering the questions on "where to and how much to install" considering the profits from arbitrage opportunities in a co-optimized electricity market. The developed framework is illustrated on a modified IEEE (Institute of Electrical and Electronics Engineers) 24 bus RTS (Reliability Test System), and the framework finds the optimal allocation solution and the revenues storage earns at each of these locations. Bulk energy storage, CAES (compressed air energy storage) is used as the representative storage technology, and the benefits of optimally allocated storage integration onto the grid are compared with transmission expansion solution. The paper also discusses about system-level indicators to identify candidate locations for economical storage ventures, which are derived based on the optimal storage allocation solution; and applies the market price based storage venture indicators on MISO (Mid-continental Independent System Operator) and PJM (Pennsylvania-New Jersey-Maryland Interconnection) electricity markets. - Highlights: • Storage optimal allocation framework based on high-fidelity storage dispatch model. • Storage with transmission addresses energy and ancillary issues under high renewables. • Bulk storage earns higher revenues from co-optimization (∼10× energy only market). • Grid offers distributed opportunities for investing in a strategic mix of storage. • Storage opportunities depend on cross-arbitrage, as seen from MISO (Mid-continental Independent System Operator) and PJM (Pennsylvania-New Jersey-Maryland Interconnection) markets