This thesis addresses the issue of making an economic case for bulk energy storage in the Arizona bulk power system. Pumped hydro energy storage (PHES) is used in this study. Bulk energy storage has often been suggested for large scale electric power systems in order to levelize load (store energy when it is inexpensive [energy demand is low] and discharge energy when it is expensive [energy demand is high]). It also has the potential to provide opportunities to avoid transmission and generation expansion, and provide for generation reserve margins. As the level of renewable energy resources increases, the uncertainty and variability of wind and solar resources may be improved by bulk energy storage technologies.

For this study, the MATLab software platform is used, a mathematical based modeling language, optimization solvers (specifically Gurobi), and a power flow solver (PowerWorld) are used to simulate an economic dispatch problem that includes energy storage and transmission losses. A program is created which utilizes quadratic programming to analyze various cases using a 2010 summer peak load from the Arizona portion of the Western Electricity Coordinating Council (WECC) system. Actual data from industry are used in this test bed. In this thesis, the full capabilities of Gurobi are not utilized (e.g., integer variables, binary variables). However, the formulation shown here does create a platform such that future, more sophisticated modeling may readily be incorporated.

The developed software is used to assess the Arizona test bed with a low level of energy storage to study how the storage power limit effects several optimization outputs such as the system wide operating costs. Large levels of energy storage are then added to see how high level energy storage affects peak shaving, load factor, and other system applications. Finally, various constraint relaxations are made to analyze why the applications tested eventually approach a constant value. This research illustrates the use of energy storage which helps minimize the system wide generator operating cost by "shaving" energy off of the peak demand.

The thesis builds on the work of another recent researcher with the objectives of strengthening the assumptions used, checking the solutions obtained, utilizing higher level simulation languages to affirm results, and expanding the results and conclusions.

One important point not fully discussed in the present thesis is the impact of efficiency in the pumped hydro cycle. The efficiency of the cycle for modern units is estimated at higher than 90%. Inclusion of pumped hydro losses is relegated to future work.