  The decreasing cost of energy storage technologies coupled with their
potential to bring significant benefits to electric power networks have kindled
research efforts to design both market and regulatory frameworks to facilitate
the efficient construction and operation of such technologies. In this paper,
we examine an open access approach to the integration of storage, which enables
the complete decoupling of a storage facility's ownership structure from its
operation. In particular, we analyze a nodal spot pricing system built on a
model of economic dispatch in which storage is centrally dispatched by the
independent system operator (ISO) to maximize social welfare. Concomitant with
such an approach is the ISO's collection of a merchandising surplus reflecting
congestion in storage. We introduce a class of tradable electricity derivatives
---referred to as financial storage rights (FSRs)--- to enable the
redistribution of such rents in the form of financial property rights to
storage capacity; and establish a generalized simultaneous feasibility test to
ensure the ISO's revenue adequacy when allocating such financial property
rights to market participants. Several advantages of such an approach to open
access storage are discussed. In particular, we illustrate with a stylized
example the role of FSRs in synthesizing fully hedged, fixed-price bilateral
contracts for energy, when the seller and buyer exhibit differing intertemporal
supply and demand characteristics, respectively.
