Factoring the Cycle Aging Cost of Batteries Participating in Electricity Markets

TLDR

Battery owners must bid to cover true operating costs, but cycle aging—a major cost component—is often omitted or poorly modeled in current market bidding tools. The study introduces a piecewise linear cost function to model battery cycle aging for market bidding. By defining marginal aging cost per cycle, the model allows profitability assessment within existing dispatch programs. A case study in ISO New England shows the model increases operating profit for battery storage in energy and reserve markets.

Abstract

When participating in electricity markets, owners of battery energy storage systems must bid in such a way that their revenues will at least cover their true cost of operation. Since cycle aging of battery cells represents a substantial part of this operating cost, the cost of battery degradation must be factored in these bids. However, existing models of battery degradation either do not fit market clearing software or do not reflect the actual battery aging mechanism. In this paper we model battery cycle aging using a piecewise linear cost function, an approach that provides a close approximation of the cycle aging mechanism of electrochemical batteries and can be incorporated easily into existing market dispatch programs. By defining the marginal aging cost of each battery cycle, we can assess the actual operating profitability of batteries. A case study demonstrates the effectiveness of the proposed model in maximizing the operating profit of a battery energy storage system taking part in the ISO New England energy and reserve markets.