Investments in merchant energy storage: Trading-off between energy and reserve markets

H. Pandžić, Yury Dvorkin, M. Carrión

Research output: Contribution to journalArticle

Abstract

Grid-scale energy storage units are regarded as an enabler of the renewable-dominant power systems. Currently available energy storage technologies are ubiquitous, but not equally suitable for providing different grid support services. As part of their investment process, merchant energy storage investors need to ensure that their energy storage investments are well aligned with unique grid support needs of each power system and that the storage characteristics are suitable for the simultaneous provision of multiple services. This paper presents a model to optimize merchant investments in energy storage units that can compete in the joint energy and reserve market. The proposed model uses the bilevel programming framework to maximize the expected lifetime profit and to ensure a desirable rate-of-return for the merchant energy storage investor, while endogenously considering market clearing decisions over a set of characteristic days. The bilevel model is first converted into a single-level equivalent using the Karush-Kuhn-Tucker-based approach and then linearized to obtain a mixed-integer linear program. The resulting program is solved using the Benders’ decomposition approach and tested on the 8-zone Independent System Operator New England test system. The case study provides numerical insights that are discussed from viewpoints of the merchant energy storage owner, the system operator, and the regulator.

Original languageEnglish (US)
Pages (from-to)277-286
Number of pages10
JournalApplied Energy
Volume230
DOIs
StatePublished - Nov 15 2018

Fingerprint

Energy storage
market
energy
energy storage
Profitability
decomposition
Decomposition

Keywords

  • Bilevel program
  • Day-ahead market
  • Energy storage
  • Reserve market

ASJC Scopus subject areas

  • Building and Construction
  • Energy(all)
  • Mechanical Engineering
  • Management, Monitoring, Policy and Law

Cite this

Investments in merchant energy storage : Trading-off between energy and reserve markets. / Pandžić, H.; Dvorkin, Yury; Carrión, M.

In: Applied Energy, Vol. 230, 15.11.2018, p. 277-286.

Research output: Contribution to journalArticle

@article{7f09912b7a444f6888abf9b37826ea3b,
title = "Investments in merchant energy storage: Trading-off between energy and reserve markets",
abstract = "Grid-scale energy storage units are regarded as an enabler of the renewable-dominant power systems. Currently available energy storage technologies are ubiquitous, but not equally suitable for providing different grid support services. As part of their investment process, merchant energy storage investors need to ensure that their energy storage investments are well aligned with unique grid support needs of each power system and that the storage characteristics are suitable for the simultaneous provision of multiple services. This paper presents a model to optimize merchant investments in energy storage units that can compete in the joint energy and reserve market. The proposed model uses the bilevel programming framework to maximize the expected lifetime profit and to ensure a desirable rate-of-return for the merchant energy storage investor, while endogenously considering market clearing decisions over a set of characteristic days. The bilevel model is first converted into a single-level equivalent using the Karush-Kuhn-Tucker-based approach and then linearized to obtain a mixed-integer linear program. The resulting program is solved using the Benders’ decomposition approach and tested on the 8-zone Independent System Operator New England test system. The case study provides numerical insights that are discussed from viewpoints of the merchant energy storage owner, the system operator, and the regulator.",
keywords = "Bilevel program, Day-ahead market, Energy storage, Reserve market",
author = "H. Pandžić and Yury Dvorkin and M. Carri{\'o}n",
year = "2018",
month = "11",
day = "15",
doi = "10.1016/j.apenergy.2018.08.088",
language = "English (US)",
volume = "230",
pages = "277--286",
journal = "Applied Energy",
issn = "0306-2619",
publisher = "Elsevier BV",

}

TY - JOUR

T1 - Investments in merchant energy storage

T2 - Trading-off between energy and reserve markets

AU - Pandžić, H.

AU - Dvorkin, Yury

AU - Carrión, M.

PY - 2018/11/15

Y1 - 2018/11/15

N2 - Grid-scale energy storage units are regarded as an enabler of the renewable-dominant power systems. Currently available energy storage technologies are ubiquitous, but not equally suitable for providing different grid support services. As part of their investment process, merchant energy storage investors need to ensure that their energy storage investments are well aligned with unique grid support needs of each power system and that the storage characteristics are suitable for the simultaneous provision of multiple services. This paper presents a model to optimize merchant investments in energy storage units that can compete in the joint energy and reserve market. The proposed model uses the bilevel programming framework to maximize the expected lifetime profit and to ensure a desirable rate-of-return for the merchant energy storage investor, while endogenously considering market clearing decisions over a set of characteristic days. The bilevel model is first converted into a single-level equivalent using the Karush-Kuhn-Tucker-based approach and then linearized to obtain a mixed-integer linear program. The resulting program is solved using the Benders’ decomposition approach and tested on the 8-zone Independent System Operator New England test system. The case study provides numerical insights that are discussed from viewpoints of the merchant energy storage owner, the system operator, and the regulator.

AB - Grid-scale energy storage units are regarded as an enabler of the renewable-dominant power systems. Currently available energy storage technologies are ubiquitous, but not equally suitable for providing different grid support services. As part of their investment process, merchant energy storage investors need to ensure that their energy storage investments are well aligned with unique grid support needs of each power system and that the storage characteristics are suitable for the simultaneous provision of multiple services. This paper presents a model to optimize merchant investments in energy storage units that can compete in the joint energy and reserve market. The proposed model uses the bilevel programming framework to maximize the expected lifetime profit and to ensure a desirable rate-of-return for the merchant energy storage investor, while endogenously considering market clearing decisions over a set of characteristic days. The bilevel model is first converted into a single-level equivalent using the Karush-Kuhn-Tucker-based approach and then linearized to obtain a mixed-integer linear program. The resulting program is solved using the Benders’ decomposition approach and tested on the 8-zone Independent System Operator New England test system. The case study provides numerical insights that are discussed from viewpoints of the merchant energy storage owner, the system operator, and the regulator.

KW - Bilevel program

KW - Day-ahead market

KW - Energy storage

KW - Reserve market

UR - http://www.scopus.com/inward/record.url?scp=85052306044&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85052306044&partnerID=8YFLogxK

U2 - 10.1016/j.apenergy.2018.08.088

DO - 10.1016/j.apenergy.2018.08.088

M3 - Article

AN - SCOPUS:85052306044

VL - 230

SP - 277

EP - 286

JO - Applied Energy

JF - Applied Energy

SN - 0306-2619

ER -