Optimum operation of bulk energy storage systems in contemporary spot electricity markets

During recent years, there has been considerable interest in the research and development of energy storage systems (ESSs), with new technologies emerging and already established ones evolving further. Among the most established services that such systems can benefit from, arbitrage is admittedly corresponding to the most critical source of revenues. On the other hand, increased investment costs and energy conversion losses attached to ESSs usually lead to rather high electricity production costs that discourage investment in such projects. Considering the situation encountered, an effort is currently undertaken in order to develop an optimum arbitrage strategy for two different bulk ESSs, i.e. pumped hydro storage (PHS) and compressed air energy storage (CAES), in order to exploit any arbitrage opportunities appearing in contemporary electricity spot markets. For this purpose, by considering the special characteristics of each technology and by using historical data available from two different market regions of Nord Pool, a practical, deterministic dispatch strategy developed allows for the estimation of maximum net cash flows. According to the results obtained, optimum unit commitment ensures greater levels of revenues that may under certain conditions prove adequate for system operation in the long-run. Furthermore, comparison at both the regional market level and at the level of ESS provides useful information, first with regards to the spot market characteristics that may allow operation of energy storage under economically viable terms, and secondly with regards to the ability of PHS and CAES to support such investment efforts.