A game-theoretic framework to investigate the conditions for cooperation between energy storage operators and wind power producers

Energy storage, has widely been accepted as a means to provide capacity firming service to renewable sources of energy due to its capability to quickly start and shut down and its ability to have flexible ramping rates. Lithium Ion batteries in particular are of interest as their production cost is expected to significantly decrease over the next few years. In addition, Li-Ion batteries have high efficiency, high energy density and high cycling tolerance. These batteries are also used in electric vehicles whose penetration is expected to grow rapidly in the coming years. The social benefit of energy storage to provide energy balancing service to renewable producers is evident, especially in the context of a micro-grid where deviations from distributed generation sources can be handled locally. However, co-operation with renewable producers may not be automatically guaranteed and would depend on the amount of revenue generated by balancing such deviations. Storage may derive more benefit from choosing to operate independently. Balancing wind deviations would take capacity away from providing other high value services to the micro-grid community such as arbitrage and regulation service. The decision to enter the market and balance deviations for the wind producer is highly intertwined with the strategy adopted by the wind producer. Interactive problems in which the outcome of a rational agent's action depends on the actions of other rational players are best studied through the setup of a game-theoretic framework. A case-study is presented here using wind and electricity market data for a site in west Texas. Historical data is used to calculate expected pay-offs for the month of January. The columns in the following table are the available strategies for the wind producer and the rows are the available strategies for the energy storage. There are four possible combination of strategies, which are discussed next: The pay-off table provides the net revenues of the wind producer in the upper right corner and the net revenues of the energy storage in the lower left corner of each cell. Note that revenue from Production Tax Credits (PTC) is not included for the wind producer.