Analysis shows enhanced bidding revenue in electricity markets with Contracts for Difference, indicating improved operational flexibility and social welfare.
Compared with pure pumped storage, hybrid pumped storage plants (HPSPs) face more complex challenges in electricity markets, such as multi-time-scale decision-making and coupled market mechanisms. Existing mid- to long-term curve decomposition strategies often lead to deviations from actual spot prices and compressed bidding space, limiting profitability and sustainable development. To address this, this study introduces Contracts for Difference (CfDs) to enhance revenue and operational flexibility. A bi-level optimization model is developed for joint participation in spot and frequency regulation markets under CfDs: the upper level maximizes HPSP revenue through capacity allocation and bidding, while the lower level maximizes social welfare via joint energy and ancillary service market clearing. The model is solved using a commercial solver and NSGA-II. Simulations show that CfDs increase spot market revenue by 33.2% and improve bidding alignment with price fluctuations, demonstrating strong market adaptability.
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Chu et al. (2025) studied this question.
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