Effect of Tariff Policy and Battery Degradation on Optimal Energy Storage

In the context of an increasing participation of renewable energy in the electricity market, demand response is a strategy promoted by electricity companies to balance the non-programmable supply of electricity with its usage. Through the use of differential electricity prices, a switch in energy consumption patterns is stimulated. In recent years, energy self-storage in batteries has been proposed as a way to take advantage of differential prices without a major disruption in daily routines. Although a promising solution, charge and discharge cycles also degrade batteries, thus expected savings in the energy bill may actually be non-existent if these savings are counterbalanced by the capacity lost by the battery. In this work a convex optimization problem that finds the operating schedule for a battery and includes the effects of current-induced degradation is presented. The goal is to have a tool that facilitates for a consumer the evaluation of the convenience of installing a battery-based energy storage system under different but given assumptions of electricity and battery prices. The problem is solved assuming operation of a commercial Li-ion under two very different yet representative electricity pricing policies.