Minimizing Bid Cost Recovery for Energy Storage with Uniform Pricing

Abstract

We study in-market uniform pricing and out-of-market bid cost recovery (BCR) payments in rolling-window dispatch for real-time power system operations with energy storage resources (ESRs). Due to intertemporal state-of-charge (SOC) constraints, ESR operations are temporally coupled, and existing in-market locational marginal pricing (LMP) may fail to compensate ESR's intertemporal opportunity costs, thereby triggering out-of-market BCR payments. We show that positive BCR is unavoidable when dispatched generators or ESRs have supply-side bids higher than the demand-side bid. We further identify an intertemporal coupling indicator associated with binding SOC constraints and demonstrate empirically that positive BCR arises only when this indicator is active, revealing that BCR is fundamentally driven by intertemporal coupling. In the simulation, we compare a BCR-minimizing uniform pricing scheme (UP-BCR) with existing real-time pricing methods under forecast uncertainty and show that UP-BCR substantially reduces BCR and demand payments relative to LMP while maintaining zero merchandising surplus in a copper-plate model.