Optimal allocation of bi-level energy storage based on the dynamic ancillary service price.

• Game of the grid and energy storage considering dynamic electricity price. • Dynamic electricity price is more effective than fixed price in ancillary market. • Fully considering the life-cycle costs and benefits of energy storage. • Energy storage capacity configuration affect the power distribution and revenue. A bi-level optimization model was proposed in multi-stakeholder scenarios considering energy storage ancillary services to coordinate the optimal configuration between power grid and wind and solar energy storage power stations. The upper and lower levels were optimized to minimize the power grid operation cost and wind and solar energy storage station cost, respectively. A dynamic pricing mechanism was proposed to efficiently coordinate the upper and lower levels and accomplish the optimal configuration of the energy storage capacity. The upper layer determines the price and communicates it to the lower layer, while the lower layer optimizes the energy storage scale and operation plan according to the price and feeds it back to the upper layer. The optimal price and the optimal configuration of energy storage participating in ancillary service market were obtained using CPLEX. Finally, the performance of the model was validated by evaluating actual power grid operating data from a provincial power system. [ABSTRACT FROM AUTHOR]