IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v124y2017icp423-434.html
   My bibliography  Save this article

Economic viability of battery energy storage and grid strategy: A special case of China electricity market

Author

Listed:
  • Lin, Boqiang
  • Wu, Wei

Abstract

Battery energy storage (BES) plays an important role in the integration of intermittent renewable power and distributed generation. The price arbitrage is a major source of energy storage income. In China, the electricity price is tightly regulated by the government. It's interesting to find out whether the BES is economic viability in such a special electricity market, and what's the optimal response of the grid (or regulator) when facing the arbitrage activities of BES. This research starts with a price arbitrage model to evaluate the feasibility of energy storage in China's electricity market, which can be used to determine the optimal investment scale and operation mode of energy storage. A quantitative assessment is also implemented to discuss the influence when factors change. Following this, an optimal pricing strategy for grid is established. The results reveal that the storage investment can realize positive profit in some districts where the price gap between peak/off-peak periods is high. Appropriate subsidies can be quantitatively described by sensitivity analysis. In terms of social welfare, the energy storage can be deployed on a large-scale at a low social cost under a suitable price mechanism.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:energy:v:124:y:2017:i:c:p:423-434
    DOI: 10.1016/j.energy.2017.02.086
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544217302682
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2017.02.086?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. Anuta, Oghenetejiri Harold & Taylor, Phil & Jones, Darren & McEntee, Tony & Wade, Neal, 2014. "An international review of the implications of regulatory and electricity market structures on the emergence of grid scale electricity storage," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 489-508.
    2. Barzin, Reza & Chen, John J.J. & Young, Brent R. & Farid, Mohammed M., 2015. "Peak load shifting with energy storage and price-based control system," Energy, Elsevier, vol. 92(P3), pages 505-514.
    3. 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.
    4. Saboori, Hedayat & Hemmati, Reza & Jirdehi, Mehdi Ahmadi, 2015. "Reliability improvement in radial electrical distribution network by optimal planning of energy storage systems," Energy, Elsevier, vol. 93(P2), pages 2299-2312.
    5. Krishnan, Venkat & Das, Trishna, 2015. "Optimal allocation of energy storage in a co-optimized electricity market: Benefits assessment and deriving indicators for economic storage ventures," Energy, Elsevier, vol. 81(C), pages 175-188.
    6. Jiang, Zhujun & Lin, Boqiang, 2012. "China's energy demand and its characteristics in the industrialization and urbanization process," Energy Policy, Elsevier, vol. 49(C), pages 608-615.
    7. 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.
    8. Ma, Tao & Yang, Hongxing & Lu, Lin, 2015. "Development of hybrid battery–supercapacitor energy storage for remote area renewable energy systems," Applied Energy, Elsevier, vol. 153(C), pages 56-62.
    9. Notton, Gilles, 2015. "Importance of islands in renewable energy production and storage: The situation of the French islands," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 260-269.
    10. Ida Bakke & Stein-Erik Fleten & Lars Ivar Hagfors & Verena Hagspiel & Beate Norheim & Sonja Wogrin, 2016. "Investment in electric energy storage under uncertainty: a real options approach," Computational Management Science, Springer, vol. 13(3), pages 483-500, July.
    11. Zafirakis, Dimitrios & Chalvatzis, Konstantinos J. & Baiocchi, Giovanni & Daskalakis, Georgios, 2016. "The value of arbitrage for energy storage: Evidence from European electricity markets," Applied Energy, Elsevier, vol. 184(C), pages 971-986.
    12. Andresen, Gorm B. & Rodriguez, Rolando A. & Becker, Sarah & Greiner, Martin, 2014. "The potential for arbitrage of wind and solar surplus power in Denmark," Energy, Elsevier, vol. 76(C), pages 49-58.
    13. Liu, Jingkun & Zhang, Ning & Kang, Chongqing & Kirschen, Daniel & Xia, Qing, 2017. "Cloud energy storage for residential and small commercial consumers: A business case study," Applied Energy, Elsevier, vol. 188(C), pages 226-236.
    14. Björn Nykvist & Måns Nilsson, 2015. "Rapidly falling costs of battery packs for electric vehicles," Nature Climate Change, Nature, vol. 5(4), pages 329-332, April.
    15. 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.
    16. 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.
    17. Lin, Boqiang & Li, Jianglong, 2015. "Analyzing cost of grid-connection of renewable energy development in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1373-1382.
    18. Li, Aijun & Hu, Mingming & Wang, Mingjian & Cao, Yinxue, 2016. "Energy consumption and CO2 emissions in Eastern and Central China: A temporal and a cross-regional decomposition analysis," Technological Forecasting and Social Change, Elsevier, vol. 103(C), pages 284-297.
    19. Hoppmann, Joern & Volland, Jonas & Schmidt, Tobias S. & Hoffmann, Volker H., 2014. "The economic viability of battery storage for residential solar photovoltaic systems – A review and a simulation model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 1101-1118.
    20. Carson, Richard T. & Novan, Kevin, 2013. "The private and social economics of bulk electricity storage," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 404-423.
    21. 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.
    22. Luo, Xing & Wang, Jihong & Dooner, Mark & Clarke, Jonathan, 2015. "Overview of current development in electrical energy storage technologies and the application potential in power system operation," Applied Energy, Elsevier, vol. 137(C), pages 511-536.
    Full references (including those not matched with items on IDEAS)

    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. 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. Hemmati, Reza & Saboori, Hedayat & Saboori, Saeid, 2016. "Stochastic risk-averse coordinated scheduling of grid integrated energy storage units in transmission constrained wind-thermal systems within a conditional value-at-risk framework," Energy, Elsevier, vol. 113(C), pages 762-775.
    3. Paulo Rotella Junior & Luiz Célio Souza Rocha & Sandra Naomi Morioka & Ivan Bolis & Gianfranco Chicco & Andrea Mazza & Karel Janda, 2021. "Economic Analysis of the Investments in Battery Energy Storage Systems: Review and Current Perspectives," Energies, MDPI, vol. 14(9), pages 1-29, April.
    4. de Sisternes, Fernando J. & Jenkins, Jesse D. & Botterud, Audun, 2016. "The value of energy storage in decarbonizing the electricity sector," Applied Energy, Elsevier, vol. 175(C), pages 368-379.
    5. Zhixian Wang & Ying Wang & Qia Ding & Chen Wang & Kaifeng Zhang, 2020. "Energy Storage Economic Analysis of Multi-Application Scenarios in an Electricity Market: A Case Study of China," Sustainability, MDPI, vol. 12(20), pages 1-17, October.
    6. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2016. "Valuation of energy storage in energy and regulation markets," Energy, Elsevier, vol. 115(P1), pages 1109-1118.
    7. 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).
    8. Antweiler, Werner, 2021. "Microeconomic models of electricity storage: Price Forecasting, arbitrage limits, curtailment insurance, and transmission line utilization," Energy Economics, Elsevier, vol. 101(C).
    9. 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.
    10. 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.
    11. Dusonchet, L. & Favuzza, S. & Massaro, F. & Telaretti, E. & Zizzo, G., 2019. "Technological and legislative status point of stationary energy storages in the EU," Renewable and Sustainable Energy Reviews, Elsevier, vol. 101(C), pages 158-167.
    12. Pusceddu, Elian & Zakeri, Behnam & Castagneto Gissey, Giorgio, 2021. "Synergies between energy arbitrage and fast frequency response for battery energy storage systems," Applied Energy, Elsevier, vol. 283(C).
    13. Telaretti, E. & Dusonchet, L., 2017. "Stationary battery technologies in the U.S.: Development Trends and prospects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 380-392.
    14. Martin, Nigel & Rice, John, 2021. "Power outages, climate events and renewable energy: Reviewing energy storage policy and regulatory options for Australia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 137(C).
    15. 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.
    16. 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).
    17. Núñez, Fernando & Canca, David & Arcos-Vargas, Ángel, 2022. "An assessment of European electricity arbitrage using storage systems," Energy, Elsevier, vol. 242(C).
    18. Qiujie Sun & Jingyu Zhou & Zhou Lan & Xiangyang Ma, 2023. "The Economic Influence of Energy Storage Construction in the Context of New Power Systems," Sustainability, MDPI, vol. 15(4), pages 1-16, February.
    19. Saboori, Hedayat & Hemmati, Reza & Ghiasi, Seyyed Mohammad Sadegh & Dehghan, Shahab, 2017. "Energy storage planning in electric power distribution networks – A state-of-the-art review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 1108-1121.
    20. 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.

    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:energy:v:124:y:2017:i:c:p:423-434. 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.journals.elsevier.com/energy .

    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.