Non-Strategic Capacity Withholding from Distributed Energy Storage within Microgrids Providing Energy and Reserve Services

Microgrids have the potential to provide security and flexibility to power systems through the integration of a wide range of resources, including distributed energy storage, usually in the form of batteries. An aggregation of microgrids can enable the participation of these resources in the main system's energy and ancillary services market. The traditional minimum-cost operation, however, can undermine microgrid's ability to hold reserve capacity for operation in islanded mode and can rapidly degrade distributed batteries. This paper studies the impacts of various operational strategies from distributed energy storage plants on their revenues and on market prices, considering an array of microgrids that act in a synchronized fashion. The operational model minimizes the entire electric power system cost, considering transmission-connected and distributed energy resources, and capturing capacity degradation of batteries as part of the cost function. Additionally, microgrid-based, distributed batteries can provide energy arbitrage and both system-level and microgrid-level security services. Through several case studies, we demonstrate the economic impacts of distributed energy storage providing these services, including also capacity degradation. We also demonstrate the benefits of providing reserve services in terms of extra revenue and battery lifespan. Finally, we conclude that limitations in the provision of system-level services from distributed batteries due to degradation considerations and higher microgrid-level security requirements may, counterintuitively, increase system-level revenues for storage owners, if such degradation considerations and microgrid-level security requirements are adopted, at once, by a large number of microgrids, leading to unintended, non-strategic capacity withholding by distributed storage owners.