Optimizing Investments in Energy Storage · Case III: Merchant ESO Perspective • ESO chooses the optimal locations and sizes that maximize its profits • SO minimizes the system

OptimizingInvestmentsinEnergyStorage

DanielKirschenUniversityofWashington

Acknowledgements

• PhDstudentsandpostdocs:– Yury Dvorkin(nowatNYU)– Ricardo Fernandez-Blanco (nowattheEuropeanJRC)– HrvojePandzic(nowattheUniversityofZagreb)– Bolun Xu– YishenWang– TingQiu (soontobeatERCOT)

• SandiaNationalLab:– CesarSilvaMonroy– Jean-PaulWatson

• Funding:

©2017D.KirschenandUniversityofWashington 2

Goal

• Optimizelocationandsizeofenergystorage• Maximizebenefitsfromspatio-temporalarbitrage

ØConsidercongestionintransmissionØConsideruncertaintyonrenewablegeneration


Optimalfromwhichperspective?

SystemOperator(SO)

EnergyStorageOwner(ESO)

MaintainReliability

MaximizeWelfare

MaximizeProfit

RecoverInvestments

UndefinedrevenueSystemexpansion

UndefinedvalueEnergy-limitedresource


Optimalfromwhichperspective?

• Perspectiveleadstodifferentproblemformulations– Problem1:SOperspective– Problem2:MixedSO-ESOperspective– Problem3:ESOwithtransmissionexpansion


ProblemI:SOPerspective

• SOinvestsinstoragetomaximizewelfare– Benevolent monopolist

• SO’sobjective:Minimize(operatingcost+investmentcostinenergystorage)

• Subjecttoconstraintson:– Investments inenergystorage– Operationofenergystorage– Systemoperation:generationandtransmission limits

• Considerstochasticrenewablegeneration• Considercongestioninthetransmissionnetwork(dcmodel)• Formulationscalabletosystemswith1000’sofbuses


ProblemI:TestSystemandData

• Threestorageinvestmentcostscenarios(ARPA-E):– High: $75/kWhand$1300/kW– Medium: $50/kWhand$1000/kW– Low: $20/kWhand$500/kW

• Round-tripefficiencyof0.81• 10-yearlifetime• 5%annualinterestrate

• 2024WECCsystem– 240buses,448lines,71thermalgenerators– 32windpowerand7solarpowerplants


SOPerspective:OptimalSitingandSizing








SOPerspective:ImpactoftheCapitalCost

• Theinvestmentcostistheprimarydriverofsizingdecisions– Asthecapitalcostincreases, theinstalledstoragecapacitydecreases


SOPerspective:ImpactofWindSpillage

• Rate-of-return(Profit/Cost)issensitivetovalueofwindspillage


VoRS:ValueofRenewableSpillage

SOPerspective:ImpactofWindSpillage

• Insufficientprofitfromspatio-temporalarbitrageunderthehighcapitalcostscenario


ProblemII:MixedSO+ESOPerspective

• Optimallocationandsizeofmerchant energystorageinacentrallyoperatedsystem

• Modifiedintegratedoptimization– Minimize(operatingcost+costofinvestment instorage)– Subjecttoconstraintsonoperationandinvestments

• Addaminimumprofitconstraint:– Lifetimenetrevenue≥ 𝜒 ⋅Investment Cost– 𝜒 isagivenrateofreturn


ProblemII:Bilevel Formulation


DecisionsonStorage

InvestmentsUpperLevel:

OperationforTypicalDaysLowerLevel:

Storagebids/offers

LMPs,acceptedbids/offers

ProblemII:TestSystemandData

• 8-zonemodeloftheISONEsystem– 8marketzones– 13transmission corridors– 76thermalgenerators– 2030renewable portfolio&load

expectations

• ARPA-eprojectionsonstoragecostandcharacteristics


ProblemII:ImpactoftheRateofReturn

• LifetimeProfit≥ 𝜒 ⋅InvestmentCost– If𝜒 > 1 → Storageinvestment isprofitable– If𝜒 = 0 → SamesolutionasproblemI

• Profitconstraintaffectsboththesitingandsizingdecisions– Reduction inthetotalenergycapacity

installed– Morediversity inlocations


ProblemII:ImpactoftheCapitalCost

• Resultsarestronglyaffectedbythecapitalcost

• Totalinstalledcapacityofstoragedecreaseswhencostincreases

• Underthehighestcapitalcostscenario,storageisplacedatthebuswiththehighestintra-dayLMPvariability


CaseIII:MerchantESOPerspective

• ESOchooses theoptimal locationsandsizes thatmaximize itsprofits• SOminimizes thesystemoperatingcost• Effectoftransmission expansion?

• Formulation:– ESOmaximizes(LifetimenetrevenueofES– Costofinvestment instorage)– SOminimizes (Operatingcost+Costofinvestment intransmissionexpansion)

• Constraints– Systemoperation– Investmentsinenergystorage– Profitability constraint:Revenue≥ 𝜒 ⋅InvestmentCost


Trilevel Formulation


MiddleLevel

TransmissionExpansion

LowerLevel

MarketClearing

ExpansionDecisions

Dispatchdecisions

Storagebids/offers

UpperLevelMerchantStorage

Investments

LMPs,acceptedstoragebids/offers

SolvedusingaCCG-typedecomposition

ProblemIII:TestSystemandData

• Threestorageinvestmentcostscenarios(ARPA-E):– High:$75/kWhand$1300/kW– Medium:$50/kWhand$1000/kW– Low:$20/kWhand$500/kW

• Round-tripefficiencyof0.81• 10-yearlifetime• 5%annualinterestrate

• 2024WECCsystem– 240buses,448lines,71thermalgenerators– 32windpowerand7solarpowerplants


EffectofTransmissionExpansion


Expandlinesconnectedtostorageonly

Expandalllines

Comparison

• Sitingof10batteriesforproblemsI, II,and IIIonthesameWECC-240systemwiththesameinputdata:

• Only3locationsarethesameforallthreeproblems• ProblemsIIandIIIhave7outof10commonlocations• BestlocationsfromtheSO’sperspectivearenotnecessarily

thebestlocationsfromamerchantperspective


Summary


ProblemI:SOPerspective

ProblemII:MixedSO- ESOPerspective

ProblemIII:ESOPerspective&TransmissionExpansion

Merchantperspective

Applicabilitytoamarketenvironment

Modelingcomplexity

Openresearchquestions:Storageasatemporarymeasure

• Batterylifetime<Transmissionlinelifetime• NeedtooptimizeinvestmentsovertheyearsØCombinatorialexplosionØTremendousuncertaintyoversystemevolution


Openresearchquestions:Multipleusesofstorage

• Notjustspatio-temporalarbitrage– Frequencyregulation– Reserve– Peakshaving

• Operationalproblem– Howdowecombinetheseapplications?– Stateofchargeconstraints–Multiplebeneficiaries

• Planningproblem


Openresearchquestions:Batterydegradation

• Complexphenomenon• Dependsonthechemistryofthebattery:• Overcharge• Overdischarge• Celltemperature• Cycleaveragestateofcharge(SoC)• Currentrate(C-rate)• Cycledepth

• Howtoincorporatedegradationinoptimaloperationstrategies?

• Impactoninvestmentdecisions?


References

• H.Pandžić,Y.Wang,T.Qiu,Y.DvorkinandD.Kirschen,"Near-OptimalMethodforSitingandSizingofDistributedStorageinaTransmissionNetwork," IEEETransactionsonPowerSystems,2015.

• Y.Dvorkin,R.Fernandez-Blanco,D.Kirschen,H.Pandzic,J.P.WatsonandC.A.Silva-Monroy,"EnsuringProfitabilityofEnergyStorage," IEEETransactionsonPowerSystems,2016

• R.Fernandez-Blanco,Y.Dvorkin,B.Xu,Y.WangandD.Kirschen,"EnergyStorageSitingandSizingintheWECCAreaandtheCAISOSystem,"TechnicalReport,UniversityofWashington,2016.

• R.Fernandez- Blanco,Y.Dvorkin,B.Xu,YWang,D.S.Kirschen,“StochasticEnergyStorageSitingandSizing:AWECCCaseStudy”,IEEETransactionsonSustainableEnergy,earlyaccess

• Y.Dvorkin,R.Fernandez-Blanco,D.Kirschen,Y.Wang,B.Xu,H.Pandzic,J.P.WatsonandC.A.Silva-Monroy,"Co-planningofInvestmentsinTransmissionandMerchantEnergyStorage," IEEETransactionsonPowerSystems,2017


Documents

Optimizing Investments in Energy Storage · Case III: Merchant ESO Perspective • ESO chooses the optimal locations and sizes that maximize its profits • SO minimizes the system