Energy Storage System Owner as a New Player in an Electricity Structure

Abstract

Daily load demand causes different marginal cost at each hour due to different operation generation units. During peak load period, expensive generation units are determined to be turned on to provide sufficient electricity supply and sufficient spinning reserve. During light load period, generation units could not be unloaded due to their minimum up/down time, startup time and startup cost, causing uneconomic operation of the generating capacities. This excess capacity during light load period can be stored in the energy storage system (ESS) and the power can be released to supply the peak load demand hours to avoid turning on the next expensive unit which resulted in higher marginal cost. Performing as virtual power plant (VPP), ESS owners can seek for market opportunities to enter electric supply industry. This paper aims for proposing an optimal operation of VPP with charging/discharging ESS plan when marginal cost identifies real-time pricing (RTP) at each hour to be used as buying/selling price to VPP. Under strategically charging/discharging scheme, both parties, i.e., utility, and VPP, can achieve benefits in terms of better economic operation, lower system generation cost, increase operational income, while environmental impact is considered. The proposed method is tested on a ten-unit system under a centralized power market structure. Numerical results show that appropriate charging/discharging strategy could provide lower total production cost and offer opportunities for ESS owners as VPPs to obtain arbitrage marginal cost.