  This paper studies the duopoly competition between renewable energy suppliers
with or without energy storage in a local energy market. The storage investment
brings the benefits of stabilizing renewable energy suppliers' outputs, but it
also leads to substantial investment costs as well as some surprising changes
in the market outcome. To study the equilibrium decisions of storage investment
in the renewable energy suppliers' competition, we model the interactions
between suppliers and consumers using a three-stage game-theoretic model. In
Stage I, at the beginning of the investment horizon, suppliers decide whether
to invest in storage. Once such decisions have been made, in the day-ahead
market of each day, suppliers decide on their bidding prices and quantities in
Stage II, based on which consumers decide the electricity quantity purchased
from each supplier in Stage III. In the real-time market, a supplier is
penalized if his actual generation falls short of his commitment. We
characterize a price-quantity competition equilibrium of Stage II, and we
further characterize a storage-investment equilibrium in Stage I incorporating
electricity-selling revenue and storage cost. Counter-intuitively, we show that
the uncertainty of renewable energy without storage investment can lead to
higher supplier profits compared with the stable generations with storage
investment due to the reduced market competition under random energy
generation. Simulations further illustrate results due to the market
competition. For example, a higher penalty for not meeting the commitment, a
higher storage cost, or a lower consumer demand can sometimes increase a
supplier's profit. We also show that although storage investment can increase a
supplier 's profit, the first-mover supplier who invests in storage may benefit
less than the free-rider competitor who chooses not to invest.
