|Title||Financial storage rights: Definition and basic properties|
|Publication Type||Conference Paper|
|Year of Publication||2014|
|Authors||Daniel Munoz-Alvarez, Eilyan Bitar|
|Conference Name||2014 North American Power Symposium (NAPS)|
|Conference Location||Pullman, WA, USA|
|Keywords||energy storage, reliability and markets, RM11-006|
The decreasing cost of energy storage technologies coupled with their potential to bring significant benefits to electric power networks have kindled research efforts to design both market and regulatory frameworks to facilitate the efficient integration of such technologies. The primary challenge resides in designing market systems that provide the correct incentives to deploy and operate storage systems efficiently in both the short and long-run. In the following paper, we propose an open access approach to the integration of storage in which storage is treated as a communal asset centrally operated by the System Operator (SO) to maximize social welfare; not unlike the operation of the transmission network today. Concomitantly, we propose a novel electricity derivative, which we refer to as financial storage rights (FSRs), to enable the redistribution of the additional merchandising surplus (attributable to storage) collected by the SO. FSRs do not interfere with the socially optimal operation of storage, and their definition as a sequence of nodal power injections facilitates their use by market participants to mitigate the cost and/or risk of meeting contractual commitments. Moreover, the revenue collected by the SO through the sale of FSRs can be used to remunerate capital expenditures in storage.