Trading Strategies for ERCOT Day-Ahead Point-to-Point Obligations With Coordinated Multiple ESS Operation Under CVaR Risk Limits

Abstract

This paper develops a stochastic co-optimization framework for a portfolio of physically operated energy storage systems (ESSs) participating in the ERCOT day-ahead market for point-to-point (PTP) obligations while explicitly controlling downside risk. The portfolio schedules a controllable net transfer on a congested path and simultaneously determines hourly PTP position sizes settled on the locational marginal price (LMP) difference on the same path. To represent how this LMP difference responds to the controllable transfer without repeatedly solving optimal power flow, we precompute transfer-dependent LMP differences on a fixed grid using DC optimal power flow and interpolate the resulting relation with a piecewise-linear (SOS2) representation. The resulting model is formulated as a mixed-integer linear program that maximizes expected profit subject to a Conditional Value-at-Risk (CVaR) limit defined relative to a target profit. Standard linear auxiliary variables enforce the CVaR constraint and directly limit severe target shortfalls under unfavorable real-time price outcomes. Case studies on the IEEE 14-bus and IEEE 118-bus systems show that tightening the CVaR limit substantially reduces the left tail of daily profit distributions with only a small reduction in average profit. On the IEEE 14-bus system, the empirical CVaR of the shortfall loss falls from <inline-formula> <tex-math notation="LaTeX">${\$}131.02$ </tex-math></inline-formula> to <inline-formula> <tex-math notation="LaTeX">${\$}81.55$ </tex-math></inline-formula> and the shortfall VaR from <inline-formula> <tex-math notation="LaTeX">${\$}112.77$ </tex-math></inline-formula> to <inline-formula> <tex-math notation="LaTeX">${\$}71.35$ </tex-math></inline-formula>, a reduction of about 38% and 37%, respectively, while the mean daily profit decreases by only 0.5% (from <inline-formula> <tex-math notation="LaTeX">${\$}541.12$ </tex-math></inline-formula> to <inline-formula> <tex-math notation="LaTeX">${\$}538.44$ </tex-math></inline-formula>). The IEEE 118-bus case shows the same qualitative behavior, with a 10% reduction in downside risk for a mean profit loss below 1%. The results further show that risk reduction is achieved mainly by reshaping the hourly allocation of PTP positions and shifting some charging and discharging activity away from the most shortfall-sensitive hours. These findings imply that coordinated ESS portfolios can use transmission-right positions not only to capture congestion-related value but also to manage revenue risk more systematically.