My own analysis has also shown that there is insufficient value in the
difference between peak and off peak electricity prices to make energy
However, this may not be the only revenue stream for an energy storage
system. Mechanisms that may provide greater return are as you say,
within islanded communities (where electricity is typically diesel
generated), reducing peaks (which has benefit in terms of the capacity
requirements of both generation and transmission, which include
cycling reduction, and avoiding capital expenditure).
Manchester university conducted a study for DTI in 2004 to compare the
economics of energy storage to an open cycle gas turbine providing
peaking. The paper was called
“Enhancing Security of the UK electricity system with energy storage”
“Part II real options modeling of the value of electricity storage in
association with wind power”
but I can’t find the links to them.
If you look up Jim Eyer of the Sandia National Laboratory, he’s done
much analysis surrounding the benefits of using energy storage in
utility power systems, particularly in deferring the upgrade of power
I’m not familiar with the concept of the capacity market, so I cannot
University of Warwick, Postgraduate Research Engineer: Energy Storage
University of Warwick, MEng Systems Engineering with Sustainability,
Beach, F. Lawton, J.L.
Central Electricity Generating Board, Generation Development and Construction Division, Gloucester, UK
This paper appears in: Electronics and Power
Issue Date: January 1982
Volume: 28 Issue: 1
On page(s): 73 – 76
Digital Object Identifier: 10.1049/ep.1982.0014
Date of Current Version: 26 August 2009
The electricity-storage station at Dinorwic will achieve high versatility and speed of response, without adversely affecting the natural environment.
On 28 January 2011 12:26, R
Dinorwig was built primarily for grid frequency support in the event of a loss of a major generator – specifically Sizewell B.
At least that was what I was told when I was working for the good ol’ CEGB. Did I get this right Barry?
Of course, with the advent of privatisation and the interesting forms of the evolving electricity market, the option for arbitraging between day and night pool prices presented an interesting opportunity for the privatised industry – how to optimise between income from grid support and arbitrage.
My guess is that this would result in issues regarding the fatigue life of certain key components, especially if the fatigue duty increased as a result.
All the best
R (EX CEGB)
Not to take away from Roger’s work but that is not actually how the BM Buy/Sell prices operate, they are imbalance prices rather than system pool type. They only come into effect if you deviate from your contracted position and they are inverse from usual pool type prices, ie you typically pay more for excess demand than you get for excess generation. I have been told that taking the mid-point of the buy sell prices is a reasonable estimate of the short-term market price. Generators (and demand) provide bid and offer prices into this which if taken by Grid for balancing or reserve purposes contribute towards the buy/sell prices. These prices are volume weighted which tends to damp extreme prices. You can access the accepted bids and offers to get a flavour of the spreads.
Arbitrage is a low value revenue stream as you have found, I did a lot of work on this using similar models about 10yrs ago and found similar results. A daily price swing of 5-7 times is required to make this work and that typically needs a clear market price and a system with cheap and expensive generation running – or a stressed system. Interestingly they are building/retrofitting pumped systems in Switzerland at present for arbitrage only.
Reserve and response is far more valuable both technically and usually commercially. Doing this in a vertically integrated and high gen cost system is usually easiest to demonstrate and obtain value.
Chartered Engineer, Renewable Energy
Date: Sun, 22 Aug 2010 23:11:12 +0100
Subject: Re: wind backup – flywheel energy storage vs STOR diesels
Roger (carbon catalysts) – many thanks for this. I guess this is why ( £13/kW pa – no O amd M costs paid for)- the Irish system has installed 100MW of diesels, (ie standby converted to STOR like schemes) with an installed capacity of 7 ? GW but not invested in batteries etc.
In the UK the STOR payments are about 50k/MW per year PLUS O and M.
———- Forwarded message ———-
22 August 2010 22:10
Subject: Value of Storage
I’ve got around to looking at the value of storage and have prepared a simple model to assess this for the GB system, copy attached (in Excel 2007 containing a couple of macos).
I’ve taken some sample days of historic price profiles from the www.bmreports.com website – two for each month of the past year to represent business and non business days. The first thing to note is that for the UK system there are two quite different profiles for the system buy and sell prices, with the buy price often being a lot higher than the sell, especially at peak price times. This is important for storage, as the energy is purchased at the buy price and then sold at the sell price. This compounds the effect of the overall cycle efficiency.
The other data used is the size of the storage system (not important as it’s all scalable and assumed not to influence price), cycle efficiency (currently set to 70%) and storage capacity (currently set to 5 hours at full load). All of these are variables so can be changed.
The basic assumption is that the operator can determine from price forecasts when it is likely to be profitable to charge the storage system and when to discharge for the day ahead. The model then looks at each sample day and determines the optimum charge/discharge regime to gain the maximum income after allowing for the cycle efficiency. In general and as we might expect, the charging tends to be done during the early morning low price period and then discharged during the peak periods later in the day. The income is the difference in the income from selling at the peak and buying during the trough periods. The cycle efficiency is allowed for by assuming that the amount purchased is the discharge amount divided by the efficiency. The model produces a range of incomes for each day by varying the charge/discharge period and selects the one that gives the maximum income for the day
Running the calculation through for all 24 days and then multiplying up by the relevant number of month and day types in the year gives the net income for the year. For a cycle efficiency of 70% and a maximum storage capacity of 5 hours at full load, the annual income is £13/kW pa. Increasing the cycle efficiency to 80% increases the income to £19/kW pa, so as we might expect, the income is sensitive to cycle efficiency. Increasing the hours of storage has little effect – in fact increasing it to 24 hours has a negligble effect on the
income even at a higher efficiency. This is because there are limited periods when it is profitable to arbitrage the price and this is often less than the maximum storage capacity of 5 hours and rarely exceeds it.
We should note that the assessment is an approximation as it is based on a few sample days and assumes that they are reasonably representative. In addition, as the prices are historic, ii assumes perfect forecasting and optimisation, which in the real world is unlikely to happen. There may be some value in carrying forward some stored energy for more than a day eg from a weekend to a weekday. However, this again requires good forecasting and this time more than a day ahead. Overall, in practice I would expect the actual income from storage to be lower than estimated by the model.
So, there is some income to be had by storage, but not a lot – probably barely enough to cover the O&M. So, there is no economic case to be made for building new storage systems with the income based solely on arbitraging the UK market. Other income would be needed to make it a worthwhile investment. If we look at other markets where the buy and sell prices are much closer, then we could see an increase in the income. However, it would be very dependent on the profile of the price across the days. I have assessed storage in another country where there is a single buy/sell price, but the profile was less peaky – the result was pretty much the same as we have for the UK, with barely enough income to cover the costs of O&M.
There are cases for isolated communities (eg islands) where storage may be a good option. In these cases, if the capital investment of storage replaces some other capex required eg put in/replace some diesels or a transmission connection, then storage could become the most economic solution.
I hope that this helps with the debate on storage.
I looked at the economics of energy storage a few years back in conjunction with a wind farm. Basically, the price differential between filling the storage system at low prices and drawing from it at high prices has to be enough to overcome the whole cycle efficiency of the storage system or it doesn’t even get operated. Looking at a years worth of data and with a typical efficiency of 70% (this covers most systems eg pumped storage, compressed air, batteries), there was little operating margin left over to cover fixed costs and certainly not enough to provide a return on capital. However, it might be worthwhile in certain circumstances where it is a capital expenditure instead of something else eg replacing gen sets at an isolated community or upgrading a power line. I guess if there’s a requirement for capacity at peak it could be compared to say a GT if that’s the competition. May work if we get a capacity market going in GB, but not in todays market.
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