Cost-saving synergy: Energy stacking in battery energy storage systems

Abstract:

Despite the great potential benefits of battery energy storage systems (BESS) to electrical grids, most standalone uses of BESS are not economical due to batteries’ high upfront costs and limited lifespans.  Energy stacking, a strategy of providing two or more services with a single BESS, has been of great interest to improve profitability. However, some key questions, e.g., the underlying mechanism by which stacking works, or why and how much it may improve profitability, remain unanswered in the literature. Using two popular battery services, we analytically show that there often exists cost-saving synergy and perform comparative statics on the optimal mix of the services to systematically characterize grid/market conditions that maximize/minimize this synergy. We also derive a theoretical upper bound on simultaneous stacking’s benefits, showing that it can approximately double the profit of the best standalone service. Several generalizations of the base model not only show that the main lessons continue to hold but also that stacking’s benefits may become even stronger.