Optimization of Energy Storage System Economics and Controls by Incorporating Battery Degradation Costs in REopt

Paul Gasper, Nick Laws, Bhavesh Rathod, Dan Olis, Kandler Smith, Foram Thakkar

Research output: NRELPresentation


The use of stationary electrochemical energy storage systems utilizing lithium-ion batteries has increased rapidly as the production scale and price for lithium-ion batteries has decreased. These energy storage systems are crucial for maintaining grid resiliency, especially for grids operating with high penetration of renewable energy generation assets or for with a variety of distributed energy generation and storage systems. One challenging factor for the development of battery energy storage systems is estimating the proper sizing, in terms of both power and energy, that minimizes total costs over the lifetime of the systems; this calculation is difficult in simple cases, where a battery is costed independently, but is extremely challenging when building loads and electrical generation by photovoltaic resources are also considered. REopt is a techoeconomic optimization tool developed by NREL to address these challenges. Previously, battery degradation has been priced by simply assuming a 10-year replacement schedule for battery systems. However, this does not account for varying degradation trends observed across real-world batteries, or allow for batteries to be operated in a degradation-aware manner that optimizes battery dispatch based on operating costs. This work incorporates a battery life model into REopt. This battery life model is simple, so that it may be solvable within the constrains of a mixed-integer linear optimization problem, but is fit to accelerated aging data recorded in the lab. To achieve the best possible accuracy for lifetime estimates given these constraints, parameters for the battery life model in REopt are estimated by fitting 20-year simulations of battery life after identifying state-space battery degradation model from accelerated aging data. Comparisons of battery life predicted in REopt and from the state-space battery degradation model to ensure validity of lifetime estimates made by REopt. Battery life and cost is optimized by controlling three decision to minimize system life cost: battery sizing, daily state-of-charge, and daily energy-throughput. The cost of battery degradation as a function of these control variables is then estimated assuming two possible maintenance strategies: replacement, where the entire battery system is replaced if cell reach an end-of-life capacity threshold; and augmentation, which establishes a fund to pay for continual purchase of new batteries to maintain the initial energy capacity of the system. These two strategies offer conservative (for replacement) and optimistic (for augmentation) bounds for total system cost. The degradation cost incurred by these strategies is then used to control battery dispatch decisions, operating the battery in a degradation-aware manner that maximizes battery lifetime while also providing energy when favorable. Because the mixed-integer linear program has perfect foresight of future energy needs, batteries with degradation costs are always operated using 'just-in-time' charging, which is unrealistic, as no energy is left in the storage system to perform other energy services or to serve as emergency back-up power. To combat this, an inequality constraint on the average annual state-of-charge is imposed, and the sensitivity of system cost to average stored energy, e.g., the cost of system resiliency, can be quantified. Analysis of results has several conclusions, for instance, oversizing of battery storage systems is not a cost burden when battery storage is an optimal solution, as any additional battery capacity can simply be utilized to avoid costs of purchasing energy from a utility.
Original languageAmerican English
Number of pages23
StatePublished - 2023

Publication series

NamePresented at the 243rd Electrochemical Society (ECS) Meeting, 28 May - 2 June 2023, Boston, Massachusetts

NREL Publication Number

  • NREL/PR-5700-85472


  • battery
  • battery degradation
  • battery life
  • battery lifecycle costs
  • energy system optimization
  • REopt


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