Profit-Oriented Planning and Multi-Market Operation Model for Hybrid Energy Storage Systems

Lizhong Zhang, Junqi Liu, Jianxiao Wang and Lei Zhu

Papers from arXiv.org

Abstract: The increasing penetration of renewable energy necessitates improved power system flexibility, driving the deployment of independent energy storage operators (ESOs). Existing research extensively investigates capacity sizing for price-taker storage systems or the operational coordination of aggregated distributed resources, lacking the joint optimization of capacity planning and multi-market bidding for a price-maker ESO with hybrid energy storage system (HESS) that preserves the technological heterogeneity of the integrated components. We propose a bi-level optimization framework to jointly optimize profit-oriented decisions on capacity and multi-market operation. The upper-level problem determines the optimal capacities of two heterogeneous storage systems while coordinating their bidding across day-ahead joint energy-reserve and real-time balancing markets. The lower-level problems represent market clearing of the system operator (SO). The model is reformulated into a mixed-integer linear program and solved with a Benders' decomposition algorithm. Results demonstrate that the ESO can allocate capacity between energy arbitrage and reserve provision strategically. The system with the high power-to-capacity ratio is used to capture arbitrage profits while the system with low power-to-capacity ratio is used to specialize in reserve markets. There can be internal power transfer between storage systems if there exist grid access constraints. The framework provides differentiated bidding strategies and market participation flexibility for HESS to enhance overall profitability.

Date: 2026-05
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