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Degradation-Aware Bi-Level Optimization of Second-Life Battery Energy Storage System Considering Demand Charge Reduction

Author

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  • Ali Hassan

    (Department of Electrical and Computer Engineering, University of Michigan, Dearborn, MI 48128, USA)

  • Guilherme Vieira Hollweg

    (Department of Electrical and Computer Engineering, University of Michigan, Dearborn, MI 48128, USA)

  • Wencong Su

    (Department of Electrical and Computer Engineering, University of Michigan, Dearborn, MI 48128, USA)

  • Xuan Zhou

    (Department of Electrical and Computer Engineering, University of Michigan, Dearborn, MI 48128, USA)

  • Mengqi Wang

    (Department of Electrical and Computer Engineering, University of Michigan, Dearborn, MI 48128, USA)

Abstract

Many electric vehicle (EV) batteries will retire in the next 5–10 years around the globe. These batteries are retired when no longer suitable for energy-intensive EV operations despite having 70–80% capacity left. The second-life use of these battery packs has the potential to address the increasing demand for battery energy storage systems (BESSs) for the electric grid, which will also create a robust circular economy for EV batteries. This article proposes a two-layered energy management algorithm (monthly layer and daily layer) for demand charge reduction for an industrial consumer using photovoltaic (PV) panels and BESSs made of retired EV batteries. In the proposed algorithm, the monthly layer (ML) calculates the optimal dispatch for the whole month and feeds the output to the daily layer (DL), which optimizes the BESS dispatch, BESSs’ degradation, and energy imported/exported from/to the grid. The effectiveness of the proposed algorithm is tested as a case study of an industrial load using a real-world demand charge and Real-Time Pricing (RTP) tariff. Compared with energy management with no consideration of degradation or demand charge reduction, this algorithm results in 71% less degradation of BESS and 57.3% demand charge reduction for the industrial consumer.

Suggested Citation

  • Ali Hassan & Guilherme Vieira Hollweg & Wencong Su & Xuan Zhou & Mengqi Wang, 2025. "Degradation-Aware Bi-Level Optimization of Second-Life Battery Energy Storage System Considering Demand Charge Reduction," Energies, MDPI, vol. 18(15), pages 1-15, July.
    • Handle: RePEc:gam:jeners:v:18:y:2025:i:15:p:3894-:d:1706943
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    References listed on IDEAS

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    1. Rehman, Waqas ur & Bo, Rui & Mehdipourpicha, Hossein & Kimball, Jonathan W., 2022. "Sizing battery energy storage and PV system in an extreme fast charging station considering uncertainties and battery degradation," Applied Energy, Elsevier, vol. 313(C).
    2. Braco, Elisa & San Martín, Idoia & Sanchis, Pablo & Ursúa, Alfredo & Stroe, Daniel-Ioan, 2022. "State of health estimation of second-life lithium-ion batteries under real profile operation," Applied Energy, Elsevier, vol. 326(C).
    3. Shubo Hu & Hui Sun & Feixiang Peng & Wei Zhou & Wenping Cao & Anlong Su & Xiaodong Chen & Mingze Sun, 2018. "Optimization Strategy for Economic Power Dispatch Utilizing Retired EV Batteries as Flexible Loads," Energies, MDPI, vol. 11(7), pages 1-21, June.
    4. Cheng, Ming & Zhang, Xuan & Ran, Aihua & Wei, Guodan & Sun, Hongbin, 2023. "Optimal dispatch approach for second-life batteries considering degradation with online SoH estimation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 173(C).
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