Effects of Electricity Tariffs on Optimal Battery

Energy Storage Sizing in Residential PV/Storage

Systems
Mohsen Gitizadeh, Hamid Fakharzadegan

Department of Electrical and Electronics Engineering

Shiraz University of technology
Shiraz, Iran
gitizadeh@sutech.ac.ir , h.fakhar@sutech.ac.ir

Abstract- In this article, the problem of sizing and dispatch

scheduling

of

battery

energy

storage

in

grid-connected

photovoltaic system with battery storage backup (PV/Storage

system) is addressed.

The goal is to minimize the costs of

purchasing electricity from the grid and the costs associated with
battery aging (cost of battery degradation is modeled in daily
dispatching). Grid-connected photovoltaic system assumed to be
available in the typical residential consumer considered in our
study. Electricity generated from the PV is used to charge the
battery and supply the house's demand. If the consumer is net
metered, any exceeding can be sold back to the grid. PV/Storage
system can reduce costs of purchasing electricity from the grid
through peak shaving and load shifting.
determines

which

application

is

being

The rate structure

used.

Load

shifting

application is implemented when time-of-use pricing is in effect

and peak shaving application is beneficial when the consumers
are charged for peak of the demand. Optimal sizing and dispatch
scheduling

of

the

battery

for

both

pricing

structures

are

determined and effectiveness of each application in reducing

costs

is

evaluated.

Mixed

Integer

Programming

(MIP)

is

implemented to solve the optimization problem.

Keywords-battery energy storage; sizing; scheduling; solar

power generation; peak demand management

I.

INTRODUCTION

Rapid reduction of fossil fuel resources on worldwide,

increasing the electricity demand and the environmental
concerns associated with conventional generators, has led to a
worldwide concern on the development of alternative electric
energy production methods. Renewable energy sources have
been regarded as the solution to the world energy concerns.
Among renewable energy technologies, grid-connected
photovoltaic (PV) application has gained a great attention in
research because it appears to be one of the most efficient and
effective solutions to this environmental problem [1].
However matching the intermittent energy generation of the
PV system with the dynamic power demand is one of the major
challenges, a solution is using storage devices. These
dispatchable storage technologies will bring added benefits to
utilities, homeowners, and commercial customers through
greater reliability, improved power quality, and overall reduced
energy costs [2].

978-1-4673-6150-7/13/$31.00 2013 IEEE

Issues primarily related to the distribution grid include:

growing end-use demand, transmission substation limits, and
voltage drop [3] have moved utility companies towards peak
demand management by assessing time-of-use (TOU) energy
pricing and demand charges for industrial and commercial
consumers. Recently with Increased implementation of smart
meters and electric vehicles, some utility companies introduced
TOU rate structure and peak demand charges for residential
consumers. Capability of batteries to supply energy generated
at one time to a load at some later time, can provide financial
benefits to the system's owner through Peak shaving, load
shifting, and demand response applications. The rate structure
and interactions between the utility and the customer determine
which application is being addressed [2]. Optimal sizing and
dispatching of battery are affected by the application which is
being used. Various studies have been discussed the problem of
battery sizing and dispatching in PV and wind applications. In
[4] the control methodologies for a battery-based energy
storage system in wind power applications are proposed and
the effect of control strategy on proper sizing of battery is
investigated. However, the sizing of the battery is significantly
affected by specific control strategies. In [5] a methodology for
calculation the optimum size of the PV array and a battery bank
for a standalone hybrid Wind/PV system is developed. In [6]
the intensive penetration of PV production into the grid is
addressed by proposing peak shaving service at the lowest cost
and the structure of a power supervisor based on an optimal
predictive power scheduling algorithm is proposed. Paper [7]
describes the optimization method of system installation and
operation for a retail store with PV and storage battery system
and an electric vehicle (EV) quick charger and a control on EV
charge is implemented to extend the battery life. Then a genetic
algorithm (GA) is employed to solve the trade-off problem
between the installation cost and the reduced maximum load
power. In [8] a short-term scheduling of battery in security
constrained unit commitment (SCUC) is proposed and analyzes
the effect of grid-connected PVIbattery system on locational
pricing, peak load shaving, and transmission congestion
management but sizing problem is not considered. Paper [9]
studies the problem of the battery size detennination used in
grid-connected PV systems for the purpose of load shifting and
peak shaving, when TOU pricing is in effect. But the effect of
peak shaving on the electric bill is not considered. Paper [10]

1072

studied the economic benefits of PV for emergency power

supply and demand charge management applications for
typical industrial customers. However battery sizing is not
mentioned. Paper [11] modeled annual energy bill savings for a
PV/Storage system over a range of battery capacities. An
approximate insolation forecast and a load forecast are used to
determine the amount of night time charging required
minimizing the cost of energy purchased by the customer from
the electric utility during the following day. In [12] a linear
programming is implemented to model optimal energy storage
dispatch schedules for peak net load management and demand
charge minimization in a grid-connected PV/Storage system.
The financial benefits of the dispatch strategy are compared
with basic off-peak charging/on-peak discharging and real-time
load response dispatch strategies.
In this paper, we study the effects of electricity tariffs on
optimal battery sizing and dispatch scheduling for residential
customers equipped with PV/Storage systems. Customers of
most utility companies can choose their electricity payment
method according to their usage pattern. Customers with
PV/Storage system which purchase electricity on a time-of-use
(TOU) basis can use excess of PV generation early in the day
to support a load later in the day (i.e. load shifting). Therefore
reduce the house's demand during late-day when the PV
generation is low and higher rate times come. If PV generation
was not sufficient to charge the battery, electricity can be
purchased from the grid when the time-of-use price is low.
Electricity purchased from the grid is used to supply all or part
of the load, when peak rates are in effect. For the propose of
peak shaving in a grid-connected PV systems, PV provide all
required power above a specified threshold. If the PV output
was not sufficient, discharging the battery which energized
earlier, reduce the house's demand to desired value. Our
objective is to investigate effects of the most available peak
demand management tariff structures on optimal sizing and
dispatching of battery which minimizes costs of purchasing
electricity from the grid. Charging higher prices at times when
it is cost-beneficial to reduce customer demand and charging
lower prices at the other times (time-varying prices) and
charging the customers for the maximum demand (demand
charge) are important types of peak demand management
tariffs. Carolina Power & Light Company [13] proposes time
of-use (i.e. TOU) and time-of-use with specifying demand
charge (i.e. TOUD) tariffs for residential customers. In a
typical customer, optimal battery sizing and dispatch
scheduling for both cases are calculated and optimum threshold
for peak demand is obtained.
II.

(1)

EB (t) (Wh) : Electricity stored in the battery at time t.

PB (t) (W) : Charging/discharging rate of battery.
The battery is charging if PB(tO and discharging if
PB(t)<O. Degradation of the performances of the battery during
the aging process is formulated as below:

I'lC(1 jI'lI'lCC((II))-Z
+1)=

XP8X
778

xl'll

(2)

o.C(t)=C",r -C(t)

(3)

Where:
C (t): Usable battery capacity at time t;
C ref: Usable battery capacity at time to;
o.C (t): The cumulative capacity loss at time t;
Z: Aging constant depending on battery technologies (for lead
acid batteries Z =3 xl 0.4);

o.t : Sampling interval.

Loss of battery capacity depends on two factors,
discharging rate of the battery and aging constant. Equation (2)
demonstrates that there is a loss of battery capacity only when
the battery is discharging.

PV

GJ id

C-AC
D

c bu
s

C-AC

I l

In

Figure I.

A simple schematic of the system model

S YSTEM MODELING

To determine the optimal sizing and dispatching of the

battery, information on the electricity demand of the residence
as well as a model of the battery and PV is required. Modeling
of system's components shown in Fig.l is described as follows:
A.

is restricted to discrete equations of battery model (1) and (2).

Dynamic equation of battery expresses as follows:

Battery System

This study has been performed with flat plate lead acid
batteries and the model presented here corresponds to this
technology. This model has already been introduced in [5] and
simplified in [9], thus presentation of calculation in this paper

System settings shown in Fig. 1 illustrate that the PV,

battery, grid, and loads are all connected to an ac bus. Since the
battery is operated on dc, a bidirectional converter is necessary
when the battery is charging or discharging. Conversion
efficiency of bidirectional converter assumed to be 11B for both
charging and discharging. PBac (t) is used to denote the power
exchanged with the ac bus, when the converter and the battery
are treated as an entity. Therefore we have:
(4)

othefWise

1073

B. P V Generator

The PV generator has been modeled by a linear power

source according to the irradiance level. The model of
electricity generated from PV modules is the simplified model
used in [14]:
Ppv

(t)

I (t ) x A

x TJpv

(5)

that, demand charge calculates monthly. Thus day with the

highest peak demand of the month is studied and the levelized
demand charged to calculate daily operation costs.

E. Constraints
1) Generated and consumed power at each time should
satisfy
(7)

Where:
I (Wm-2) is the global horizontal irradiation;
A (m2) is the total area of PV modules;
llpv

is the solar conversion efficiency of PV modules.

A dc-to-ac inverter with constant conversion efficiency llpv

is used to connect dc output of the PV to ac bus. This modeling
of PV generator is elementary and PV modules temperature
effects are not taken into account but it is appropriate for this
application and significantly representative of the behavior in
the range of operation conditions of the system.
C.

Load

Load consumption pattern in a single household, mainly

depends on environmental conditions, set of appliances in the
household, the electrical rating of these appliances and the use
of the appliances. [15]. Therefore, daily usage pattern of each
household is specified by behavior of the occupants which
varies with seasonal changes and weather variations through
the year. Considering seasonal effect and behavior of a single
household, the consumption pattern of the household in each
season will be detennined. In this paper the load at time t is
shown as PL (t).

(I-0.8)C (t) :s; EB (t):s; C (t) =C If!j -!1C (t)

The objective function to be minimized is the expected

daily operation's costs of the system over the entire studied
period. Operation's costs of the system include purchasing
electricity from grid and costs associated to degradation of the
battery.

3) Charging/discharging rate of the battery depends on

available
battery
capacity
C(t)
and
mlllimum
charging/discharging time of the battery dH which for
simplicity assumed to be the same for both charging and
discharging.
(9)

(10)

III.

A.

t=IO

+K xL'lC(tO+T) +DC x(max(Vet(t)))

I

CASE STUDY

Time-ofuse
17.037 <C per KWh for on-peak hours in summer season
5.386 <C per KWh for off-peak hours in summer season

(0+24

L Ep(t)PNet(t)

(8)

To investigate the effects of pricing structure on battery

sizing determination, a typical residential customer is
considered. Two pricing structure proposed by Carolina Power
& Light Company [13] for residential customers, is considered:

D. Objective Function

min

2) Stored energy in the battery EB (t) should be less than

battery capacity at each time. Fully discharging of the battery
assumed to be possible but to achieve longer life of the battery,
maximum depth of discharge (DOD) more than 80% of the
available battery capacity, is not allowed. Thus:

16.154 <C per KWh for on-peak hours in winter season

(6)

5.386 <C per KWh for off-peak hours in winter season

B.

Time-ofuse with peak demand charge

Where
DC: Levelized costs of demand charge
PNet(t): Net power purchased from grid at time t
K: Unit cost for battery capacity loss (K=O.l5 for flooded lead
acid batteries [16])
The summation in the first line is expected costs of
purchasing electricity from grid; the first term in second line
corresponds to demand charge when it is considered; and the
second term corresponds to battery degradation costs. Note

6.076 <C per KWh for on-peak hours

5.386 <C per KWh for off-peak hours
5.02 $ per KW for on-peak demand in summer season
3.73 $ per KW for on-peak demand in winter season
The on-peak hours for summer season (calendar months of
June through September) are defined as the hours between
10:00 a.m. and 9:00 p.m. The on-peak hours for winter season
are defined as those hours between 6:00 a.m. and 1:00 p.m.,

1074

plus 4:00 p.m. through 9:00 p.m. The on-peak demand shall be
the maximum demand used in the on-peak hours of the current
month.
To calculate PV output, solar irradiance data in the studied
location for the year 20lO is downloaded from [17]. Output
power of PV is calculated using (5) and solar irradiance data in
studied days. Conversion efficiency of PV modules llpv
assumed to be 18% and area of modules considered to be 20
square meter.
Electricity usage data of a typical residential customer
requested from Carolina Power & Light Company, is used in
this case study. As failure to peak shave on one day can have
severe economic consequences when monthly peak demand
charge is taken into account, day with the highest peak demand
in each season is used to evaluate demand charge management.
Demand curves are expressed in 30-min intervals as sampling
interval used in this paper L1t=0.5.

IV.
A.

RESULTS

Time-af-use (TOUE)

Optimization problem is solved to find optimal sizing and

dispatching of the battery when time-of-use tariff (TOUE) is in
effect. The primary solution results obtained from the solution
of the optimization problem are the values for the capacity of
the battery storage and the amount of charging/discharging rate
(daily dispatching) of battery. Results from optimal dispatch
scheduling of the battery for a typical value of battery capacity
( Cref = 12KWh) in one of the two studied days (17 Jan. 20lO),
are shown in figures (4)-(6).

1000IfM+M------

OJ
c:

500

-5
III

.!:

11 i'/1 i
i ii
j ; !;
, i ,
, r ;
-5
-1000 L-:'----':---:'-...

1 O:.
1 .:..:, 1.L.
.---,1
6 :..:.L .:" .L.O L

Objective
function
(6) is
function of battery
charging/discharging rate PBac (t), battery capacity Cref Battery
capacity Cref considered as discrete variable with 3 (KWh)
steps and 30 (KWh) upper limits. The proposed Mixed Integer
Programming (MIP) model of battery sizing is solved using the
CPLEX solver in GAMS [18]. For all combination of battery
capacity, optimal dispatching of battery for selected day in
each season is calculated and the best combination which
minimizes the objective function is obtained.

-500

1 i
8

Hours

22 ---.
2.J

Figure 4. Optimal dispatch scheduling of the battery

3000
2000

"-

1000

-1000
-2000

10

12

Hours

,.

16

18

20

22

24

Figure 5. Net load of the customer without using battery system and when
battery system is operating
10

12

Hours

14

18

&>

20

2.5 r-------==,,"
2

1.5

1:

Figure 2. Demand of a typical customer in a day with the highest peak demand
in summer season (10 August 2010)

.0

o
...J

0.5
10

12
Hours

16

18

20

22

24

Figure 6. Battery life degradation during system operation

3.5 r-----------'----'
3

WOO

-;.----:---,'''0-
".--,
Hours

20

22

24

Figure 3. Demand of a typical customer in a day with the highest peak demand
in winter season (17 January 2010)

...
-;; 2.5
1iI
8 2
c:

.2 1.5
OJ
1
a.
o

0.5
0

L-
0
OO
60OO90OO
1
2 OO
015 00018
OO0210
002
400027
OOO

300
OO
Battery capacity (Wh)

Figure 7. Operation costs of the system (i.e. costs of electricity purchasing from
grid and battery degradation) in two studied days for different battery capacities

1075

Charging/discharging rates of the battery is shown in fig.4.

The battery is charged at maximum rate during off-peak hours
(0-6 a.m.) until the battery is fully charged. Battery charge state
remains steady until on-peak hours begin. During 9 a.m.-l p.m.
the battery is discharging, the house's demand is met and
excess energy is sold back to the grid as illustrated in fig.7.
During off-peak hours from 1 p.m.-4 p.m. battery is re
energized to meet the house's demand. Note that, from 2 p.m.
to 3 p.m., net load of the house is negative, as shown in Fig. 5.
Therefore there is surplus PV generation; however, the surplus
generation is stored in the battery and is not sold back to the
grid because currently the electricity price is not high.
In this case, due to unlimited peak demand of the customer
and high enough margin between on-peak and off-peak prices,
it is profitable to purchase electricity from the grid and charge
the battery in low-price hours (to the maximum battery
capacity) and discharging the battery in high-price hours to
meet the house's demand and selling back the excess energy to
the grid. Therefor higher battery capacities culminate in lower
operation costs, as illustrated in Fig. 7. The optimal battery
capacity which minimizes the operation cost during the studied
period was found to be Cref = 30 (KWh). Objective function for
this value of battery capacity is 1.238 which has reduced
operation costs (without battery system) up to 154%. For the
battery capacity (Cref = 12 KWh), operation costs reduced
about 32%. Fig.6 shows that battery capacity loss during daily
operation was about 2.5 (Wh).
B.

Time-ofuse with peak demand charge (TOUD)

sequence, higher battery capacity does not guarantee lower

operation costs (fig.11). In this case battery capacity loss
during operation is 1.2 (Wh) as shown in fig. 10.

Figure 8. Optimal dispatch scheduling of the battery (case B)

2500

o
n.

Unlike the previous case, cost of the battery capacity loss

during operations is more than the potential gain expressed as
the margin between on-peak and off-peak prices.
Consequently, battery is not used to sell back electricity to the
grid; and discharging of the battery is restricted to hold peak
demand under the targeted threshold, as illustrated in fig. 9.
Operation costs during the studied period for different
battery capacities is calculated and plotted in fig.11. The
optimal battery capacity which minimizes the operation cost
was found to be Cref = 6 (KWh) and peak demand target was
set to be (PDT=1000 W). Objective function for this value of
battery capacity and peak demand target is 2.090 which has
reduced operation costs (without battery system) about 17%.
According to (10) batteries with higher capacities have higher
discharging rate. Higher discharging rate of the battery leads to
more battery capacity degradation costs, as expressed by (2).
Therefore, for higher battery capacities, costs of battery
degradation grow higher. In this rate structure proposed by
Carolina Power & Light Company, demand charge is not high
enough to compensate costs of battery degradation. As a

_. _

'500
'ODD

500

i'

-500 '--'---'----'---"--.L---=.L --:-'

--".Lo ---:, ':2 --:-'
'----:":
,6
,.
,.
c...2....,J
2O
22
Hours

Figure 9. Net load of the customer without using battery system and when
battery system is operating (case B)

In this section, optimal sizing and dispatch scheduling of

the battery is calculated when demand charge is assessed.
Battery scheduling for typical battery capacity (Cref = 12 KWh)
in one of the studied days is shown in figures (8)-(10).
Fig. 8 illustrates that, battery is charged from 4 a.m. to 5
a.m. and 14 p.m. to 16 p.m. The stored energy is used to curtail
net load of the house to targeted peak demand (targeted peak
demand assumed to be PDT=1300 W in this case) during on
peak hours from 7 a.m. to 9 a.m. and 16 p.m. to 21 p.m.

2000

.. Without battery system -- With battery system

r-,.J----.-:-........,. ..,.---;.,..'--...---...,...-......,. ..-'"-T---,

:E"

1.' ,---.-:-....,.-..,.---...---...,...-..,.---,----,

'.2

'"
Q.

O.B

0.6

0.4

0.2
o

o '--'---'--"----',.L
O---:-'':-2 --:-'
''8---:2
' -:": -- '6---:'
O --,'2 c.
2 2'...,J
Hours

Figure I O. Battery life degradation during system operation (case B)

2.5

c: 1.5
o
:;::;
1
..
Q.
00.5
u

3000 6000

9000 12000 1500018000 21000 24000 2700030000

Battery capacity (Wh)

Figure 11. Operation costs of the system in two studied days for different
battery capacities (case B)

V.

CONCLUSION

PV/Storage systems provide financial benefits to the

system's owner and the utility especially through peak shaving
and load shifting. Interactions between the utility and the

1076

customer determine which application is being addressed. In

this work, the effects of two pricing structures proposed by
Carolina Power & Light Company, on optimal sizing of battery
energy storage in a residential PV/Storage system was
investigated.
Our results illustrate that, financial benefits of battery
energy storage for a customer highly depends on electricity rate
structure and battery aging. In time-of-use pricing, high margin
between on-peak and off-peak prices approve efficiency of
battery energy storage system. When demand charge IS
assessed, the margin is not high enough to cover costs of
battery capacity degradation. Thus, demand charge should
cover battery degradation costs and encourage the customer to
use peak shaving application. In our studied pricing structure,
load shifting application with PV/Storage systems has more
financial and environmental benefits to the system's owner and
the utility.
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Development

Corporation,

1077