12.3 Energy arbitrage and ancillary services

Energy arbitrage and ancillary services are key ways grid-scale storage systems make money and support the grid. By buying low and selling high, storage operators can profit from price swings in wholesale markets. This strategy helps balance supply and demand.

Storage systems also provide crucial grid services like frequency regulation and voltage support. These fast-acting capabilities help maintain grid stability and power quality, making storage valuable for integrating more renewable energy into the grid.

Energy Arbitrage and Wholesale Markets

Profiting from Price Fluctuations in Wholesale Electricity Markets

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• Energy arbitrage involves storing energy when prices are low and selling it back to the grid when prices are high, allowing energy storage operators to profit from price differences
• Wholesale electricity markets are where electricity is bought and sold in bulk by generators, utilities, and other market participants
  • Prices in these markets can fluctuate significantly based on supply and demand (peak vs. off-peak hours)
  • Energy storage can help balance supply and demand by absorbing excess energy during periods of low demand and injecting it back into the grid during high demand
• Capacity markets are a type of wholesale electricity market where generators are paid to ensure they have sufficient capacity available to meet future demand
  • Energy storage can participate in capacity markets by committing to provide a certain amount of capacity when needed (during peak demand or emergencies)
  • This provides an additional revenue stream for energy storage operators beyond energy arbitrage

Factors Influencing Energy Arbitrage Profitability

• The profitability of energy arbitrage depends on several factors:
  • The price spread between low and high demand periods (larger spreads are more profitable)
  • The efficiency of the energy storage system (higher efficiency means less energy loss during charging and discharging)
  • The cost of the energy storage system and its operation (lower costs lead to higher profitability)
  • Market rules and regulations that may impact energy storage participation (favorable rules can enhance profitability)
• Energy storage operators must carefully analyze these factors to determine the optimal times to charge and discharge their systems to maximize profits

Frequency Regulation and Voltage Support

Maintaining Grid Stability through Frequency Regulation

• Frequency regulation involves balancing the supply and demand of electricity in real-time to maintain the grid frequency at its nominal value (60 Hz in the US)
  • If supply exceeds demand, the frequency will rise; if demand exceeds supply, the frequency will drop
  • Energy storage can provide frequency regulation by quickly absorbing or injecting power to counteract frequency deviations
• Energy storage systems can respond more rapidly to frequency deviations than traditional generators, making them well-suited for frequency regulation
  • Batteries, flywheels, and supercapacitors are particularly effective due to their fast response times (milliseconds to seconds)

Supporting Grid Voltage and Reactive Power

• Voltage support involves maintaining the voltage of the grid within acceptable limits to ensure the proper operation of electrical equipment and the stability of the power system
  • Energy storage can provide voltage support by injecting or absorbing reactive power, which helps regulate voltage levels
• Reactive power support is the injection or absorption of reactive power to maintain the desired voltage level in the grid
  • Reactive power is the portion of power that does not perform useful work but is necessary to maintain the voltage and magnetic fields in AC systems
  • Energy storage systems with power electronics interfaces (inverters) can generate or consume reactive power as needed to support grid voltage

Operating Reserves and System Restoration

Providing Operating Reserves for Grid Reliability

• Spinning reserve refers to generating capacity that is online, synchronized with the grid, and can quickly respond to changes in demand or supply
  • Energy storage can provide spinning reserve by maintaining a portion of its capacity in a charged state, ready to discharge when needed
• Non-spinning reserve is generating capacity that is not currently online but can be brought online and synchronized with the grid within a specified time frame (typically 10-30 minutes)
  • Energy storage can provide non-spinning reserve by maintaining a portion of its capacity in a charged state and being able to come online quickly when called upon

Supporting System Restoration with Black Start Capability

• Black start refers to the process of restoring power to the grid after a complete or partial blackout without relying on external power sources
  • Energy storage systems with black start capability can provide the initial power needed to start larger generators and help restore the grid
• Energy storage can serve as a reliable and independent power source during black start operations, helping to minimize the duration and impact of blackouts
  • Batteries and pumped hydro storage are well-suited for black start due to their ability to store large amounts of energy and provide sustained power output