Assessing the feasibility of battery energy storage coupled to photovoltaic plants, participating on energy and ancillary services markets, through power system optimization and sub-hourly simulations

Abstract

The integration of variable renewable energy sources into power grids presents significant challenges and opportunities. Among the most promising solutions is the deployment of Battery Energy Storage Systems (BESS), which can offer multiple services such as peak shaving, load shifting, ancillary services, backup for critical loads, among others. However, the installation of BESS has been limited by their high costs (despite a sustained year-over-year reduction) and by regulatory challenges, particularly regarding the remuneration mechanisms for each service they provide. In this context, this work examines regulatory frameworks and market incentives, and evaluates the operational and financial indicators of photovoltaic (PV) power plants with BESS to determine their economic viability in the utility-scale market. A two-stage power system cost optimization model is proposed (BESS installation and operation), which considers energy and reserve allocation, installation of DC-coupled batteries, and the expansion of existing solar plants. In addition, the model incorporates battery state of charge and state of health, based on a PV+BESS simulation implemented using the System Advisor Model (SAM) software, in order to capture the nonlinearities and degradation behavior of BESS. The model is applied to the Chilean power system as a case study, using a 26 node network for the BESS installation and DC solar capacity expansion stage, and a 212 node network for the operation stage, with 311 solar plants and over 1000 generating units in total, considering the most relevant nodes of the national electric grid. Several scenarios were simulated, mainly with different probabilities of reserve activation. This study provides valuable insights into how PV+BESS plants can be effectively integrated into the energy market, primarily by participating in the provision of reserves for frequency control, thereby supporting broader adoption of renewable energy technologies. The results show that the vast majority of BESS installations are used to provide ancillary services rather than for energy arbitrage, and that most solar plants expand their DC capacity, enhancing implicit storage due to its lower cost compared to explicit storage (BESS). Additionally, battery installations are distributed across the country, indicating that distributed storage is needed to operate the power system at minimum cost, rather than concentrating storage in a specific region. Furthermore, under the regulatory frameworks and remuneration schemes considered, location and solar resource do not significantly affect economic feasibility; the solutions preferred by the Independent System Operator (ISO) may not be optimal for individual plant operators (who are often the owners of the plants); and battery degradation varies considerably across plants and scenarios. Therefore, detailed studies considering both centralized and independent perspectives are required for the effective deployment of energy storage systems across an electric grid.