Monetary Value of a District’s Flexibility on the Spot- and Reserve Electricity Markets

Abstract

In the future, advanced multi-energy systems are expected to handle an increasing share of fluctuating renewable energy generation through the management of multiple advanced energy conversion and storage technologies operating across different energy carriers. The market diffusion of such concepts of Local Energy Management—the management of energy supply, demand, and storage within a given geographical area—is expected to provoke a fundamental reorganization of the power generation sector. This work contributes to this topic by estimating the maximum potential economic value attained from using the flexibility of a district to take advantage of operating within multiple electricity markets at the same time. The study is based on the measured demand and production data of a newly built suburban residential district located in Central Switzerland. The actual configuration of the district and the resulting flexibility, as well as an extension with a battery storage system, is used to estimate the economic value of the flexibility. Then, an optimization algorithm manages flexible demand, production, and storage capacities in order to alternatively maximize the revenues/cost savings, self-sufficiency, or share of renewable resources of the district’s energy supply. In this vein, the impact of the way the system operates in the markets regarding the degradation of the battery is assessed and its pay-back-time is estimated. The analysis revealed a considerable profit potential associated with the district thermal and electricity storage flexibility, in particular, when operating on both the spot and reserve electricity markets. Firstly, it was shown that overall energy costs can be minimized through an optimal management of energy conversion and storage systems. Secondly, complementing the infrastructure with batteries and trading flexibility on the spot market would decrease costs by about 43%, while an additional 20% cost decrease could be captured by including trading on the reserve market. Thirdly, it has been shown that operation on the spot- and reserve market does not seem to degrade the battery more than solely operation on the spot market. However, when operating on the spot- and reserve markets, battery amortization would still take about 10 years.