An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals
The increased uptake of variable renewable energy sources has increased electricity price volatility in many energy pool markets, providing an opportunity for storage systems to profit through energy arbitrage. Comparison between the cost or value of storage systems engaging in energy arbitrage shou...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-12-01
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| Series: | Energies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1996-1073/17/1/13 |
| _version_ | 1797358900162330624 |
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| author | Timothy Weber Bin Lu |
| author_facet | Timothy Weber Bin Lu |
| author_sort | Timothy Weber |
| collection | DOAJ |
| description | The increased uptake of variable renewable energy sources has increased electricity price volatility in many energy pool markets, providing an opportunity for storage systems to profit through energy arbitrage. Comparison between the cost or value of storage systems engaging in energy arbitrage should be performed on a levelised basis due to differences in system lifetime. Existing energy arbitrage models with bid/offer curves and imperfect forecasting are typically computationally expensive and are impractical for calculating lifetime levelised cost metrics. In this work, an open-source modular energy arbitrage model with bid and offer curve inputs was developed for a lithium-ion battery energy storage system (BESS) and pumped hydro system (PHS) to analyse lifetime levelised cost and revenue. The mixed integer linear program scheduling module included a new piece-wise linearised description of PHS charging behaviour for rapid optimisation. A one-at-a-time sensitivity analysis indicated that levelised cost and revenue were highly sensitive to discharging efficiency. In a case study based on Australia’s National Electricity Market, imperfect forecasting with no risk hedging was found to increase levelised costs by up to 24% and decrease levelised revenue by up to 50% relative to perfect price forecasting, despite 95% of prices being forecast to be within $35/MWh of the actual trading price. BESS levelised costs were more significantly correlated with consistent low risk bids (Kendall Tau-b of 0.75), since the undiscounted capital costs contribute to a larger proportion of the overall costs than in the PHS systems. |
| first_indexed | 2024-03-08T15:08:55Z |
| format | Article |
| id | doaj.art-de158664579d4640b1fad66e2141c247 |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-03-08T15:08:55Z |
| publishDate | 2023-12-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-de158664579d4640b1fad66e2141c2472024-01-10T14:55:27ZengMDPI AGEnergies1996-10732023-12-011711310.3390/en17010013An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price SignalsTimothy Weber0Bin Lu1School of Engineering, Australian National University, Canberra, ACT 2600, AustraliaSchool of Engineering, Australian National University, Canberra, ACT 2600, AustraliaThe increased uptake of variable renewable energy sources has increased electricity price volatility in many energy pool markets, providing an opportunity for storage systems to profit through energy arbitrage. Comparison between the cost or value of storage systems engaging in energy arbitrage should be performed on a levelised basis due to differences in system lifetime. Existing energy arbitrage models with bid/offer curves and imperfect forecasting are typically computationally expensive and are impractical for calculating lifetime levelised cost metrics. In this work, an open-source modular energy arbitrage model with bid and offer curve inputs was developed for a lithium-ion battery energy storage system (BESS) and pumped hydro system (PHS) to analyse lifetime levelised cost and revenue. The mixed integer linear program scheduling module included a new piece-wise linearised description of PHS charging behaviour for rapid optimisation. A one-at-a-time sensitivity analysis indicated that levelised cost and revenue were highly sensitive to discharging efficiency. In a case study based on Australia’s National Electricity Market, imperfect forecasting with no risk hedging was found to increase levelised costs by up to 24% and decrease levelised revenue by up to 50% relative to perfect price forecasting, despite 95% of prices being forecast to be within $35/MWh of the actual trading price. BESS levelised costs were more significantly correlated with consistent low risk bids (Kendall Tau-b of 0.75), since the undiscounted capital costs contribute to a larger proportion of the overall costs than in the PHS systems.https://www.mdpi.com/1996-1073/17/1/13energy arbitragebatteriespumped hydroopen-sourceprice bandsrisk hedging |
| spellingShingle | Timothy Weber Bin Lu An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals Energies energy arbitrage batteries pumped hydro open-source price bands risk hedging |
| title | An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals |
| title_full | An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals |
| title_fullStr | An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals |
| title_full_unstemmed | An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals |
| title_short | An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals |
| title_sort | open source energy arbitrage model involving price bands for risk hedging with imperfect price signals |
| topic | energy arbitrage batteries pumped hydro open-source price bands risk hedging |
| url | https://www.mdpi.com/1996-1073/17/1/13 |
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