Economic Value of Li-ion Energy Storage System in Frequency Regulation Application from Utility Firm’s Perspective in Korea

Wonchang Hur,Suchul Nam,Wooje Kim,Kijun Park,Kwangsup Shin,Yongma Moon

doi:10.3390/en8065000

Abstract

Energy Storage Systems (ESSs) have recently been highlighted because of their many benefits such as load-shifting, frequency regulation, price arbitrage, renewables, and so on. Among those benefits, we aim at evaluating their economic value in frequency regulation application. However, unlike previous literature focusing on profits obtained from participating in the ancillary service market, our approach concentrates on the cost reduction from the perspective of a utility firm that has an obligation to pay energy fees to a power exchange. More specifically, we focus on the payments between the power exchange market and the utility firm as a major source of economic benefits. The evaluation is done by cost- benefit analysis (CBA) with a dataset of the Korean market while considering operational constraint costs as well as scheduled energy payments, and a simulation algorithm for the evaluation is provided. Our results show the potential for huge profits to be made by cost reduction. We believe that this research can provide a guideline for a utility firm considering investing in ESSs for frequency regulation application as a source of cost reduction.

Highlights

In a traditional generation setting, electricity, in its technical characteristics, cannot be stored, which means that if there is demand, the demand should be fulfilled right away
This paper proposes an economic valuation method for a battery-based energy storage system used for frequency regulation purposes, from a utility firm’s perspective
This paper considers the viewpoint of a utility that has to pay constraint costs to a power exchange market as compensation for controlling frequency regulation

Summary

Introduction

In a traditional generation setting, electricity, in its technical characteristics, cannot be stored, which means that if there is demand, the demand should be fulfilled right away This implies that a power system should always secure sufficient generation capacity to meet the highest demand at peak times, even though demand stays lower for most of the time. Such inefficiency is becoming more problematic as peak time demands keep soaring faster than average demands. A variety of applications of ESS have been proposed, including peak-time shifting, load balancing, provision of ancillary services, and quality enhancement.

Methods

Results

Conclusion