Barriers to grid-connected battery systems: Evidence from the Spanish electricity market

Yu Hu, David Soler Soneira and Mar\'ia Jes\'us S\'anchez

Papers from arXiv.org

Abstract: Electrical energy storage is considered essential for the future energy systems. Among all the energy storage technologies, battery systems may provide flexibility to the power grid in a more distributed and decentralized way. In countries with deregulated electricity markets, grid-connected battery systems should be operated under the specific market design of the country. In this work, using the Spanish electricity market as an example, the barriers to grid-connected battery systems are investigated using utilization analysis. The concept of "potentially profitable utilization time" is proposed and introduced to identify and evaluate future potential grid applications for battery systems. The numerical and empirical analysis suggests that the high cycle cost for battery systems is still the main barrier for grid-connected battery systems. In Spain, for energy arbitrage within the day-ahead market, it is required that the battery wear cost decreases to 15 Euro/MWh to make the potentially profitable utilization rate higher than 20%. Nevertheless, the potentially profitable utilization of batteries is much higher in the applications when higher flexibility is demanded. The minimum required battery wear cost corresponding to 20% potentially profitable utilization time increases to 35 Euro/MWh for energy arbitrage within the day-ahead market and ancillary services, and 50 Euro/MWh for upward secondary reserve. The results of this study contribute to the awareness of battery storage technology and its flexibility in grid applications. The findings also have significant implications for policy makers and market operators interested in promoting grid-connected battery storage under a deregulated power market.

Date: 2020-06, Revised 2020-11
New Economics Papers: this item is included in nep-ene and nep-reg
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