Potential Arbitrage Revenue of Energy Storage Systems in PJM

Mauricio B. C. Salles, Junling Huang, Michael J. Aziz and William W. Hogan
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Mauricio B. C. Salles: Laboratory of Advanced Electric Grids - LGrid, Polytechnic School, University of São Paulo, São Paulo 05508-010, Brazil
Junling Huang: John F. Kennedy School of Government, Harvard University, Cambridge, MA 02138, USA
Michael J. Aziz: John A. Paulson School of Engineering and Applied Sciences, Harvard University, Cambridge, MA 02138, USA
William W. Hogan: John F. Kennedy School of Government, Harvard University, Cambridge, MA 02138, USA

Energies, 2017, vol. 10, issue 8, 1-19

Abstract: The volatility of electricity prices is attracting interest in the opportunity of providing net revenue by energy arbitrage. We analyzed the potential revenue of a generic Energy Storage System (ESS) in 7395 different locations within the electricity markets of Pennsylvania-New Jersey-Maryland interconnection (PJM), the largest U.S. regional transmission organization, using hourly locational marginal prices over the seven-year period 2008–2014. Assuming a price-taking ESS with perfect foresight in the real-time market, we optimized the charge-discharge profile to determine the maximum potential revenue for a 1 MW system as a function of energy/power ratio, or rated discharge duration, from 1 to 14 h, including a limited analysis of sensitivity to round-trip efficiency. We determined minimum potential revenue with a similar analysis of the day-ahead market. We presented the distribution over the set of nodes and years of price, price volatility, and maximum potential arbitrage revenue. From these results, we determined the breakeven overnight installed cost of an ESS below which arbitrage would be profitable, its dependence on rated discharge duration, its distribution over grid nodes, and its variation over the years. We showed that dispatch into real-time markets based on day-ahead market settlement prices is a simple, feasible method that raises the lower bound on the achievable arbitrage revenue.

Keywords: battery; electricity market; energy arbitrage; energy storage; real-time market (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: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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