Optimal Battery Storage Arbitrage Considering Degradation Cost in Energy Markets

Energy arbitrage have monetary benefits for privately owned battery energy storage systems, such as the battery of an electric vehicle or residential batteries. However, the life cycle and degradation cost of the battery storage should be taken into consideration and can decrease obtained income in the long-term. This paper proposes an optimization framework to derive optimal bidding and offering curves for lead-acid battery storage participate in a stepwise energy market. The objective is to maximize the profit comes from participating in energy arbitrage action, while the life cycle of the battery is considered by objective function and constraints. Due to the small capacity of the considered storage unit, it can be assumed that this unit is a price-taker participant, which its actions cannot influence the market prices. Hence, the energy prices are modeled as uncertain parameters using stochastic programming approach. The second order stochastic dominance constraints are as risk management method.