The day-ahead market significantly influences energy storage strategies by shaping how storage systems—particularly battery storage—decide when to charge (store energy) and discharge (supply energy). This is primarily driven by price arbitrage opportunities where batteries charge during low-price periods and discharge during high-price periods.
Influence of the Day-Ahead Market on Energy Storage Strategies
1. Price Arbitrage and Scheduling
In the day-ahead market, energy prices are forecast and set for delivery the following day. Storage operators strategically plan their charging and discharging cycles based on these prices to maximize profit. They store energy when prices are low (often during surplus generation or low demand) and release it when prices peak—effectively smoothing price fluctuations and capturing value from price differences.
2. Impact on Market Prices and Storage Behavior
Battery storage participation tends to reduce the frequency of zero and negative price hours by absorbing excess supply during low-price periods, which increases demand and thus raises prices in those hours. This causes peak prices and solar capture prices to increase more markedly. Essentially, energy storage can push up peak prices by charging during off-peak low prices and discharging during peak high prices. This behavior encourages storage owners to optimize around these price signals in the day-ahead market.
3. Regulatory and Market Participation Constraints
In markets like CAISO, storage resources often have resource adequacy obligations requiring them to bid into the day-ahead market. These obligations shape bidding strategies, as storages must submit energy offer curves and may face limitations on bid flexibility. Additionally, market power mitigation efforts can impact how storage participates but have shown limited impact on most battery dispatch so far. However, storage operators may withhold offers in day-ahead markets to capitalize on potential real-time market price spikes, reflecting complex strategic behavior influenced by day-ahead market rules.
4. Complementary Revenue Streams and Long-Duration Storage
While short-duration batteries primarily exploit day-ahead price arbitrage, long-duration storage may focus more on other revenue opportunities, such as capacity markets, which reward availability for times of system stress. The day-ahead market still informs these strategies by providing price signals, but long-duration storage often integrates multiple market opportunities for profitability.
Summary
| Influence Aspect | Impact on Energy Storage Strategy |
|---|---|
| Price Arbitrage | Charge at low prices, discharge at high prices in day-ahead market |
| Market Price Effects | Raises peak prices and reduces zero/negative price hours |
| Market Participation Rules | Resource adequacy obligations enforce bidding; bid flexibility may be limited |
| Strategic Behavior | Possible withholding of offers to exploit real-time price spikes |
| Revenue Diversification | Long-duration storage also targets capacity markets alongside day-ahead |
In conclusion, the day-ahead market guides energy storage operators to optimize dispatch schedules to exploit forecasted price differences, influencing when and how much storage is charged or discharged. This behavior not only maximizes storage revenue but also affects overall market prices, particularly peak and solar capture prices, shaping broader energy market dynamics.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-day-ahead-market-influence-energy-storage-strategies/
