Battery Energy Storage Systems in Energy and Reserve Markets

Recent Federal Energy Regulatory Commission (FERC) Order 841 requires that Independent System Operators (ISOs) facilitate the participation of energy storage systems (ESSs) in energy, ancillary services, and capacity markets, by including ESS bidding parameters that represent the physical and operational characteristics. However, in the existing market frameworks that allow Battery Energy Storage Systems (BESSs) to participate, the bids and offers do not explicitly represent the physical and operational characteristics such as the state of charge (SOC), discharge rate, degradation, etc. This paper proposes a novel BESS operational cost model considering degradation cost, based on depth of discharge and discharge rate. The model is developed considering Lithium-ion batteries, and the approach can be applied to other conventional electrochemical batteries, but not flow batteries. A detailed bid/offer structure based on the proposed BESS operational cost functions is formulated. Thereafter, a new framework and mathematical model for BESS participation in an LMP based, co-optimized, energy and spinning reserve market, are developed. Three case studies are presented to investigate the impact of BESS participation on system operation and market settlement. The proposed model is validated on the IEEE Reliability Test System (RTS) to demonstrate its functionalities.