Energy storage systems in energy and ancillary markets: A backwards induction approach

In this study, we consider a battery storage operator's best strategy each day, using backwards induction. We analyze the storage device as an exhaustible resource with a limited number of charging cycles and operating years. Based on this approach, we build a revenue model to maximized the net present value of the battery energy storage system revenues by applying the three-staged-method employed by Shcherbakova et al. [14]. We found that the battery in unable to cover its costs, and it does not use all the cycles available in its lifetime. This result, however, may be a function of the limits of our analytical approach.