A novel production cost model for provision of capacity firming by prosumer batteries

The increasing integration of variable renewable energy sources requires firming resources, typically involving storage, gas generation, and new transmission infrastructure to maintain a reliable power supply. In contrast, this paper argues that using prosumer-owned batteries coupled with rooftop solar systems is a promising alternative. A production cost model is proposed to study the provision of capacity-firming services by prosumer virtual power plants in future grid scenario analysis. The model employs a bilevel optimization framework that (1) enables prosumers to prioritize self-consumption before offering surplus battery capacity for firming services, ensuring operational autonomy, and (2) allows the system operator to select the most cost-effective prosumer solutions without compromising the overall benefits to prosumers. The model effectiveness is evaluated through a case study of the Australian National Electricity Market. Results indicate that prosumer-owned batteries can significantly lower the cost of capacity firming by reducing reliance on gas generation and utility-scale storage. Furthermore, capacity-firming services provide prosumers with an additional revenue stream, enhancing the economic viability of home batteries. However, the study also reveals a decreasing marginal benefit of the value of the capacity-firming service provided by prosumers as their battery size relative to solar capacity increases.