IEEE Power & Energy Magazine - September/October 2017 - 46

designs with capacity de-rating and resource aggregation is a
near-term, implementable option for improving the ability of
ESSs to compete in capacity markets. Nevertheless, further
consideration may be required to design more efficient alternatives that reward all resources for the value they provide.

trends in Europe and the United States regarding bidding
options for storage in DAM and briefly discuss potential
ways for market signals to provide flexibility.
Open Product Design: Bidding Formats

Europe
The European Price Coupling of Regions (PCR) offers a variety
of bidding protocols. These protocols can be divided into two
categories: 1) simple orders and 2) complex and block orders.
The latter category-in particular, linked block orders-
seems to be, for the time being, the best fit for storage bidding into the DAM. A suitable bidding protocol for ESSs
should allow the market-clearing algorithm to schedule storage power consumption and production during the periods
with the largest price difference, while meeting some basic
constraints (e.g., ensuring that the ESS is discharged only if
it has been charged before).
As shown in Figure 1, storage operators may submit an
off-peak purchase order (to charge the device) and link this
order to a block order that sells electricity during peak hours
(thus discharging the device). The operator depicted in Figure 1 chooses to purchase electricity in hours 5, 6, and 7
for later resale during hours 18, 19, and 20. Thanks to the
linking constraint, the storage operator can be certain that
the device will not be cleared for an infeasible program. Furthermore, this bidding format guarantees that the buy/sell
combination is in the money; as a consequence, the money
spent in the purchase order must be compensated for by the
profit that the selling order earns.
Despite the advantages of this bidding format, it does
not guarantee the most efficient operation of ESSs. Storage
operators must estimate which hours will be peak and which
off-peak. This issue could be mitigated if market agents
were allowed to combine linked block orders with a different type of complex orders: exclusive block orders.
An exclusive block order allows agents to submit several
simple block orders with different patterns, and only one
(at maximum) will be executed. This increases the chances
of having the most efficient use of the ESS cleared in the
Energy Market
ESSs are eligible to participate in day-ahead markets (DAM) market. If several blocks are in the money, the clearing
in the vast majority of systems. Nonetheless, the energy algorithm will choose the one that minimizes system cost.
limitation, coupled with the intertemporal constraints of Exclusive block orders, when combined with linked block
ESSs, poses some challenges. Enhanced bidding formats orders, could significantly mitigate ESS price risk.
Figure 2 shows the schematic of an offer for storage operensure that ESSs are scheduled efficiently and within their
operational limits. We will review the most recent regulatory ators when these two types of orders are combined. Agents
can submit different estimates of
off-peak/on-peak hours and prices.
In the case that several linked block
Purchase Order
Selling Order
orders are in the money, the market algorithm chooses the one that
minimizes system cost. Unfortu1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
nately, mixing linked block orders
(Hours)
and exclusive block orders is not
yet permitted.
figure 1. An example of a linked block order.
Flexibility

Many stakeholders have emphasized the need to design
capacity products that more closely reflect system operations
and flexibility requirements. Similarly, the European Commission has introduced different product designs that signal
long-term investment in flexibility. A number of options
exist to ensure that capacity products procure resources with
sufficient flexibility.
First, regulators may introduce a technical requirement
stating that only resources with certain ramping capabilities
are eligible to bid into the capacity market. Both the Belgian strategic reserve and the Greek flexibility remuneration
mechanism have implemented such ramp-up requirements.
The former requests that participating power plants maintain
a 6.5-h ramp-up time, and the latter suggests an 8-MW/min
ramp rate with 3-h's notice (starting from hot conditions).
Moreover, when introducing a capacity mechanism based
on a reliability option, the incentives for flexibility depend on
the reference market used in the settlement of the option, as
well as the ability of this market to reflect scarcity. Systems that
choose to index their reliability option to a very short-term market will send a stronger signal for bringing flexibility into the
system. Italy's CRM product is based on a reliability option, the
reference market for which represents a basket of the day-ahead
market and the ancillary services market.
Aside from a few exceptions, CRMs in the United States
and Europe have focused primarily on bringing firm capacity
into the system regardless of flexibility. Ensuring that such
capacity is able to satisfy actual system needs means, first
of all, ensuring that other shorter-term markets provide the
correct price signals. If that is not sufficient, then updated
designs taking CRM flexibility into account may be needed.

46	

ieee power & energy magazine	

september/october 2017



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