Charging ahead: Battery Storage in Energy Trading

As  renewable energy resources become a more dominant part of the energy mix, battery storage solutions become critical to help optimize renewable assets and balance a grid that is increasingly populated by intermittent energy sources such as  wind and solar. However, as renewable energy continues to be promoted as the path to meeting our energy transition goals, any short supply in the market will greatly impact market prices. This offers battery storage owners an opportunity to monetize and profit from their assets, provided they equip themselves with digital solutions that enable the required automation and visibility: Charging ahead – Battery storage in energy trading.

Energy storage projects alongside an electricity network are necessary to achieve the decarbonation goals that countries have set for themselves. With outputs from wind and solar being less predictable than thermal generators, batteries are set to become increasingly critical in the power market as backup to supply (discharge) or absorb (charge) electricity. With such a pivotal function, battery storage owners are in position to take advantage of potential revenue opportunities in an increasingly volatile power market as the share of renewable generation grows.

With wind or solar projects as primary generation sources, energy storage is most commonly used in balancing markets and ancillary services such as frequency control, regulation, and load balancing. Because of the frequency of these under- or over-supply situations, the guarantee to deliver or absorb power at specific times in a stressed market is of value and brings the opportunity for profit; the market will pay both for withdrawing power and storing power.

Both technology and knowledge play a role as organizations attempt to navigate the speed at which the market operates as well the (lack of) predictability of the market.  Smart automation through algorithms may not cover each scenario, especially those during unexpected and abnormal conditions.

Companies that participate in the wholesale power market can employ various tools to support and optimize their trading capabilities, from determining future power prices, to position visibility, and increasing responsiveness that enables them to dispatch assets at the most profitable times. 

• Market Access:
  An Energy Trading and Risk Management (ETRM) system automates tasks and business processes that support the entire trade cycle from deal capture and contract management. The ETRM system will allow market participants to tackle everything from market pricing, fees, trade confirmations, position management and valuations, risk controls, collateral and credit management, to settlement, and regulatory compliance reporting. Direct connections with trading venues, like spot markets can be established, while supporting automated / algorithmic trading solutions.
  
  
• Price Forecasting
  The functions in the ETRM system can be leveraged when the overall solution is equipped with an integrated ability to forecast short (and long-term) power prices.  For the short term forecast a Neural Network method will be performed, while  long-term forecasting may employ a number of methods. Under the Neural Network method, historical data inputs are divided into train and test sets. By taking the train data set, the method performs optimizations in an iterative fashion and provides the optimized model parameters. Those model parameters are used in the test data for the model validation. Once the models are validated the optimized, model parameters with new input data are fed in the model for the price forecasting
  
  
• Portfolio Optimization
  Portfolio Optimization improves a portfolio’s operation by modeling detailed unit operating constraints and market conditions to provide a generation schedule for energy and ancillary services, support the evaluation and pricing of potential short-term transactions, and facilitate the analysis and simulation of deterministic scenarios. It provides comprehensive modeling and excellent optimization capabilities, which enable generating companies to schedule resources, meet a wide range of operating and business constraints, minimize operating costs, and/or maximize profitability.

Trading around battery storage assets is challenging and no single model may fit across markets. It demands sophisticated tools that have the flexibility to model business processes and/or the integration capability to import proprietary attributes for customer-specific valuation purposes. In addition, a next-generation ETRM system that supports near real-time operations offers experienced traders the opportunity to step in and take control in situations where human intervention is needed to navigate unexpected volatile market conditions because algorithmic models fall short.

The latest Battery Energy Storage Systems (BESS) are now at a scale where they can be used as a flexible asset that stores clean energy which can be dispatched to the grid with potentially attractive revenues. Especially as the owner grids is experiencing capacity limitations of transmission lines to facilitate the growing renewable generation, dispatchable BESS solutions will help stabilize the grid. BESS asset owners participating in the market can utilize tools to support multiple strategies to monetize their assets. In addition, it provides other market participants the ability to offer new services to their customers.

At Hitachi Energy we deliver the digital solutions enabling the required automation to charge ahead with trading around battery storage.

Learn more about energy trading and risk management (ETRM) from Hitachi Energy.