  The problem of pricing utility-scale energy storage resources (ESRs) in the
real-time electricity market is considered. Under a rolling-window dispatch
model where the operator centrally dispatches generation and consumption under
forecasting uncertainty, it is shown that almost all uniform pricing schemes,
including the standard locational marginal pricing (LMP), result in lost
opportunity costs that require out-of-the-market settlements. It is also shown
that such settlements give rise to disincentives for generating firms and
storage participants to bid truthfully, even when these market participants are
rational price-takers in a competitive market. Temporal locational marginal
pricing (TLMP) is proposed for ESRs as a generalization of LMP to an in-market
discriminative form. TLMP is a sum of the system-wide energy price, LMP, and
the individual state-of-charge price. It is shown that, under arbitrary
forecasting errors, the rolling-window implementation of TLMP eliminates the
lost opportunity costs and provides incentives to price-taking firms to bid
truthfully with their marginal costs. Numerical examples show insights into the
effects of uniform and non-uniform pricing mechanisms on dispatch following and
truthful bidding incentives.
