Battery Storage for Grid Application : A case study of implementing a Lithium-ion storage system for power peak shaving and energy arbitrage

Abstract: Large scale Lithium-ion battery energy storage systems (BESS) for stationary power grid application is a developing field among energy storage technologies. Predictions indicate an increased use of the technology which offers a solution to the challenges that the increasing share of intermittent energy sources causes on the power grid. The non-plannability of intermittent power production requires solutions to maintain a stable and reliable power grid. Further commercialization of BESSes is also seen as use increases for electric vehicles and other mobile use. A distribution grid owner, referred to as the Company, has a power subscription for power that is fed from the regional grid, where additional power peak fees are added when exceeding the subscription limit. This study investigates whether a Lithium-ion BESS can be financially beneficial for the Company by examining two power grid services. The first one is power peak shaving, and the second one is energy arbitrage. Energy arbitrage signifies that the BESS is charged during low electricity prices and discharged during high prices, thus generating profit. This is accomplished by simulating a Lithium-ion BESS in MATLAB (2019) where the studied services are combined. The results show that a Lithium-ion BESS can be used for the purpose of peak shaving and energy arbitrage, although an investment is not profitable for the Company with the current market situation. The sensitivity analysis does however indicate profitability if the current power peak fees and spot prices remain unchanged while the BESS investment cost is reduced by 50%. This decrease in BESS cost is predicted possible within the next decade as BESS demand is expected to increase. The study implies that the main factor effecting the solution to be profitable is the high investment cost.