Potential Arbitrage Revenue of Energy Storage Systems in PJM

Journal Article · Thu Jul 27 00:00:00 EDT 2017 · Energies (Basel)

DOI:https://doi.org/10.3390/en10081100· OSTI ID:1424748

Salles, Mauricio  ^[1]; Huang, Junling ^[2]; Aziz, Michael ^[3]; Hogan, William ^[2]

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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

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.

• Research Organization: Harvard Univ., Cambridge, MA (United States)
• Sponsoring Organization: USDOE Advanced Research Projects Agency - Energy (ARPA-E)
• Grant/Contract Number: AR0000348
• OSTI ID: 1424748
• Journal Information: Energies (Basel), Vol. 10, Issue 12; ISSN 1996-1073
• Publisher: MDPI AG
• Country of Publication: United States
• Language: English

Related Subjects

25 ENERGY STORAGE
29 ENERGY PLANNING, POLICY, AND ECONOMY
battery
electricity market
energy arbitrage
energy storage
real-time market