Storage or no storage: duopoly competition between renewable energy suppliers in a local energy market

Dongwei Zhao, Hao Wang, Jianwei Huang, Xiaojun Lin

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3 Citations (Scopus)


Renewable energy generations and energy storage are playing increasingly important roles in serving consumers in power systems. This paper studies the market competition between renewable energy suppliers with or without energy storage in a local energy market. The storage investment brings the benefits of stabilizing renewable energy suppliers' outputs, but it also leads to substantial investment costs as well as some surprising changes in the market outcome. To study the equilibrium decisions of storage investment in the renewable energy suppliers' competition, we model the interactions between suppliers and consumers using a three-stage game-theoretic model. In Stage I, at the beginning of the investment horizon (containing many days), suppliers decide whether to invest in storage. Once such decisions have been made (once), in the day-ahead market of each day, suppliers decide on their bidding prices and quantities in Stage II, based on which consumers decide the electricity quantity purchased from each supplier in Stage III. In the real-time market, a supplier is penalized if his actual generation falls short of his commitment. We characterize a price-quantity competition equilibrium of Stage II in the local energy market, and we further characterize a storage-investment equilibrium in Stage I incorporating electricity-selling revenue and storage cost. Counter-intuitively, we show that the uncertainty of renewable energy without storage investment can lead to higher supplier profits compared with the stable generations with storage investment due to the reduced market competition under random energy generation. Simulations further illustrate results due to the market competition. For example, a higher penalty for not meeting the commitment, a higher storage cost, or a lower consumer demand can sometimes increase a supplier's profit. We also show that although storage investment can increase a supplier 's profit, the first-mover supplier who invests in storage may benefit less than the free-rider competitor who chooses not to invest in storage.

Original languageEnglish
Pages (from-to)31-47
Number of pages17
JournalIEEE Journal on Selected Areas in Communications
Issue number1
Publication statusPublished - Jan 2020
Externally publishedYes


  • energy storage
  • Local energy market
  • market competition
  • market equilibrium
  • renewable generation

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