The Past as prologue : the value creation of batteries on the U.S. electric grid as a function of time and location

Abstract

We simulate the revenue generated by transmission-connected, small scale energy storage in the energy and capacity markets using historic prices across 10,000 U.S. locations from 2014 to 2017. On average, including capacity market revenue doubles total revenue, such that five-times more systems breakeven. Furthermore, participating in the capacity market shifts the whereabouts of top-earning systems eastwards, and allows top-earning nodes to remain top-earning for longer. That being said, revenue generation still varies greatly across years for a given location. In order to reflect the contribution of storage to grid reliability during times of stress, we treat capacity market revenue as a function of output during given hours throughout the year; changing the identification of these hours - whether taken as some percent of top demand hours, or as determined by market regulators- can increase revenue up to ten-times that of energy market participation alone. Durations shorter than 8-hours are found to more significantly contribute to reliability than predicted via simplistic analysis of the durations of high risk hours. Considering that participation in the capacity market, as modeled, will always increase total revenue, and that storage units will change dispatch behavior even to earn comparatively small increases in total revenue, designing markets that appropriately incentivize system reliability is a critical task of regulators.