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Electricity is a real-time product. Supply and demand, or generation and consumption, have to match exactly at any instance to support the stable operation of the power system. This results from the fact that electricity is not economically storable on a large scale. While this is challenged by techno-economic developments leading to increased and improved storage capacities, storage levels remain well below that of other energy commodities. In addition, in light of the growing importance of sustainability, there is an ongoing transition towards variable renewable energy sources. Their limited controllability and predictability result in an increasing need for flexibility, which is the ability to provide power adjustments to compensate for temporary imbalances between generation and consumption. At the same time, the flexibility offered by the generation side is threatened by closure of conventional power plants that are currently experiencing decreasing profitability. While flexibility can also be provided by flexible supply, flexible demand, and the electric grid, electricity storage is expected to play an important role to fill the flexibility gap.This thesis studies the participation and modeling, and role and value, of electricity storage in short-term electricity markets, including day-ahead and intra-day energy markets, and real-time balancing markets. These markets are important tools to deal with the variability in the system, in which the need for flexibility is expressed and its provision is valorized. As such, they are becoming increasingly important with the ongoing integration of variable renewables. The geographical scope includes Belgium and the Central Western European region, including the French, German, and Dutch market zones next to that of Belgium.First, the concept of electricity storage is discussed, along with a quantitative study on the role, value, and benefits of storage in the transition to, and operation of, highly renewable power systems. The former includes a discussion on the definition of electricity storage, applications for which storage systems can be used, techno-economic parameters by which storage systems can be characterized, and storage technologies that are often considered for grid integration. The latter includes the presentation of a system-wide generation expansion planning model that decides on the cost-minimizing generation mix and scheduling to meet the demand for energy and frequency control, subject to detailed operating requirements and constraints. This model is applied to a test system to derive system-independent and broadly-applicable insights on the role and value of storage, and the interdependency of flexibility sources.Second, since understanding short-term markets is essential for analyses related to flexibility, their design rules are studied in detail along with the implications for flexibility. This is done for the four market zones of the Central Western European region, and provides insight in whether flexibility is treated consistently and appropriately among the different markets, both in time and in space. Where appropriate, desirable future market reforms are indicated.Third, the storage participation, including its trading and operation, in short-term markets is studied. In a first study, employing storage systems for a single application is considered, namely day-ahead market arbitrage. A single-player storage operator perspective is assumed, resulting in a price-based unit commitment formulation. Detailed operating constraints are considered, and a new methodology to study the price-effect of storage actions is introduced based on so-called market resilience functions. This price-effect states that storage generally reduces price spreads by increasing low prices and decreasing high prices. In addition, a stepwise approximation to the piecewise linear market resilience functions is proposed, offering the capability to reduce computation time while providing accurate lower and upper bounds. The developed models are applied to Belgian market data to quantify the arbitrage value and price-effect. Since determining the true value of storage requires the aggregation of applications, and the co-optimization of these applications to avoid conflicting uses, in a second study the day-ahead market arbitrage models are extended to allow for the aggregation of different arbitrage opportunities in the three short-term markets. In addition, the price-effect is studied for the intra-day and real-time markets as well. These models are used to analyze the opportunities for storage in the three short-term markets and four market zones, while differences in storage value are traced back to differences in market design.Fourth, the aggregation of applications can also be achieved through the co-operation and sharing of storage resources by different players. New markets, or market products within existing markets, to enable such storage uses, and thus the decoupling of ownership from operation, can be valuable levers to capture the true value of storage. The concept of physical storage rights is introduced, which can be auctioned to different players and entitle the holders to the right to use storage resources. Based on a case study with Belgian data, the storage value in a range of fixed a priori allocations is compared to that of allocations resulting from the proposed auction-based mechanism to show its merits.

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Energy users are investing in solar panels, batteries and smart-home energysystems. New technology is creating both new opportunities and new needs.New opportunities arise when users are empowered to respond to marketsignals. New needs arise when network topology is transforming. Decentralizedrenewable energy, electric vehicles, and storage are changing the face of electricitydistribution networks. Taking advantage of new opportunities means openingthe market to all participants. Making the best use of decentralized resourcesmeans identifying decentralized network needs and constraints. This dissertationis divided into two main parts to study the coordination of demand response-user participation- procurement. The first part studies the integration ofdemand response into the wholesale market design. The second part analyseslocal network needs and studies how user participation can be coordinated toprovide local flexibility services.The integration of demand response into the wholesale electricity market isstudied in Part I of the thesis. Demand response needs to be aggregated tomake a difference at a wholesale market level. The aggregation of demand poseschallenges to market design regarding interactions between actors, procurementprocedures and remuneration mechanisms. What’s more, aggregation has effectson current market participants. The aggregator trades flexibility provided byconsumers who already have contracts with retailers. These retailers foreseeneeds of their customers and trade energy accordingly. When a third party,the aggregator, is also making decisions on their forecasted load, conflicts arise.The exact nature of these conflicts is explored in detail. It is found that whenconsumers are asked to modify their consumption patterns at one hour, theyare likely to make up for it at a later hour. This is defined as the rebound effect.Aggregators impact balancing responsible parties (BRPs) on two main levels:market profits and retail profits. Proposals for transfer payments from theaggregator to the BRP to solve these conflicts are modelled using an empiricalapproach. The BRP is modelled as a portfolio owner of generation and load.The aggregator supplies demand response flexibility to the market during thebest possible hours as a result of an optimization. It is found that demandresponse will be deployed as long as the transfer payment is less than thepeak and off-peak market price. Demand response has an arbitraging effectin the market therefore can be profitable for the party attributed balancingresponsibility.Part II of the dissertation is aimed at reaping the possibilities of demandresponse at a local level. While the focus of Part I is geared towards wholesalemarket benefits, the focus of Part II is in using flexibility to deal with grid issuesand avoid network reinforcements. It is found in current literature and ongoingprojects that there is no consensus on a framework design for the procurementof local flexibility. The transmission system operator, the distribution systemoperator (DSO), an independent aggregator, and a third party actor have allbeen proposed as local market operators. A method is proposed to analyze theneed that can be fulfilled by local flexibility in the distribution system. Demandand price criteria for flexibility services are defined from the point of view of theDSO. The value of flexibility to the DSO is defined by an analysis of the savingsachieved by avoiding grid reinforcements. Congestion in the distribution grid ischosen a use-case to test the methodology.A first case is studied where the DSO procures flexibility directly at cost-valuein order to avoid network reinforcements. It is found that flexibility use can saveup to two thirds of the cost of grid reinforcements for the DSO compared tothe case without flexibility. A second case is studied where a profit maximizingmaking aggregator is introduced. In this case, the DSO competes with a BRPfor the flexibility resources that would solve its problems in the grid. A quantitydemanded and a valuation of flexibility for the BRP is proposed. The BRPneeds flexibility to cover deviations in its short term to intraday renewableenergy profiles. The BRP is willing to pay for flexibility as long as it costs lessthan the balancing penalties it would otherwise incur. The two actors, DSOand BRP, have different decision horizons. The DSO needs to make a decisionto buy flexibility or reinforce the network in advance, while the BRP needsflexibility on an almost real-time horizon. The aggregator needs to make thedecision of who to sell to in advance, so the market is bilaterally organized. Itis shown that as the DSO’s willingness to pay is higher than the BRP’s mostof the time, so it wins the bid for most of the available flexibility with respectto the BRP. There is still a long way to travel for users to deliberately affectthe functioning of electricity markets and grids. This dissertation opens up adiscussion on a whole scale and a local level in an effort to exploit different possible uses of flexibility.