Reliable Frequency Regulation through Vehicle-to-Grid: Encoding Legislation with Robust Constraints

Problem definition: Vehicle-to-grid increases the low utilization rate of privately owned electric vehicles by making their batteries available to electricity grids. We formulate a robust optimization problem that maximizes a vehicle owner's expected profit from selling primary frequency regulation to the grid and guarantees that market commitments are met at all times for all frequency deviation trajectories in a functional uncertainty set that encodes applicable legislation. Faithfully modeling the energy conversion losses during battery charging and discharging renders this optimization problem non-convex. Methodology/results: By exploiting a total unimodularity property of the uncertainty set and an exact linear decision rule reformulation, we prove that this non-convex robust optimization problem with functional uncertainties is equivalent to a tractable linear program. Through extensive numerical experiments using real-world data, we quantify the economic value of vehicle-to-grid and elucidate the financial incentives of vehicle owners, aggregators, equipment manufacturers, and regulators. Managerial implications: We find that the prevailing penalties for non-delivery of promised regulation power are too low to incentivize vehicle owners to honor the delivery guarantees given to grid operators.