Optimal Sizing of Battery Storage Systems for Industrial Applications when Uncertainties Exist

Abstract

Demand response (DR) can be very useful for an industrial facility, since it allows noticeable reductions in the electricity bill due to the significant value of energy demand. Although most industrial processes have stringent constraints in terms of hourly active power, DR only becomes attractive when performed with the contemporaneous use of battery energy storage systems (BESSs). When this option is used, an optimal sizing of BESSs is desirable, because the investment costs can be significant. This paper deals with the optimal sizing of a BESS installed in an industrial facility to reduce electricity costs. A four-step procedure, based on Decision Theory, was used to obtain a good solution for the sizing problem, even when facing uncertainties; in fact, we think that the sizing procedure must properly take into account the unavoidable uncertainties introduced by the cost of electricity and the load demands of industrial facilities. Three approaches provided by Decision Theory were applied, and they were based on: (1) the minimization of expected cost; (2) the regret felt by the sizing engineer; and (3) a mix of (1) and (2). The numerical applications performed on an actual industrial facility provided evidence of the effectiveness of the proposed procedure.

Optimal Time to Invest Energy Storage System under Uncertainty Conditions

“…Besides, we need to note that more important thing in investment is the fact that uncertainty is not ignorable or sometimes it is very crucial because it causes the decision flexibility, as described in economics literature [7]. However, only few studies about uncertainty in ESS investment became discussed [2,21]. In the case of price arbitrage trade, since the market price is determined by supply and demand which are uncertain, a firm encounters uncertain future cash flows from the utilization of ESS.…”

“…The impact of uncertainty could be important in investment decisions as described in [2,7]. Therefore, in this section, we investigate the impact of uncertainty which is represented by volatility.…”

“…This is also reported in ESS literature as well. Reference [2] found that the probabilities of the futures can influence the optimal ESS sizing problem and emphasized the importance of addressing uncertainty in decision making. In addition to uncertainty, we considered a firm's option to wait.…”

“…Nowadays, in the era of energy shortage, the development of energy storage systems (ESSs) has been highlighted because they can allow current and/or future power grids to operate more efficiently and can maximize its economic value [1,2]. In an electrical power grid, utility firms generate electricity continuously and balance electricity demand and supply.…”

“…Some studies related to evaluation of ESS investment like [1,3] did not take uncertainty into account. Also, even though the most recent research [2] emphasizes the importance of unavoidable uncertainty, an option to determine when to invest is not considered.…”