With ever increasing shares of intermittent renewables also the need for flexible supply and demand resources as well as storages is increasing. In particular it is expected that decentralized storages and demand response can contribute to the integration of higher shares of renewables into the electricity system. This raises also a challenge related to market design which is often overlooked. The issue is how an existing small‐scale storage would optimally bid into a voluntary power exchange like those established in Europe.
It is shown that the optimal bidding strategy is based on a simple evaluation of the expected spread. If the expected spread implies a profitable operation of the storage, (almost) unconditional bids are submitted to the power exchange. Otherwise no bids are submitted. This bidding choice is shown to be suboptimal in a welfare perspective and the introduction of specific spread products is proposed to overcome this flaw in the current market design.