Comparing the economic value of lithium-ion battery technologies in the nine wholesale electricity markets in North America

Lithium-ion batteries are becoming critical flexibility assets in future electric power systems. Batteries can arbitrage price differences in wholesale electricity markets to make a profit while at the same time reducing total system operating costs and improving renewable energy integration. However, lithium-ion batteries have a limited lifetime due to capacity degradation, and one battery pack can only make a limited profit before reaching its end-of-life. In this paper, we screen the profit potential of Lithium iron phosphate (LFP), nickel manganese cobalt (NMC), and lithium nickel cobalt aluminum oxides (NCA) batteries in all nine wholesale electricity markets in North America. We apply a systematic dynamic valuation framework that finds the highest revenue potential for the considered lithium-ion battery project subjecting to its degradation mechanism, while the degradation model used in the valuation is derived based on real lab test data over varying cycle conditions. The study found that battery valuation depends largely on battery technology and storage duration and varies across operational locations. Moreover, the study revealed that calendar life has a greater impact on battery valuation than cycle life for an 8-years calendar life scenario while cycle life shows greater impact for a 15-year calendar life scenario for all battery technologies. This impact is more pronounced in LFP than in NMC and NCA. The study recommends battery operators consider strategies that would maximize a longer cycle life or calendar life usage of a battery as this would accumulate higher profits over its lifetime.