The Economics of Using Plug-in Hybrid Electric Vehicle Battery Packs For Grid Storage

In order to increase market acceptance for purchasers of plug-in hybrid electric vehicles, hereafter PHEVs, legislation passed in 2008 provided a subsidy as tax credits for said consumers. PHEVs have the potential to provide services to the electricity sector (vehicle-to-grid, hereafter V2G), in the form of “…peak load shifting, smoothing variable generation from wind and other renewables, and providing distributed grid-connected storage as a reserve against unexpected outages.” One of the most advantageous properties of electricity markets is the lack of cost-effective storage. In the absence of energy storage, meeting peak demand becomes difficult and investments in generators and transmission lines must be made. Because of this, the difference between daily peak and off-peak costs can vary significantly within a year.
In regard to V2G services, the authors believe that this system will be more profitable for grid support than the capital cost of batteries that must be remunerated for grid use. In addition to quick battery reaction times, V2G energy has the ability to stabilize or slow fluctuations from sporadic sources, particularly wind or solar sources, and eradicate the need for ‘raid ramping’ of generators to “match variable power sources.” Ramping can also lead to the increase in pollution. Peterson et al. evaluate the net revenue, “the net of avoided grid energy purchases from using the energy stored in the vehicle battery pack,” of V2G energy sales to determine the ‘attractive incentive’ for future owners in three separate categories: an organized market, as energy sales to the grid, or capturing values by running the meter slower.  While the first two options hold transaction and grid costs, the third option does not. Based on the implications of stored grid electricity, energy arbitrage is examined and potential sale prices of electricity, as well as other pertinent data, are collected from Boston, Massachusetts, Rochester, New York and Philadelphia, Pennsylvania. Each city’s hourly electricity markets differed considerably. Based on the authors’ findings, profits derived from battery purchases are not incentive enough for vehicle owners to use the battery pack for electricity storage and off-vehicle use.—Laura Silverberg
Peterson, Scott B., Whitacre, J.F., Apt, Jay, 2010. The Economics of Using Plug-In Hybrid Electric Vehicle Battery Packs for Grid Storage. Journal of Power Sources 195, 2377–2384.

Peterson et al. analyze the potential economic implications of utilizing vehicle batteries to “store grid electricity generated at off-peak hours for off-vehicle use during peak hours.” Hourly electricity prices in Boston, Rochester and Philadelphia were used to “arrive at daily profit values, while the economic losses associated with battery degradation were calculated based on data collected” from combined driving and off-vehicle electricity utilization. The authors calculated the revenue from energy arbitrage, degradation costs, and analyzed a sell-before-buy model as the basis for their study. In the revenue model, the authors assumed the PHEV owner was fixed under a real time pricing, hereafter RTP, tariff. With the addition of a transmission and distribution cost of 7¢kWh-1 to the “hourly nodal price” to estimate the RTP, the data resulted in the incentive for owners to use their PHEV for energy arbitrage. The degradation cost study was based on laboratory data from cycling lithium iron phosphate battery cells (LiFePO4) produced by A123 Systems. Using the Chevy Volt’s battery pack pricing as the framework for this degradation study, the authors concluded that by using a $5,000 replacement cost, a degradation cost of 4.2¢kWh-1 would operate. The sell-before-buy model entails a battery pack beginning on a day when it is fully charged. From 8 a.m. to 4:59 p.m., the authors designate time for driving exclusively and all other times are allocated for charging. The battery pack is charged at the lowest cost hours possible. In order to determine the amount of battery pack capacity a profit-driven consumer would choose to devote to energy arbitrage, the authors utilize two separate methods. The first method entails the consumer knowing the future TRP where they choose the most expensive locational marginal pricing, hereafter LMP, hour to use the battery pack for home energy use and the cheapest hour after to recharge. In this scenario, the vehicle is fully charged by 8 a.m. The second method calls for knowledge of previous RTPs to determine the hours least expensive to recharge the vehicle. While this method may mis-predict the cost of recharging since it is purely based on speculation, the battery pack energy can be used for home energy as well. The profit is calculated as the revenue cost from energy arbitrage, therefore doubling the incentive for consumers.
          Peterson et al. provide significant data resulting from their various studies. Using the three cities as the framework for examining electricity market costs, the maximum annual profit ($118) occurred in Philadelphia in 2008, whereas in Boston, the least profitable city, a consumer’s profit would only result in $12–48 based on a particular year’s market. Based on estimated profit analyses, the authors concluded that increased battery size would not increase the profit greatly due to the limitation of local circuit infrastructure in the three cities.
The authors presented sensitivity analyses on the effect of battery pack replacement cost on profit. Only if the battery pack replacement cost is set to zero, so too will be the cost of degradation. This would yield the maximum profit, particularly in Philadelphia. The difference between peak and off peak is higher in the Pennsylvania New Jersey Maryland Interconnection LLC, hereafter, PJM, than the other regional transition organizations, hereafter RTOs. In this scenario, Boston becomes more profitable than Rochester. The authors also discuss the interest of grid operators knowing when vehicle owners will make their energy available for sale on a given day. Philadelphia was found to be most profitable when PHEV consumers participated in energy arbitrage 56% of the days between the years 2003–2008. However, if the battery pack replacement cost is $10,000, this percentage decreases to 38%.
          The results indicate that vehicle owners are not likely to receive sufficient incentives from energy arbitrage to increase the use of car batteries for grid energy storage. The maximum annual profit is between $142–249 in all three cities due to the small variation present in LMPs. If degradation cost is included, the maximum annual profit would only range from $12–48 in perfect circumstances, although more realistically, it would range from $6–72. The authors suggest that if a large number of consumers decide to participate in energy arbitrage, the profit would decrease since the LMP spread would be lowered. Grid net social welfare benefits were also considered. The authors found that the increase of construction and use of peaking generators are similar in size to the energy arbitrage profit. Since there may only be $300–400 of annual net social welfare benefits that can be transferred to the owner of a PHEV, it is unlikely that large-scale usage of grid energy storage will be appealing to a large number of said vehicle owners. 

One thought on “The Economics of Using Plug-in Hybrid Electric Vehicle Battery Packs For Grid Storage

  1. Pingback: Solar Power Duo: A Perovskite and Silicone Based Semiconductor | Energy Vulture

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