Valuation of State-Of-Charge Management Risks of Energy Storage on Electricity Markets

Independent System Operators (ISOs) are confronted with a challenge due to integration of large number of small sized energy storage (ES) units. The challenge stems from choosing: (a) the high cost of monitoring and controlling ES with knowledge of their state of charge (SOC), or (b) absorbing high costs arising from uncertainty and absence of knowing of the SOC values. In either case, these costs would eventually be reflected in electricity prices, and hence ISOs seek to know which of these is the lowest cost option. In this paper, we propose a tool that quantifies the risks associated with allowing private ES owners/operators to manage SOC. SOC can be unavailable at any given hour for any given amount. We solve the UC process for all these scenarios in order to compare impacts, in particular to total commitment costs and prices. We applied our algorithm to a system modelled on a practical transmission system in Ontario. ES units were placed in the system, and their impacts on total commitment costs and prices were observed. Factors that increase total commitments costs include time of day of unavailable ES, larger ES units, and lower availability factors, and vice versa. Using our method, ISOs can make sound policy choices around SOC management responsibility, risk management for unavailable ES, and the role for ES for their unique system.