  The primary concerns of this paper are twofold: to understand the economic
value of storage in the presence of ramp constraints and exogenous electricity
prices, and to understand the implications of the associated optimal storage
management policy on qualitative and quantitative characteristics of storage
response to real-time prices. We present an analytic characterization of the
optimal policy, along with the associated finite-horizon time-averaged value of
storage. We also derive an analytical upperbound on the infinite-horizon
time-averaged value of storage. This bound is valid for any achievable
realization of prices when the support of the distribution is fixed, and
highlights the dependence of the value of storage on ramp constraints and
storage capacity. While the value of storage is a non-decreasing function of
price volatility, due to the finite ramp rate, the value of storage saturates
quickly as the capacity increases, regardless of volatility. To study the
implications of the optimal policy, we first present computational experiments
that suggest that optimal utilization of storage can, in expectation, induce a
considerable amount of price elasticity near the average price, but little or
no elasticity far from it. We then present a computational framework for
understanding the behavior of storage as a function of price and the amount of
stored energy, and for characterization of the buy/sell phase transition region
in the price-state plane. Finally, we study the impact of market-based
operation of storage on the required reserves, and show that the reserves may
need to be expanded to accommodate market-based storage.
