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The value of compressed air energy storage in energy and reserve markets

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  • Drury, Easan
  • Denholm, Paul
  • Sioshansi, Ramteen

Abstract

Storage devices can provide several grid services, however it is challenging to quantify the value of providing several services and to optimally allocate storage resources to maximize value. We develop a co-optimized Compressed Air Energy Storage (CAES) dispatch model to characterize the value of providing operating reserves in addition to energy arbitrage in several U.S. markets. We use the model to: (1) quantify the added value of providing operating reserves in addition to energy arbitrage; (2) evaluate the dynamic nature of optimally allocating storage resources into energy and reserve markets; and (3) quantify the sensitivity of CAES net revenues to several design and performance parameters. We find that conventional CAES systems could earn an additional $23 ± 10/kW-yr by providing operating reserves, and adiabatic CAES systems could earn an additional $28 ± 13/kW-yr. We find that arbitrage-only revenues are unlikely to support a CAES investment in most market locations, but the addition of reserve revenues could support a conventional CAES investment in several markets. Adiabatic CAES revenues are not likely to support an investment in most regions studied. Modifying CAES design and performance parameters primarily impacts arbitrage revenues, and optimizing CAES design will be nearly independent of dispatch strategy.

Suggested Citation

  • Drury, Easan & Denholm, Paul & Sioshansi, Ramteen, 2011. "The value of compressed air energy storage in energy and reserve markets," Energy, Elsevier, vol. 36(8), pages 4959-4973.
    • Handle: RePEc:eee:energy:v:36:y:2011:i:8:p:4959-4973
    DOI: 10.1016/j.energy.2011.05.041
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    References listed on IDEAS

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    1. Denholm, Paul & Sioshansi, Ramteen, 2009. "The value of compressed air energy storage with wind in transmission-constrained electric power systems," Energy Policy, Elsevier, vol. 37(8), pages 3149-3158, August.
    2. Grazzini, Giuseppe & Milazzo, Adriano, 2008. "Thermodynamic analysis of CAES/TES systems for renewable energy plants," Renewable Energy, Elsevier, vol. 33(9), pages 1998-2006.
    3. Walawalkar, Rahul & Apt, Jay & Mancini, Rick, 2007. "Economics of electric energy storage for energy arbitrage and regulation in New York," Energy Policy, Elsevier, vol. 35(4), pages 2558-2568, April.
    4. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas & Weiss, Jurgen, 2009. "Estimating the value of electricity storage in PJM: Arbitrage and some welfare effects," Energy Economics, Elsevier, vol. 31(2), pages 269-277, March.
    5. Salgi, Georges & Lund, Henrik, 2008. "System behaviour of compressed-air energy-storage in Denmark with a high penetration of renewable energy sources," Applied Energy, Elsevier, vol. 85(4), pages 182-189, April.
    6. Cavallo, Alfred, 2007. "Controllable and affordable utility-scale electricity from intermittent wind resources and compressed air energy storage (CAES)," Energy, Elsevier, vol. 32(2), pages 120-127.
    7. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas, 2011. "A comparative analysis of the value of pure and hybrid electricity storage," Energy Economics, Elsevier, vol. 33(1), pages 56-66, January.
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