Cost–Benefit Analysis of Energy Storage in Distribution Networks

Abstract

Due to the challenges posed to power systems because of the variability and uncertainty in clean energy, the integration of energy storage devices (ESD) has provided a rigorous approach to improve network stability in recent years. Moreover, with the rapid development of the electricity market, an ESD operation strategy, which can maximize the benefits of ESD owners as well as the contribution to the electricity network stability, plays an important role in the marketization of ESDs. Although the benefits for ESD owners are discussed in many studies, the economic impact of ESD operation on distribution networks has not been commendably taken into account. Therefore, a cost-benefit analysis method of ESD which quantifies the economic impact of ESD operation on distribution networks is proposed in this paper. Considering the time-of-use (TOU) price and load demand, the arbitrage of ESD is realized through a strategy with low price charging and high price discharging. Then, the auxiliary service of ESD is realized by its capability of peak shaving and valley filling. In this paper, the long-run incremental cost (LRIC) method is adopted to calculate the network price based on the congestion cost. Based on the dynamic cost-benefit analysis method, the cost-benefit marginal analysis model in the ESD life cycle is proposed through the calculation of the present value of benefit. Subsequently, the optimal ESD capacity and charge/discharge rate is obtained to get the shortest payback period by analyzing different operation parameters. Finally, a case study is undertaken, where the ESD operation model mentioned above is simulated on a two-bus system and a 33-bus system, and the ESD cost-benefit analysis and the analysis of corresponding influence factors are carried out adequately.Energies 2019, 12, 3363 2 of 23 significantly. Hence, it is important to put forward an appropriate cost-benefit method of ESDs in distribution networks.Moreover, the electricity market reform has been carried out gradually around the world, and the pilot work of an incremental distribution network is on its way [2]. The incremental distribution network encourages multiple subjects, such as grid companies or individual users, to invest jointly, thus, there is no longer a single form of monopoly for system planning and construction. The permeability of clean energy, such as solar energy, wind energy, tidal energy, nuclear energy, and geothermal energy is increasing rapidly, and the number of ESD users in local power networks is also increasing year by year. Under the background described above, the power supply, network, and load construction are presented as a new mode of investment opening. Therefore, it is more practical to discuss the investment benefits of ESDs in the network under the mode.The motivation and incitement of this paper were discussed above.To keep abreast of current information and development in the field of ESDs, the literature reviews are introduced as follows.There are several relevant studies on the charge and discharge ra...

Cost-Benefit Analysis of Battery Energy Storage in Electric Power Grids: Research and Practices

“…Methods considering an investment decision without an extended planning horizon often annualize future costs and benefits using similar financial modelling techniques. Alternative financial modelling techniques and performance parameters such as Return on Investment [28], Internal Rate of Return (IRR) [28][29][30], payback time [28,30,31], option values [31,32], Weighted Average Cost of Capital, or benefit/cost ratio [30,33] are rarely used in the literature.…”

“…One must therefore expect that BESS assets have to be replaced during the long-term (grid) planning horizon. A majority of the reviewed references focus exclusively on BESS as grid planning alternatives and only some [28,[37][38][39][40][41] explicitly consider both grid reinvestment and BESS alternatives. Often it is not explicitly described whether BESS is considered as a temporary solution to postpone grid reinvestments [38,42] or as a more permanent solution.…”