Energy storage systems comprise a wide range of technologies with different technical characteristics. Battery energy storage (BESS) has the potential to improve electric power grid performance, stability, and resilience.
Arbitrage is defined as a trading strategy to “take advantage of spot market price spreads”. Multiple studies assessed how to maximize arbitrage profits, but the consistent finding is that the attainable revenues are on their own insufficient to repay investment in battery storage.
Innovative state-of-charge management strategy helps exploit synergies between fast frequency response and arbitrage. BESS can take the advantage of different energy market prices by charging battery during low price hours and discharging during peak price hours.
The strategy considers two main points: The first is following the time of use rates, to discharge during periods of high electricity prices, and to charge during periods of low electricity prices to obtain the benefits from the electricity price difference. The second is during the period of high power consumption, through BESS discharge, reducing the user demand for electricity purchase during the period, thereby reducing the annual contractual capacity charge.
The combination of these two synergies means that a battery system could increase its operating profits by 25% by delivering arbitrage and frequency response alternately. This result is shown to be statistically robust using historical data. A battery system able to discharge for 1.5–2 h at its full power rating will most likely optimize these synergies.