Simulating Financial Returns of Arbitrage Opportunities using Lithium-Ion Battery Storage Paired with Photovoltaic Systems in 3 U.S. Wholesale Electricity Markets

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2018-04-26

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Abstract

Interest in battery storage as a means to support renewable energy integration has recently increased as more developers continue to build utility-scale renewable energy resources. Yet, the ability for large-scale battery projects to be deployed depends on the ability to make the projects financially attractive.This analysis seeks to determine whether a battery energy storage system paired with a 110MW utility-scale solar PV installation can result in net present value (NPV) positive returns when engaging in electricity price arbitrage. The analysis examines the revenues and costs that would be incurred under 12 different scenarios that vary in assumptions regarding the location of the market -focusing on ERCOT, PJM and CAISO, the intra-day variations in electricity prices, the energy storage capacity of the battery, and the length of the battery charge and discharge. Overall, the results show that the financial viability of large battery storage projects receiving revenues exclusively from electricity price arbitrage requires high intra-day price differentials. Therefore, battery storage remains unprofitable without subsidies at current prices and further means of extracting value from batteries (such as ancillary services), and reduction in capital costs are needed before large-scale Lithium-Ion battery operations become widespread in the United States energy market.

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Miller, Nicole (2018). Simulating Financial Returns of Arbitrage Opportunities using Lithium-Ion Battery Storage Paired with Photovoltaic Systems in 3 U.S. Wholesale Electricity Markets. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/16539.


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