Estimating the maximum potential revenue for grid connected electricity storage :
Abstract
The valuation of an electricity storage device is based on the expected future cash flow 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,more »
 Authors:
 Publication Date:
 Research Org.:
 Sandia National Lab. (SNLNM), Albuquerque, NM (United States)
 Sponsoring Org.:
 USDOE National Nuclear Security Administration (NNSA)
 OSTI Identifier:
 1088080
 Report Number(s):
 SAND20123863
456396
 DOE Contract Number:
 AC0494AL85000
 Resource Type:
 Technical Report
 Country of Publication:
 United States
 Language:
 English
Citation Formats
Byrne, Raymond Harry, and Silva Monroy, Cesar Augusto. Estimating the maximum potential revenue for grid connected electricity storage :. United States: N. p., 2012.
Web. doi:10.2172/1088080.
Byrne, Raymond Harry, & Silva Monroy, Cesar Augusto. Estimating the maximum potential revenue for grid connected electricity storage :. United States. doi:10.2172/1088080.
Byrne, Raymond Harry, and Silva Monroy, Cesar Augusto. Sat .
"Estimating the maximum potential revenue for grid connected electricity storage :". United States.
doi:10.2172/1088080. https://www.osti.gov/servlets/purl/1088080.
@article{osti_1088080,
title = {Estimating the maximum potential revenue for grid connected electricity storage :},
author = {Byrne, Raymond Harry and Silva Monroy, Cesar Augusto.},
abstractNote = {The valuation of an electricity storage device is based on the expected future cash flow 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 20102011 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.},
doi = {10.2172/1088080},
journal = {},
number = ,
volume = ,
place = {United States},
year = {Sat Dec 01 00:00:00 EST 2012},
month = {Sat Dec 01 00:00:00 EST 2012}
}

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