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A Novel Business Model for Aggregating the Values of Electricity Storage

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Author Info

  • Xian He
  • Erik Delarue
  • William D'haeseleer
  • Jean-Michel Glachant

Abstract

Electricity storage is considered a valuable source of flexibility whose applications cover the whole electricity value chain. However, most of the existing evaluation methods for electricity storage are conceived for only one specific use of the storage, which often leads to the conclusion that the investment on storage does not pay off. We think that the value of storage cannot be properly estimated without taking into account the possibility of aggregating the services that storage can offer to different actors. In this paper, we propose a new business model that allows aggregating multiple revenue streams of electricity storage in a systematic way. The main idea of the business model is to coordinate a series of auctions in which the right to utilize the storage unit is auctioned in different time horizons. The model consists of an optimization module and a coordination mechanism. The former simulates the optimal strategy of a certain actor using the available storage capacities in a certain auction, while the latter ensures non-conflicting uses of storage by actors in different auctions. The functioning of the model is demonstrated by a case study. The results show that a storage unit can achieve a higher return on investment in the manner proposed in the business model.

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File URL: http://cadmus.eui.eu/bitstream/handle/1814/14994/RSCAS_2010_82.pdf
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Bibliographic Info

Paper provided by European University Institute in its series RSCAS Working Papers with number 2010/82.

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Date of creation: 19 Nov 2010
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Handle: RePEc:rsc:rsceui:2010/82

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Keywords: electricity storage; business model; optimization;

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References

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  1. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas & Weiss, Jurgen, 2009. "Estimating the value of electricity storage in PJM: Arbitrage and some welfare effects," Energy Economics, Elsevier, vol. 31(2), pages 269-277, March.
  2. Muche, Thomas, 2009. "A real option-based simulation model to evaluate investments in pump storage plants," Energy Policy, Elsevier, vol. 37(11), pages 4851-4862, November.
  3. Denholm, Paul & Sioshansi, Ramteen, 2009. "The value of compressed air energy storage with wind in transmission-constrained electric power systems," Energy Policy, Elsevier, vol. 37(8), pages 3149-3158, August.
  4. Ramteen Sioshansi, 2010. "Welfare Impacts of Electricity Storage and the Implications of Ownership Structure," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 173-198.
  5. Walawalkar, Rahul & Apt, Jay & Mancini, Rick, 2007. "Economics of electric energy storage for energy arbitrage and regulation in New York," Energy Policy, Elsevier, vol. 35(4), pages 2558-2568, April.
  6. Kapsali, M. & Kaldellis, J.K., 2010. "Combining hydro and variable wind power generation by means of pumped-storage under economically viable terms," Applied Energy, Elsevier, vol. 87(11), pages 3475-3485, November.
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Cited by:
  1. Richter, Mario, 2013. "Business model innovation for sustainable energy: German utilities and renewable energy," Energy Policy, Elsevier, vol. 62(C), pages 1226-1237.
  2. Muche, Thomas, 2014. "Optimal operation and forecasting policy for pump storage plants in day-ahead markets," Applied Energy, Elsevier, vol. 113(C), pages 1089-1099.

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