IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v260y2020ics0306261919319609.html
   My bibliography  Save this article

Impact of battery technological progress on electricity arbitrage: An application to the Iberian market

Author

Listed:
  • Arcos-Vargas, Ángel
  • Canca, David
  • Núñez, Fernando

Abstract

Recent technological advances in power electronics and electrical storage have increased interest in the arbitrage business based on Battery Energy Storage Systems. With this objective, the present work develops a Mixed-Integer Linear Programming model for obtaining optimal electricity sale\purchase strategies with batteries. For each configuration (battery size /inverter size), the model provides an optimal trading strategy. Using this strategy for different configurations and with the current market prices, some financial indicators are calculated in order to select the optimal configuration. Finally, our analysis considers the significant technological progress that has occurred in recent years, the effects on profitability of a reduction in the battery cost, and of an improvement both in the round-trip efficiency and in the battery's lifetime (in terms of the number of cycles). The results indicate that, with current technology, the optimal inverter size for a 10 MWh battery is 3 MW, although, if technological progress continues at the current rate, the arbitrage of electricity by using batteries is expected to be viable from 2024 onwards. Additionally, the effects that different technological improvements (cost, useful life and losses) will have on profitability are calculated,; for example, it is observed that an improvement of 1.6% of the round-trip efficiency and an increase of 1000 life cycles will provide an average increase of 16,000 € and 75,000 €, respectively, in terms of Net Present Value.

Suggested Citation

  • Arcos-Vargas, Ángel & Canca, David & Núñez, Fernando, 2020. "Impact of battery technological progress on electricity arbitrage: An application to the Iberian market," Applied Energy, Elsevier, vol. 260(C).
    • Handle: RePEc:eee:appene:v:260:y:2020:i:c:s0306261919319609
    DOI: 10.1016/j.apenergy.2019.114273
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261919319609
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2019.114273?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wu, Wei & Lin, Boqiang, 2018. "Application value of energy storage in power grid: A special case of China electricity market," Energy, Elsevier, vol. 165(PB), pages 1191-1199.
    2. Das, Trishna & Krishnan, Venkat & McCalley, James D., 2015. "Assessing the benefits and economics of bulk energy storage technologies in the power grid," Applied Energy, Elsevier, vol. 139(C), pages 104-118.
    3. He, Xian & Delarue, Erik & D'haeseleer, William & Glachant, Jean-Michel, 2011. "A novel business model for aggregating the values of electricity storage," Energy Policy, Elsevier, vol. 39(3), pages 1575-1585, March.
    4. Adebayo, Abiola I. & Zamani-Dehkordi, Payam & Zareipour, Hamidreza & Knight, Andrew M., 2018. "Impacts of transmission tariff on price arbitrage operation of energy storage system in Alberta electricity market," Utilities Policy, Elsevier, vol. 52(C), pages 1-12.
    5. Yucekaya, Ahmet, 2013. "The operational economics of compressed air energy storage systems under uncertainty," Renewable and Sustainable Energy Reviews, Elsevier, vol. 22(C), pages 298-305.
    6. Connolly, D. & Lund, H. & Finn, P. & Mathiesen, B.V. & Leahy, M., 2011. "Practical operation strategies for pumped hydroelectric energy storage (PHES) utilising electricity price arbitrage," Energy Policy, Elsevier, vol. 39(7), pages 4189-4196, July.
    7. Kazempour, S. Jalal & Moghaddam, M. Parsa & Haghifam, M.R. & Yousefi, G.R., 2009. "Electric energy storage systems in a market-based economy: Comparison of emerging and traditional technologies," Renewable Energy, Elsevier, vol. 34(12), pages 2630-2639.
    8. Berrada, Asmae & Loudiyi, Khalid, 2016. "Operation, sizing, and economic evaluation of storage for solar and wind power plants," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1117-1129.
    9. Bradbury, Kyle & Pratson, Lincoln & Patiño-Echeverri, Dalia, 2014. "Economic viability of energy storage systems based on price arbitrage potential in real-time U.S. electricity markets," Applied Energy, Elsevier, vol. 114(C), pages 512-519.
    10. 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.
    11. 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.
    12. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2016. "Valuation of energy storage in energy and regulation markets," Energy, Elsevier, vol. 115(P1), pages 1109-1118.
    13. Terlouw, Tom & AlSkaif, Tarek & Bauer, Christian & van Sark, Wilfried, 2019. "Multi-objective optimization of energy arbitrage in community energy storage systems using different battery technologies," Applied Energy, Elsevier, vol. 239(C), pages 356-372.
    14. Jannesar, Mohammad Rasol & Sedighi, Alireza & Savaghebi, Mehdi & Guerrero, Josep M., 2018. "Optimal placement, sizing, and daily charge/discharge of battery energy storage in low voltage distribution network with high photovoltaic penetration," Applied Energy, Elsevier, vol. 226(C), pages 957-966.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Timothy Weber & Bin Lu, 2023. "An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals," Energies, MDPI, vol. 17(1), pages 1-31, December.
    2. Yuan, Meng & Sorknæs, Peter & Lund, Henrik & Liang, Yongtu, 2022. "The bidding strategies of large-scale battery storage in 100% renewable smart energy systems," Applied Energy, Elsevier, vol. 326(C).
    3. Ikechi Emmanuel, Michael & Denholm, Paul, 2022. "A market feedback framework for improved estimates of the arbitrage value of energy storage using price-taker models," Applied Energy, Elsevier, vol. 310(C).
    4. Núñez, Fernando & Canca, David & Arcos-Vargas, Ángel, 2022. "An assessment of European electricity arbitrage using storage systems," Energy, Elsevier, vol. 242(C).
    5. León, L.M. & Romero-Quete, D. & Merchán, N. & Cortés, C.A., 2023. "Optimal design of PV and hybrid storage based microgrids for healthcare and government facilities connected to highly intermittent utility grids," Applied Energy, Elsevier, vol. 335(C).
    6. Brändle, Gregor & Schönfisch, Max & Schulte, Simon, 2020. "Estimating Long-Term Global Supply Costs for Low-Carbon Hydrogen," EWI Working Papers 2020-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 10 Aug 2021.
    7. Fernando N'u~nez & David Canca & 'Angel Arcos-Vargas, 2020. "An assessment of European electricity arbitrage using storage systems," Papers 2010.11912, arXiv.org.
    8. Shang, Wenxu & Yu, Wentao & Xiao, Xu & Ma, Yanyi & Chen, Ziqi & Ni, Meng & Tan, Peng, 2022. "Optimizing the charging protocol to address the self-discharge issues in rechargeable alkaline Zn-Co batteries," Applied Energy, Elsevier, vol. 308(C).
    9. Mercier, Thomas & Olivier, Mathieu & De Jaeger, Emmanuel, 2023. "The value of electricity storage arbitrage on day-ahead markets across Europe," Energy Economics, Elsevier, vol. 123(C).
    10. Juan Antonio Ballesteros-Gallardo & Angel Arcos-Vargas & Fernando Núñez, 2021. "Optimal Design Model for a Residential PV Storage System an Application to the Spanish Case," Sustainability, MDPI, vol. 13(2), pages 1-26, January.
    11. Çam, Eren, 2020. "Optimal Dispatch of a Coal-Fired Power Plant with Integrated Thermal Energy Storage," EWI Working Papers 2020-5, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 10 Aug 2021.
    12. Adnan, Muflih A. & Kibria, Md Golam, 2020. "Comparative techno-economic and life-cycle assessment of power-to-methanol synthesis pathways," Applied Energy, Elsevier, vol. 278(C).
    13. Emmanouil, Stergios & Nikolopoulos, Efthymios I. & François, Baptiste & Brown, Casey & Anagnostou, Emmanouil N., 2021. "Evaluating existing water supply reservoirs as small-scale pumped hydroelectric storage options – A case study in Connecticut," Energy, Elsevier, vol. 226(C).
    14. Nina Strobel & Daniel Fuhrländer-Völker & Matthias Weigold & Eberhard Abele, 2020. "Quantifying the Demand Response Potential of Inherent Energy Storages in Production Systems," Energies, MDPI, vol. 13(16), pages 1-22, August.
    15. Gutierrez-Garcia, Francisco & Arcos-Vargas, Angel & Gomez-Exposito, Antonio, 2022. "Robustness of electricity systems with nearly 100% share of renewables: A worst-case study," Renewable and Sustainable Energy Reviews, Elsevier, vol. 155(C).
    16. Vykhodtsev, Anton V. & Jang, Darren & Wang, Qianpu & Rosehart, William & Zareipour, Hamidreza, 2022. "A review of modelling approaches to characterize lithium-ion battery energy storage systems in techno-economic analyses of power systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 166(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Núñez, Fernando & Canca, David & Arcos-Vargas, Ángel, 2022. "An assessment of European electricity arbitrage using storage systems," Energy, Elsevier, vol. 242(C).
    2. Fernando N'u~nez & David Canca & 'Angel Arcos-Vargas, 2020. "An assessment of European electricity arbitrage using storage systems," Papers 2010.11912, arXiv.org.
    3. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2016. "Valuation of energy storage in energy and regulation markets," Energy, Elsevier, vol. 115(P1), pages 1109-1118.
    4. Blanco, Herib & Faaij, André, 2018. "A review at the role of storage in energy systems with a focus on Power to Gas and long-term storage," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 1049-1086.
    5. Zakeri, Behnam & Syri, Sanna, 2015. "Electrical energy storage systems: A comparative life cycle cost analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 569-596.
    6. McConnell, Dylan & Forcey, Tim & Sandiford, Mike, 2015. "Estimating the value of electricity storage in an energy-only wholesale market," Applied Energy, Elsevier, vol. 159(C), pages 422-432.
    7. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2017. "Profitability, risk, and financial modeling of energy storage in residential and large scale applications," Energy, Elsevier, vol. 119(C), pages 94-109.
    8. Goteti, Naga Srujana & Hittinger, Eric & Sergi, Brian & Lima Azevedo, Inês, 2021. "How does new energy storage affect the operation and revenue of existing generation?," Applied Energy, Elsevier, vol. 285(C).
    9. Antweiler, Werner, 2021. "Microeconomic models of electricity storage: Price Forecasting, arbitrage limits, curtailment insurance, and transmission line utilization," Energy Economics, Elsevier, vol. 101(C).
    10. McPherson, Madeleine & Tahseen, Samiha, 2018. "Deploying storage assets to facilitate variable renewable energy integration: The impacts of grid flexibility, renewable penetration, and market structure," Energy, Elsevier, vol. 145(C), pages 856-870.
    11. Mercier, Thomas & Olivier, Mathieu & De Jaeger, Emmanuel, 2023. "The value of electricity storage arbitrage on day-ahead markets across Europe," Energy Economics, Elsevier, vol. 123(C).
    12. Chazarra, Manuel & Pérez-Díaz, Juan I. & García-González, Javier & Praus, Roland, 2018. "Economic viability of pumped-storage power plants participating in the secondary regulation service," Applied Energy, Elsevier, vol. 216(C), pages 224-233.
    13. Ding, Jie & Xu, Yujie & Chen, Haisheng & Sun, Wenwen & Hu, Shan & Sun, Shuang, 2019. "Value and economic estimation model for grid-scale energy storage in monopoly power markets," Applied Energy, Elsevier, vol. 240(C), pages 986-1002.
    14. Ikechi Emmanuel, Michael & Denholm, Paul, 2022. "A market feedback framework for improved estimates of the arbitrage value of energy storage using price-taker models," Applied Energy, Elsevier, vol. 310(C).
    15. Khan, Agha Salman M. & Verzijlbergh, Remco A. & Sakinci, Ozgur Can & De Vries, Laurens J., 2018. "How do demand response and electrical energy storage affect (the need for) a capacity market?," Applied Energy, Elsevier, vol. 214(C), pages 39-62.
    16. Lin, Boqiang & Wu, Wei, 2017. "Economic viability of battery energy storage and grid strategy: A special case of China electricity market," Energy, Elsevier, vol. 124(C), pages 423-434.
    17. Fares, Robert L. & Webber, Michael E., 2014. "A flexible model for economic operational management of grid battery energy storage," Energy, Elsevier, vol. 78(C), pages 768-776.
    18. Tom Brijs & Frederik Geth & Sauleh Siddiqui & Benjamin F. Hobbs & Ronnie Belmans, 2016. "Price-Based Unit Commitment Electricity Storage Arbitrage with Piecewise Linear Price-Effects," Discussion Papers of DIW Berlin 1567, DIW Berlin, German Institute for Economic Research.
    19. Mauricio B. C. Salles & Junling Huang & Michael J. Aziz & William W. Hogan, 2017. "Potential Arbitrage Revenue of Energy Storage Systems in PJM," Energies, MDPI, vol. 10(8), pages 1-19, July.
    20. Pedro Crespo Del Granado & Stein Wallace & Zhan Pang, 2016. "The impact of wind uncertainty on the strategic valuation of distributed electricity storage," Computational Management Science, Springer, vol. 13(1), pages 5-27, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:260:y:2020:i:c:s0306261919319609. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.