A trade-off analysis between the spot and real-time electricity markets for batteries

While integration of higher shares of renewable energy sources in the power industry portfolio improves sustainability, it introduces more uncertainty to the electricity markets. The uncertainty and variability of renewables escalates the need for cost-effective ways to balance supply and demand in real-time. Energy storage systems are considered a viable solution to hedge against the intermittency of supply. However, most prior studies suggest marginal or even negative profitability of batteries when participating in one stage of the electricity market. Given the physical characteristics of batteries which make it suitable for in multiple market stages, we investigate the profitability of batteries when simultaneously participating in the spot (day-ahead) and real-time (balancing) markets. We formulate a stochastic programming framework to choose optimal market position, optimal bidding strategy, and optimal capacity split between the two markets. Our results show that participation of batteries in multiple stages of the electricity markets generates additional profit for the battery. The optimal strategy is to participate in the spot market with full capacity as a seller and with full capacity in the real-time market (for down-regulation) as a buyer.