Estimating the maximum potential revenue for grid connected electricity storage : arbitrage and regulation.

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The valuation of an electricity storage device is based on the expected future cash ow generated by the device. Two potential sources of income for an electricity storage system are energy arbitrage and participation in the frequency regulation market. Energy arbitrage refers to purchasing (stor- ing) energy when electricity prices are low, and selling (discharging) energy when electricity prices are high. Frequency regulation is an ancillary service geared towards maintaining system frequency, and is typically procured by the independent system operator in some type of market. This paper outlines the calculations required to estimate the maximum potential revenue from participating ... continued below

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65 p.

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Byrne, Raymond Harry & Silva Monroy, Cesar Augusto. December 1, 2012.

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This report is part of the collection entitled: Office of Scientific & Technical Information Technical Reports and was provided by UNT Libraries Government Documents Department to Digital Library, a digital repository hosted by the UNT Libraries. It has been viewed 39 times . More information about this report can be viewed below.

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  • Sandia National Laboratories
    Publisher Info: Sandia National Laboratories (SNL-NM), Albuquerque, NM (United States)
    Place of Publication: Albuquerque, New Mexico

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Description

The valuation of an electricity storage device is based on the expected future cash ow generated by the device. Two potential sources of income for an electricity storage system are energy arbitrage and participation in the frequency regulation market. Energy arbitrage refers to purchasing (stor- ing) energy when electricity prices are low, and selling (discharging) energy when electricity prices are high. Frequency regulation is an ancillary service geared towards maintaining system frequency, and is typically procured by the independent system operator in some type of market. This paper outlines the calculations required to estimate the maximum potential revenue from participating in these two activities. First, a mathematical model is presented for the state of charge as a function of the storage device parameters and the quantities of electricity purchased/sold as well as the quantities o ered into the regulation market. Using this mathematical model, we present a linear programming optimization approach to calculating the maximum potential revenue from an elec- tricity storage device. The calculation of the maximum potential revenue is critical in developing an upper bound on the value of storage, as a benchmark for evaluating potential trading strate- gies, and a tool for capital nance risk assessment. Then, we use historical California Independent System Operator (CAISO) data from 2010-2011 to evaluate the maximum potential revenue from the Tehachapi wind energy storage project, an American Recovery and Reinvestment Act of 2009 (ARRA) energy storage demonstration project. We investigate the maximum potential revenue from two di erent scenarios: arbitrage only and arbitrage combined with the regulation market. Our analysis shows that participation in the regulation market produces four times the revenue compared to arbitrage in the CAISO market using 2010 and 2011 data. Then we evaluate several trading strategies to illustrate how they compare to the maximum potential revenue benchmark. We conclude with a sensitivity analysis with respect to key parameters.

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65 p.

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  • Report No.: SAND2012-3863
  • Grant Number: AC04-94AL85000
  • Office of Scientific & Technical Information Report Number: 1088080
  • Archival Resource Key: ark:/67531/metadc829443

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Office of Scientific and Technical Information (OSTI) is the Department of Energy (DOE) office that collects, preserves, and disseminates DOE-sponsored research and development (R&D) results that are the outcomes of R&D projects or other funded activities at DOE labs and facilities nationwide and grantees at universities and other institutions.

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  • December 1, 2012

Added to The UNT Digital Library

  • May 19, 2016, 9:45 a.m.

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  • June 17, 2016, 3:12 p.m.

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Byrne, Raymond Harry & Silva Monroy, Cesar Augusto. Estimating the maximum potential revenue for grid connected electricity storage : arbitrage and regulation., report, December 1, 2012; Albuquerque, New Mexico. (digital.library.unt.edu/ark:/67531/metadc829443/: accessed August 14, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.