The impact of secondary regulation reserve market cannibalization on the business model of a hybrid wind-battery virtual power plant

This work analyses the impact that a potential large decrease in the secondary regulation reserve market price due to the expected growth in the penetration of battery energy storage systems in the aFRR market, could have on the economic feasibility of a hybrid wind-battery power plant in the Spanish power system. For this purpose, we have used FASBATT to simulate the operation of a hybrid wind-battery power plant participating in the day-ahead and aFRR market of the Spanish power system, considering different synthetic cannibalization scenarios. The results obtained in the paper show how cannibalisation of the secondary regulation reserve market price can significantly affect the profitability of the battery, with larger storage capacities facing greater risks due to stronger impacts on the net present value. The results highlight the importance of anticipating future market conditions in battery investment planning.