Economic Value of Li-ion Energy Storage System in Frequency Regulation Application from Utility Firm’s Perspective in Korea

Wonchang Hur, Yongma Moon, Kwangsup Shin, Wooje Kim, Suchul Nam and Kijun Park
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Wonchang Hur: College of Business Administration, Inha University, Incheon 431050, Korea
Yongma Moon: College of Business Administration, University of Seoul, Seoul 130743, Korea
Kwangsup Shin: Graduate School of Logistics, Incheon National University, Incheon 406772, Korea
Wooje Kim: College of Business and Technology, Seoul National University of Science and Technology, Seoul 139743, Korea
Suchul Nam: KEPCO Research Institute, Daejeon 305760, Korea
Kijun Park: KEPCO Research Institute, Daejeon 305760, Korea

Energies, 2015, vol. 8, issue 6, 1-18

Abstract: Energy Storage Systems (ESSs) have recently been highlighted because of their many benefits such as load-shifting, frequency regulation, price arbitrage, renewables, and so on. Among those benefits, we aim at evaluating their economic value in frequency regulation application. However, unlike previous literature focusing on profits obtained from participating in the ancillary service market, our approach concentrates on the cost reduction from the perspective of a utility firm that has an obligation to pay energy fees to a power exchange. More specifically, we focus on the payments between the power exchange market and the utility firm as a major source of economic benefits. The evaluation is done by cost- benefit analysis (CBA) with a dataset of the Korean market while considering operational constraint costs as well as scheduled energy payments, and a simulation algorithm for the evaluation is provided. Our results show the potential for huge profits to be made by cost reduction. We believe that this research can provide a guideline for a utility firm considering investing in ESSs for frequency regulation application as a source of cost reduction.

Keywords: energy storage system; economic value; utility firm; frequency regulation; ancillary services (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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