  High shares of variable renewable energy necessitate substantial energy
storage capacity. However, it remains unclear how to design a market that, on
the one hand, ensures a stable and sufficient income for storage firms, and, on
the other hand, maintains stable and affordable electricity costs for the
consumers. Here, we use a game theoretic model to study storage competition in
wholesale electricity markets. A main result is that these types of games are
not necessarily stable. In particular, we find that under certain conditions,
which imply a combination of a high share of variable renewable energy sources
and low flexibility of conventional power plants, the system will not converge
to an equilibrium. However, we demonstrate that a price cap on storage price
bids can ensure convergence to a stable solution. Moreover, we find that when
the flexibility of conventional power plants is low, while the storage usage
for energy balancing increases with renewable energy generation, the
profitability of using storage for the sole purpose of energy arbitrage
decreases.
