Arbitrage analysis for different energy storage technologies and strategies

Xinjing Zhang; Chao (Chris) Qin; Eric Loth; Yujie Xu; Xuezhi Zhou; Haisheng Chen

Energy Reports (Nov 2021)

Arbitrage analysis for different energy storage technologies and strategies

Xinjing Zhang,
Chao (Chris) Qin,
Eric Loth,
Yujie Xu,
Xuezhi Zhou,
Haisheng Chen

Affiliations

Xinjing Zhang: Institute of Engineering Thermophysics, Chinese Academy of Sciences, Beijing, 100190, China; Mechanical and Aerospace Engineering, University of Virginia, Charlottesville VA, 22904, USA; University of Chinese Academy of Sciences, Beijing, 100049, China
Chao (Chris) Qin: Mechanical and Aerospace Engineering, University of Virginia, Charlottesville VA, 22904, USA
Eric Loth: Mechanical and Aerospace Engineering, University of Virginia, Charlottesville VA, 22904, USA; Corresponding authors.
Yujie Xu: Institute of Engineering Thermophysics, Chinese Academy of Sciences, Beijing, 100190, China; University of Chinese Academy of Sciences, Beijing, 100049, China
Xuezhi Zhou: Bijie High-tech Industrial Development Zone National Energy Large Scale Physical Energy Storage Technologies R&D Center, Guizhou Bijie, 551712, China; Corresponding authors.
Haisheng Chen: Institute of Engineering Thermophysics, Chinese Academy of Sciences, Beijing, 100190, China; University of Chinese Academy of Sciences, Beijing, 100049, China

Journal volume & issue: Vol. 7
pp. 8198 – 8206

Abstract

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The time-varying mismatch between electricity supply and demand is a growing challenge for the electricity market. This difference will be exacerbated with the fast-growing renewable energy penetration to the grid, due to its inherent volatility. Energy storage systems can offer a solution for this demand-generation imbalance, while generating economic benefits through the arbitrage in terms of electricity prices difference. In the present study, a method to estimate the potential revenues of typical energy storage systems is developed. The revenue is considered as the income from the energy storage plant with various roundtrip efficiencies. Thus, an optimal methodology was developed to determine the largest revenue through the charging and discharging operations based on the price profile. It is then applied to the California market in the United States to investigate the potential economic performance of three primary energy storage technologies: Lithium-Ion Batteries, Compressed Air Energy Storage and Pumped Hydro Storage. In particular, the maximum daily revenue from arbitrage is calculated considering various strategies of charging and discharging times as well as the technology’s roundtrip efficiency. The estimated capacity cost of energy storage for different loan periods is also estimated to determine the breakeven cost of the different energy storage technologies for an arbitrage application scenario. Pumped hydro storage (PHS) is found to be the most cost-effective but is not a good candidate for increased capacity in many countries due to concerns associated with developing new dams. Compressed Air Energy Storage (CAES), was found to be the second most cost-effective but still requires much more technology development before it is ready for widespread usage. Lithium battery is well-developed but is currently much too costly (by a factor of four) for a large scale energy storage application. The proposed method can be applied as these and other technologies and their associated costs evolve.

Published in Energy Reports

ISSN: 2352-4847 (Online)
Publisher: Elsevier
Country of publisher: United Kingdom
LCC subjects: Technology: Electrical engineering. Electronics. Nuclear engineering
Website: http://www.journals.elsevier.com/energy-reports/

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