Storage deployment and its impact on wholesale electricity prices

The European Union’s ambitious renewable energy targets highlight the pivotal role of Battery Energy Storage Systems (BESS) in mitigating the inherent variability of renewable generation and matching it to fluctuating electricity demand. This paper analyzes how storage capacity additions influences day-ahead electricity prices through a deterministic Real-Time Optimization model that replicates the strategic behavior of market producers. The model incorporates day-ahead bidding curves as proxies for price–demand elasticity and accommodates alternative producer strategies, both price-taking and price-making behaviors. Its output includes projected market prices and the revenues of storage operators in the day-ahead market, excluding other potential income streams. By comparing these projections with investment parameters, the study provides insights into the economic viability of storage expansion scenarios proposed in national energy plans. The methodology is applied to the Spanish electricity system using 2024 market data.