Economic viability of battery energy storage and grid strategy: A special case of China electricity market

• Published in: Energy (Oxford) Vol. 124; pp. 423 - 434
• Main Authors: Lin, Boqiang, Wu, Wei
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 01.04.2017; Elsevier BV
• Subjects: Alternative energy sources; Batteries; Battery energy storage; China; China's power market; Distributed generation; economic sustainability; Economics; Electric power distribution; Electricity; electricity costs; Electricity distribution; Electricity pricing; energy; Energy storage; Feasibility studies; income; Integration; Investment; Markets; Peak periods; Price arbitrage model; prices; Pricing strategy; Renewable energy; Sensitivity analysis; social welfare; subsidies; Viability; China; Price arbitrage model; Pricing strategy; China's power market; Battery energy storage
• ISSN: 0360-5442; 1873-6785
• DOI: 10.1016/j.energy.2017.02.086

Battery energy storage (BES) plays an important role in the integration of intermittent renewable power and distributed generation. The price arbitrage is a major source of energy storage income. In China, the electricity price is tightly regulated by the government. It's interesting to find out whether the BES is economic viability in such a special electricity market, and what's the optimal response of the grid (or regulator) when facing the arbitrage activities of BES. This research starts with a price arbitrage model to evaluate the feasibility of energy storage in China's electricity market, which can be used to determine the optimal investment scale and operation mode of energy storage. A quantitative assessment is also implemented to discuss the influence when factors change. Following this, an optimal pricing strategy for grid is established. The results reveal that the storage investment can realize positive profit in some districts where the price gap between peak/off-peak periods is high. Appropriate subsidies can be quantitatively described by sensitivity analysis. In terms of social welfare, the energy storage can be deployed on a large-scale at a low social cost under a suitable price mechanism. •Presenting an arbitrage model to determine BES's optimal scale and operation mode.•Energy storage can realize positive profit in some districts of China.•Analyzing the factors that may impact revenue of energy storage.•The grid can reduce the shock of energy storage by optimizing price mechanism.