Optimal market-based battery energy storage system capacity sizing: Considering strategic behavior of collusions in the electricity day-ahead market

Abstract

Battery Energy Storage Systems (BESS) play a crucial role in mitigating the volatility and intermittency of Renewable Energy Sources (RESs) and are widely deployed across the globe. To support the growth of BESS, governments have introduced various policies, including subsidies aimed at aligning BESS costs with benchmark RES costs. However, these measures can lead to strategic collusion between BESS and RES operators when BESS capacity is insufficient, resulting in the waste of social resources when surplus capacity exists. To address this, this paper presents an Optimal BESS Capacity Sizing (OBCS) framework based on day-ahead (DA) market clearing, designed to promote market operations that closely resemble a completely competitive without the need for policies that directly target strategic behavior control. We propose a collusive bidding analysis method to assess the strategic behavior within collusions. Building on this, we introduce an OBCS framework that leverages collusive bidding insights and existing BESS subsidies to regulate strategic behavior. Finally, the proposed OBCS method is applied to both test and real electricity markets, demonstrating that the operation cost of the DA market can be reduced by 24.29 % in abundant scenario and 13.62 % in scarce scenario compared to the initial state.