Understanding the role and value of battery storage in renewables-rich distribution grids under uncertainty and different market paradigms

Economy-wide electrification is driving steep load growth, while renewables and batteries are increasing pressure at the distribution grid edge often requiring costly upgrades.

Local Electricity Markets (LEMs) can coordinate distributed energy resources (DERs) more efficiently than conventional designs.

This paper extends the LEM framework by modeling photovoltaic (PV) inflow as an Ornstein-Uhlenbeck (OU) process to capture uncertainty and temporal correlation.

Using rolling-horizon alternating optimal power flow on the IEEE 123-node feeder, we compare operator, customer, and system costs plus storage value under three market designs: flat tariff (FT), real-time pricing (RTP), and LEM.

Results show that the LEM achieves the lowest customer and system costs, under uncertainty, while RTP performs worst.

It outperforms the other markets across most storage and solar penetration levels.

However, it may worsen customer outcomes at very low PV penetration, indicating that LEM adoption should accompany PV expansion and precede storage expansion.

We examine two approaches to estimating battery storage value.

Storage value depends on storage penetration, imbalance between storage and PV penetrations, location, and whether batteries are colocated with renewables and/or load.

Poorly placed units can worsen congestion, whereas well-sited units benefit owners and the system.

Both the marginal value of new storage and the stored energy value of existing capacity decline as PV penetration rises.

However, they respond oppositely to battery penetration: marginal value falls because of diminishing returns as the fleet grows, while stored energy value rises as more batteries compete for the same local PV generation.

These metrics capture different dimensions of storage value under a LEM: one measures the benefit of expanding the fleet, while the other measures the scarcity premium on energy already stored.