Researchers from the University of California, Berkeley, including Dirk Lauinger, Luc Coté, and Andy Sun, have developed an optimization model that could significantly improve the way electricity storage systems participate in energy markets. Their work, published in the journal Operations Research, focuses on enhancing the profitability and efficiency of storage systems by optimizing their involvement in both arbitrage and frequency regulation services.
Electricity storage systems, such as batteries, play a crucial role in modern energy markets. They can store excess energy when supply outweighs demand and release it when demand is high, a process known as arbitrage. Additionally, these systems provide ancillary services, such as frequency regulation, which helps balance the grid by responding to sudden fluctuations in supply and demand. The researchers’ model aims to maximize the benefits of these dual functions.
The optimization model calculates bids for both arbitrage and frequency regulation, ensuring that storage operators can meet their market commitments even with unforeseen fluctuations. Initially, this requirement involves complex, nonconvex constraints. However, the researchers simplified these constraints into a finite number of deterministic ones, making the model more practical and efficient. The resulting formulation is a mixed-integer bilinear program that can be solved quickly, with solution times under 5 seconds, making it suitable for real-time decision-making.
Empirical tests conducted on European electricity markets demonstrated the model’s effectiveness. The researchers found that joint market participation—combining arbitrage and frequency regulation—more than doubled profits compared to arbitrage alone. Additionally, this strategy almost halved the energy storage output, indicating a more efficient use of storage capacity. The model also accounts for intraday trading, further enhancing its applicability in dynamic market conditions.
As battery capacities continue to grow, exceeding the demand for ancillary services, more sophisticated trading strategies will become essential. The researchers’ model serves as a foundational building block for these advanced strategies, offering a practical tool for storage operators to optimize their market participation and improve overall profitability.
The research, titled “Storage Participation in Electricity Markets: Arbitrage and Ancillary Services,” was published in the journal Operations Research, providing a valuable contribution to the field of energy storage and market optimization.
This article is based on research available at arXiv.