Economic Value Assessment and Optimal Sizing of an Energy Storage System in a Grid-Connected Wind Farm

Dong Choi,Daiki Min,Jong-Hyun Ryu

doi:10.3390/en11030591

Abstract

This study identifies the optimal management policy of a given energy storage system (ESS) installed in a grid-connected wind farm in terms of maximizing the monetary benefits and provides guidelines for defining the economic value of the ESS under optimal management policy and selecting the optimal size of the ESS based on economic value. Considering stochastic models for wind power and electricity price, we develop a finite-horizon periodic-review Markov decision process (MDP) model to seek the optimal management policy. We also use a simple optimization model to find the optimal storage capacity and charging/discharging capacity of the ESS. By applying our analytic approach to a real-world grid-connected wind farm located in South Korea, we verify the usefulness of this study. Our numerical study shows that the economic value of the ESS is highly dependent on management policy, wind electricity variability, and electricity price variability. Thus, the optimal size of ESS should be carefully determined based on the locational characteristics and management policy even with limited investments. Furthermore, this study provides a meaningful policy implication regarding how much of a subsidy the government should provide for installing ESS in a wind farm.

Highlights

As greenhouse gas emission reduction has recently received extensive attention, renewable energy resources have been rapidly integrated into the electricity sector around the world
This paper describes how to identify the optimal management policy of the energy storage system (ESS) installed in a grid-connected wind farm in terms of maximizing economic benefits, and, more importantly, provides an analytic guideline for defining the economic value of ESS under the policy and selecting its optimal size
We define the economic value of ESS as the difference between the average profit made by selling electricity from a wind farm with ESS and one without ESS, and prove that the economic value of ESS is non-decreasing and jointly concave with respect to the storage capacity and charging/discharging capacity sizes

Summary

Introduction

As greenhouse gas emission reduction has recently received extensive attention, renewable energy resources have been rapidly integrated into the electricity sector around the world. According to a recent report published by the International Energy Agency (IEA), renewable energy resources will account for the largest portion of total primary energy consumption in the global electricity sector in 2030 [1]. The report projects that wind energy will make the largest contribution to the penetration. As the penetration level of the wind energy in an electric power system increases, the critical weak points of the wind energy—intermittency and non-dispatchability—have posed more challenges in the operation of the electric power system in terms of the quality of power, liability, and so on. As attempts to overcome these challenges, new technologies have been developed, such as a smart grid and/or an energy storage system (ESS). With recent technological advancement and Energies 2018, 11, 591; doi:10.3390/en11030591 www.mdpi.com/journal/energies

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