Degradation-Infused Energy Portfolio Allocation Framework: Risk-Averse Fair Storage Participation

TL;DR

This paper introduces a degradation-aware energy portfolio allocation framework that optimizes battery participation in electricity markets by incorporating degradation costs and risk aversion, leading to improved profits and fairness.

Contribution

It develops a closed-form degradation model integrated into a risk-averse portfolio optimization framework for multi-battery market participation.

Findings

Closed-form degradation model accurately predicts battery wear.

CVaR effectively manages market price uncertainty.

Framework enhances storage profit while ensuring fairness.

Abstract

This work proposes a novel degradation-infused energy portfolio allocation (DI-EPA) framework for enabling the participation of battery energy storage systems in multi-service electricity markets. The proposed framework attempts to address the challenge of including the rainflow algorithm for cycle counting by directly developing a closed-form of marginal degradation as a function of dispatch decisions. Further, this closed-form degradation profile is embedded into an energy portfolio allocation (EPA) problem designed for making the optimal dispatch decisions for all the batteries together, in a shared economy manner. We term the entity taking these decisions as `facilitator' which works as a link between storage units and market operators. The proposed EPA formulation is quipped with a conditional-value-at-risk (CVaR)-based mechanism to bring risk-averseness against uncertainty in market prices. The proposed DI-EPA problem introduces fairness by dividing the profits into various units using the idea of marginal contribution. Simulation results regarding the accuracy of the closed-form of degradation, effectiveness of CVaR in handling uncertainty within the EPA problem, and fairness in the context of degradation awareness are discussed. Numerical results indicate that the DI-EPA framework improves the net profit of the storage units by considering the effect of degradation in optimal market participation.