In the rapidly evolving energy sector, battery energy storage systems (BESSs) are becoming increasingly integral to grid stability and renewable energy integration. However, as these systems grow in popularity, so does the need for operators to understand the delicate balance between short-term market profits and long-term asset degradation. A recent study published in the journal “Future Batteries Report” sheds light on this very issue, offering a techno-economic framework that could reshape how BESS operators approach trading strategies.
Led by Mirko Ledro, a researcher at Ørsted Wind Power A/S and the Technical University of Denmark, the study introduces an ageing-aware trading strategy that accounts for the degradation of lithium-ion batteries. This approach is a significant departure from traditional unbounded trading strategies, which often prioritize immediate gains without considering the long-term health of the battery.
“The key insight here is that trading strategies have a direct impact on the lifespan of battery storage systems,” Ledro explains. “By incorporating ageing factors into the trading strategy, operators can significantly enhance the financial viability of their projects.”
The study focuses on a 20MW/10.85MWh BESS traded in the UK’s 30-minute day-ahead (DA) market. Using a three-day rolling horizon optimisation model repeated over a year, the researchers compared various trading strategies, including those that account for battery ageing through constraints or cost-of-use (COU) in the objective function.
The results were striking. Trading strategies that included a COU in the objective function outperformed others, with an increase of up to 21% in annualised net present value (NPV) compared to an unbounded strategy. This finding underscores the importance of considering long-term degradation costs in trading decisions.
“Deriving a COU from installation or replacement costs leads to a non-optimal annualised NPV,” Ledro notes. “It’s crucial to use the annualised NPV to compare results from BESS projects of different lifetimes.”
The implications of this research are far-reaching. As the energy sector continues to transition towards renewable sources, the role of BESSs will only grow in importance. By adopting ageing-aware trading strategies, operators can extend the lifespan of their assets, reduce long-term costs, and ultimately enhance the financial viability of their projects.
“This study provides a robust framework for operators to make more informed decisions,” says Ledro. “It’s a step towards more sustainable and economically sound energy storage solutions.”
As the energy sector continues to evolve, the insights from this research could shape the future of battery storage systems, ensuring they remain a cornerstone of the renewable energy transition.