Revenue Stacking for BESS: Fast Frequency Regulation and Balancing Market Participation in Italy

Abstract

Battery energy storage systems (BESS) are considered a relevant flexible resource for supporting the balancing of a RES-penetrated power grid. Since their cost structure is characterized by very high capital costs, it is of utmost importance to ensure efficient and effective operations from a techno-economic perspective. The possibility of services (and revenues) stacking is one of the most discussed optimization solutions. The present work provides a novel approach for BESS modeling, including the stacking of two diverse ancillary services, a dedicated balancing market bidding model, and a state-of-charge management strategy. Fast frequency regulation is proposed as a power-based service, requiring large ramping capability, but asking BESS activation just for a limited amount of time. For the remainder, BESS power can be traded on balancing market (BM): energy-based services, such as tertiary regulation, could be effectively coupled with power-based, fast regulations, increasing the economic attractiveness of investments in BESS. The case of fast reserve (FR), a new high-speed frequency response service proposed by the Italian TSO in Italy, is assessed in this study. FR provision foresees a capacity-based remuneration (k€/MW/year) and requires to ensure 1000 hours per year of availability. After assessing its cost-effectiveness as a stand-alone service, a sequential multiservice strategy is proposed, where BESS provides FR for 1000 hours, while for the rest of the time it is dedicated to the provision of replacement reserve (RR). Performances of BESS are evaluated considering the reliability of the provision, its operational efficiency, and investment’s economics. Performed tests demonstrate how, within the current Italian regulatory framework, the investment’s rate of return improves thanks to the multiservice approach. In particular, while maintaining a proper reliability, the minimum acceptable remuneration from FR yearly auctions decreases by 13%; at the same time, self-dispatching of energy through BM calls reduces the need to purchase energy on day-ahead market and keeps BESS state-of-charge far from saturation regions, thus also increasing its lifetime.