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Title: Potential Arbitrage Revenue of Energy Storage Systems in PJM

The volatility of electricity prices is attracting interest in the opportunity of providing net revenue by energy arbitrage. We analyzed the potential revenue of a generic Energy Storage System (ESS) in 7395 different locations within the electricity markets of Pennsylvania-New Jersey-Maryland interconnection (PJM), the largest U.S. regional transmission organization, using hourly locational marginal prices over the seven-year period 2008–2014. Assuming a price-taking ESS with perfect foresight in the real-time market, we optimized the charge-discharge profile to determine the maximum potential revenue for a 1 MW system as a function of energy/power ratio, or rated discharge duration, from 1 to 14 h, including a limited analysis of sensitivity to round-trip efficiency. We determined minimum potential revenue with a similar analysis of the day-ahead market. We presented the distribution over the set of nodes and years of price, price volatility, and maximum potential arbitrage revenue. From these results, we determined the break even overnight installed cost of an ESS below which arbitrage would be profitable, its dependence on rated discharge duration, its distribution over grid nodes, and its variation over the years. We showed that dispatch into real-time markets based on day-ahead market settlement prices is a simple, feasible method that raisesmore » the lower bound on the achievable arbitrage revenue.« less
Authors:
ORCiD logo [1] ;  [2] ;  [3] ;  [2]
  1. University of Sao Paulo (Brazil). Laboratory of Advanced Electric Grids-LGrid, Polytechnic School
  2. Harvard Univ., Cambridge, MA (United States). John F. Kennedy School of Government
  3. Harvard Univ., Cambridge, MA (United States). John A. Paulson School of Engineering and Applied Sciences
Publication Date:
Grant/Contract Number:
AR0000348
Type:
Accepted Manuscript
Journal Name:
Energies (Basel)
Additional Journal Information:
Journal Name: Energies (Basel); Journal Volume: 10; Journal Issue: 12; Journal ID: ISSN 1996-1073
Publisher:
MDPI AG
Research Org:
Harvard Univ., Cambridge, MA (United States)
Sponsoring Org:
USDOE Advanced Research Projects Agency - Energy (ARPA-E)
Country of Publication:
United States
Language:
English
Subject:
25 ENERGY STORAGE; 29 ENERGY PLANNING, POLICY, AND ECONOMY; battery; electricity market; energy arbitrage; energy storage; real-time market
OSTI Identifier:
1424748

Salles, Mauricio, Huang, Junling, Aziz, Michael, and Hogan, William. Potential Arbitrage Revenue of Energy Storage Systems in PJM. United States: N. p., Web. doi:10.3390/en10081100.
Salles, Mauricio, Huang, Junling, Aziz, Michael, & Hogan, William. Potential Arbitrage Revenue of Energy Storage Systems in PJM. United States. doi:10.3390/en10081100.
Salles, Mauricio, Huang, Junling, Aziz, Michael, and Hogan, William. 2017. "Potential Arbitrage Revenue of Energy Storage Systems in PJM". United States. doi:10.3390/en10081100. https://www.osti.gov/servlets/purl/1424748.
@article{osti_1424748,
title = {Potential Arbitrage Revenue of Energy Storage Systems in PJM},
author = {Salles, Mauricio and Huang, Junling and Aziz, Michael and Hogan, William},
abstractNote = {The volatility of electricity prices is attracting interest in the opportunity of providing net revenue by energy arbitrage. We analyzed the potential revenue of a generic Energy Storage System (ESS) in 7395 different locations within the electricity markets of Pennsylvania-New Jersey-Maryland interconnection (PJM), the largest U.S. regional transmission organization, using hourly locational marginal prices over the seven-year period 2008–2014. Assuming a price-taking ESS with perfect foresight in the real-time market, we optimized the charge-discharge profile to determine the maximum potential revenue for a 1 MW system as a function of energy/power ratio, or rated discharge duration, from 1 to 14 h, including a limited analysis of sensitivity to round-trip efficiency. We determined minimum potential revenue with a similar analysis of the day-ahead market. We presented the distribution over the set of nodes and years of price, price volatility, and maximum potential arbitrage revenue. From these results, we determined the break even overnight installed cost of an ESS below which arbitrage would be profitable, its dependence on rated discharge duration, its distribution over grid nodes, and its variation over the years. We showed that dispatch into real-time markets based on day-ahead market settlement prices is a simple, feasible method that raises the lower bound on the achievable arbitrage revenue.},
doi = {10.3390/en10081100},
journal = {Energies (Basel)},
number = 12,
volume = 10,
place = {United States},
year = {2017},
month = {7}
}