• Energy Research
• 2021-2025close

PurposeThe ongoing urbanization and decarbonization require deployment of energy storage in the urban energy system to integrate large-scale variable renewable energy (VRE) into the power grids. The cost reductions of batteries enable private entities to invest energy storage for energy management whose operating strategy may differ from traditional storage facilities. This study aims to investigate the impacts of energy storage on the power system with different operation strategies. Two strategies are modeled through a simulation-based regional economic power dispatch model. The profit-oriented strategy denotes the storage system operated by private entities for price arbitrage, and the nonprofit-oriented strategy denotes the storage system dispatched by an independent system operator (ISO) for the whole power system optimization. A case study of Jiangsu, China is conducted. The results show that the profit-oriented strategy only has a very limited impact on the cost reductions of power system and may even increase the cost for consumers. While nonprofit-oriented energy storage performs a positive effect on the system cost reduction. CO2 emission reduction can only be achieved under a high VRE scenario for energy storage. Integrating energy storage into the power system may increase CO2 emissions in the near term. In addition, the peak-valley spread is crucial to trigger operations of profit-oriented energy storage, and the profitability of energy storage operator is observed to be decreasing with the total storage capacity. This study provides new insights for the energy management in the smart city, and the modeling framework can be applied to regions with different resource endowments.Design/methodology/approachThe authors characterize two battery storage operating strategies of profit- and nonprofit-oriented by adopting a simulation-based economic dispatch model. A simulation from 36 years of hourly weather data of wind and solar output from case study of Jiangsu, China is conducted.FindingsThe results show that the profit-oriented strategy only has a very limited impact on the cost reductions of power system and may even increase the cost for consumers. While nonprofit-oriented energy storage performs a positive effect on the system cost reduction. CO2 emission reduction can only be achieved under high VRE scenario for energy storage. Integrating energy storage into the power system may increase CO2 emissions in the near term. In addition, the peak-valley spread is crucial to trigger operations of profit-oriented energy storage, and the profitability of energy storage operator is observed to be decreasing with the total storage capacity.Originality/valueThis study provides new insights for the energy management in the smart city, and the modeling framework can be applied to regions with different resource endowments.

Abstract This paper presents a preemption game model based on real option theory to analyze the optimal bidding price for investors participating in a renewable auction. We studied how investors each decides their own optimal bidding price, with preemption by rivals and incomplete information, to balance their expected profits and ability to hedge risk. We demonstrate that adjusting the bidding price to hedge the risks from adverse market conditions can equal that of choosing a flexible investment time based on the standard real option model. The unique Bayesian Nash equilibrium of the game constituted with the optimal bidding price of each investor is also characterized. The quantitative solution to the model is provided, with integration of least squares Monte Carlo, and in the case study we calculate the optimal bidding price of offshore wind power concessions in China. An interesting finding in the quantitative evidence is that, although the optimal bidding price is close to zero net present value if the number of participants is large, with consideration of risk-hedging ability, investors may tend to play a hostile bid, which shows that a large number of participants may do harm to some renewable projects that are not mature enough.