Increased deployment of intermittent renewable energy plants raises concerns about energy security and energy affordability. Capacity markets (CMs) have been implemented to provide investment stability to generators and secure energy generation by reducing the number of shortage hours. The research presented in this paper contributes to answering the question of whether batteries can provide cost effective back up services for one year in this market. The analysis uses an equivalent circuit lithium ion battery model coupled with two degradation models (empirical and semi-empirical) to account for capacity fade during battery lifetime. Depending on the battery’s output power, four de-rating factors of 0.5 h, 1 h, 2 h and 4 h are considered to study which de-rating strategy can result in best economic profit. Two scenarios for the number of shortage hours per year in the CM are predicted based on the energy demand data of Great Britain and recent research. Results show that the estimated battery profit is maximum with 2 h and 1 h de-rating factors and minimum with 4 h and 0.5 h. Depending on the battery degradation model used, battery degradation cost can considerably impact the potential profit if the battery’s temperature is not controlled with adequate thermal management system. The empirical and semi-empirical models predict that the degradation cost is minimum at 5 °C and 25 °C respectively. Moreover, both models predict degradation is minimum at lower battery charge levels. While the battery’s capacity fade can be minimized to make some profits from the CM service, the increased shortage hours can make providing this service not economically viable.
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