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A novel production cost model for provision of capacity firming by prosumer batteries

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  • Aldaadi, Mohsen
  • Pantoš, Miloš
  • Riaz, Shariq
  • Chapman, Archie C.
  • Verbič, Gregor

Abstract

The increasing integration of variable renewable energy sources requires firming resources, typically involving storage, gas generation, and new transmission infrastructure to maintain a reliable power supply. In contrast, this paper argues that using prosumer-owned batteries coupled with rooftop solar systems is a promising alternative. A production cost model is proposed to study the provision of capacity-firming services by prosumer virtual power plants in future grid scenario analysis. The model employs a bilevel optimization framework that (1) enables prosumers to prioritize self-consumption before offering surplus battery capacity for firming services, ensuring operational autonomy, and (2) allows the system operator to select the most cost-effective prosumer solutions without compromising the overall benefits to prosumers. The model effectiveness is evaluated through a case study of the Australian National Electricity Market. Results indicate that prosumer-owned batteries can significantly lower the cost of capacity firming by reducing reliance on gas generation and utility-scale storage. Furthermore, capacity-firming services provide prosumers with an additional revenue stream, enhancing the economic viability of home batteries. However, the study also reveals a decreasing marginal benefit of the value of the capacity-firming service provided by prosumers as their battery size relative to solar capacity increases.

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  • Aldaadi, Mohsen & Pantoš, Miloš & Riaz, Shariq & Chapman, Archie C. & Verbič, Gregor, 2025. "A novel production cost model for provision of capacity firming by prosumer batteries," Energy, Elsevier, vol. 321(C).
    • Handle: RePEc:eee:energy:v:321:y:2025:i:c:s0360544225008631
    DOI: 10.1016/j.energy.2025.135221
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