Dynamic Valuation of Battery Lifetime in Electricity Markets

Bolun Xu

Published 2020-11-17Version 1

Our world is now booming with new and used batteries. By responding to electricity price signals to charge or discharge, these batteries can aid grid operations while profiting their owners, but careful planning must be made to maximize their lifetime utilization following unique degradation characteristics. This paper presents a dynamic valuation framework that optimally determines the value of batteries participating in electricity markets. A comprehensive case study using historical price data from the New York Independent System Operator shows that a battery's value is highly sensitive to both the external market environment as well as its internal state of health. The results conclude second-life batteries are superior choices for conducting electricity price arbitrage compared to new batteries, and as batteries become cheaper, their manufacturing cost will no longer determine how batteries should be operated in the grid.