Effects of battery degradation on economic viability of energy storage systems participating in regulation markets

FERC Order 755 requires transmission system operators to provide performance-based payment for ancillary services. Battery Energy Storage Systems (BESS) have the capacity to play a more vital role in regulation market because of their ability to provide an accurate and fast response to automatic generation control (AGC) dispatch signals. However, since batteries are complex electrochemical systems, it is difficult to understand how the battery degradation phenomena will affect the total revenue from BESS providing the regulation service. In this paper, we show that bid-in strategies that consider the battery degradation as a function of the service provided have a substantial effect on the total revenue for the BESS operators. Different bid-in strategies aiming at enhancing BESS's total revenue before it reaches its end of life are analyzed and compared with nominal capacity based bid-in approaches. Finally, we propose a practical bid-in strategy that provides substantial improvement over the nominal capacity based approach.