*5.3. Full Project Extrapolation Results*

The trade-off between maximizing short-term profits and stretching the life of the energy storage system is a crucial factor to consider. The NPV is a useful metric that takes into account future cash flows and discount rates to determine a project's overall profitability.

In the table, the NPV of each case is calculated, discounting the daily cash flow and the purchase cost of the BESS. The results show that the best NPV is achieved when the BESS is reserved for SE and capacity firming. When only participating in the day-ahead market, the NPV is not very different, but participating in the intraday market significantly lowers the NPV, indicating lower project profitability.

The results of each simulation scenario are extrapolated for the entire project life. The average daily cash flow is determined from the average daily results of 2018, and daily degradation is similarly calculated to estimate project completion. The project ends when the accumulated degradation of the BESS reaches 20%, a commonly used value in the relevant literature (e.g., [22,23]). The average values and estimated project lifetimes for each case are presented in Table 4.


**Table 4.** Project extrapolation under each case.

It is worth noting that the BESS is not operated in the ideal scenario. In this case, the BESS is only utilized for allocating generated energy when prices are the highest. However, due to the degradation costs and the BESS efficiency, this operation is not profitable.

The SE has lower daily profits but a higher NPV compared to the case with CF. The NPV of each project is calculated using a 7.5% discount rate and is presented in Table 5. The results show that using the BESS for the SE service and capacity firming provides the highest NPV.

**Table 5.** NPV under each case.


#### **6. Conclusions**

A three-level EMS for a HF to participate in the Iberian electricity market has been presented. The day-ahead and intraday market offering strategies are formulated as linear programming problems, with generation and price forecasts at the start of each market session as inputs. The model has incorporated adjustments based on Iberian market regulations to account for committed power correction impacts. It also includes a real-time degradation model of the BESS to assess capacity and power losses.

A simulation framework has been proposed to assess various BESS market participation strategies. The results indicate that participating in both day-ahead and intraday wholesale markets generates the highest expected profits, but actual profits are lower compared to other strategies. The proposed optimization algorithm and results of the study can be applied to any electrical system that operates with concurrent day-ahead and intraday spot markets, which is a common practice in many countries. This can be used as a guide for agents trying to optimize their plants.

The results show that using the BESS in all markets does not necessarily result in a higher income, challenging the common belief that utilizing the BESS in all markets leads to the best outcome. The proposed SE service enables participation in intraday markets without the drawback of market overlap, enhancing the BESS utilization efficiency and increasing the NPV of the project. Moreover, it highlights the crucial role of adjustment mechanisms on actual income and the importance of modeling them thoroughly. Lastly, it is worth remarking that the plant proposed in this work is considered a price-taker; the effect of a plant or a number of plants large enough to impact electricity market prices is proposed as a future work.

**Author Contributions:** The authors contributed equally to this work. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research received no external funding.

**Data Availability Statement:** Data is available by request.

**Conflicts of Interest:** The authors declare no conflict of interest.
