Bidding strategy for battery storage systems in the secondary control reserve market

Abstract

In continental Europe, automatic Frequency Restoration Reserve (aFRR) is one of three control reserve services to counteract imbalances in the electrical grid. The market is dominated by a few operators of conventional power plants since the auction design is complex and new players face various entrance barriers. In order to stabilize the electrical grid in the future, renewable generation technologies need to enter the market. To encourage operators (and traders) of renewable generation facilities to enter the market, this paper presents a bidding strategy based on an optimization approach for deriving an optimal bid and for estimating the revenue potential on this market. The focus is on the participation of Battery Energy Storage Systems (BESS) either in standalone mode or in conjunction with a virtual power plant (VPP). An in-depth cost breakdown and battery ageing model support the derivation of earning potentials. With current costs of containerized BESS, an operation is not economically viable. However, with a predicted cost breakdown for the year 2025 and a pooled operation, profits can be generated. But even for the reduced-cost scenario, profits were found to be lower than on the Frequency Control Reserve (FCR) market.