A pumped storage hydro unit operation with increasing degrees of market power: Standalone and portfolio integration

When a pumped storage hydro (PSH) unit has some degree of market power, its profit maximization strategy may lead to a decrease of storage energy and, therefore, the capacity to integrate wind power may be reduced under these circumstances. However, if the PSH unit is integrated in a generation company (GenCo) that has a portfolio generation with different power plant technologies, the PSH unit operation is considerably changed. To analyze this problem, an optimal weekly scheduling of a PSH unit integrated in a price-maker GenCo is computed. The degree of market power is modeled by the residual inverse demand function with variable elasticity. The achieved results show that in the standalone mode, increasing degrees of market power corresponds to decreasing levels of storage. However, when integrated on a GenCo the situation may be reversed, and therefore, the capacity to integrate wind power may be considerably increased.