# Risk-Based Virtual Energy Storage System Service Strategy for Prosumers
###### Abstract  
The high cost of an energy storage system (ESS) is a barrier to its use. This paper proposes a risk-based virtual ESS (VESS) service strategy for prosumers. The basic concept of the VESS service is to logically refer to a physical ESS by multiple users. The VESS service can install ESS with a larger capacity compared to the case of installing ESS individually. Therefore, the VESS reduces the cost barrier through economies of scale. Moreover, ESS is not always being utilized at its maximum in the VESS service. Considering the risk, a VESS can offer a greater capacity than an installed ESS capacity. In this paper, the VESS service model suggested considers not only the economic benefit of increasing the VESS installation capacity but also the value at risk arising from servicing a greater capacity. The VESS service problem is formulated as a convex problem according to the VESS installation capacity and service price by applying stochastic approximation and is optimally solved using the gradient descent method in an iterative manner. The simulation results demonstrate that, when the proposed service strategy is used, the service provider that considers the risk achieves a significantly greater economic benefit of around 30% for the 128-prosumer pair case as compared to the one that does not consider risk. The benefit of the prosumer is increased by approximately 3.5% for the 128-prosumer pair case because the mismatched quantity is reduced during the peer-to-peer energy transaction. In addition, it is discussed how the proposed VESS service strategy achieves benefit through unit ESS cost reduction by the economics of scale and achieves increased service capacity with the multi-user diversity gain of participants. e 25 February 2021 25 March 2021 28 March 2021 28 March 2021  
**Publisher's Note:** MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. Recently, virtual ESSs (also called cloud ESSs or shared ESSs) have been introduced. The basic concept of the VESS service is to logically refer to a physical ESS [16]. The VESS service is a shared energy storage resource that provides storage services to small consumers. The basic procedure of the VESS service is composed as follows: (1) The customers participating in the service rent the ESS capacity they need. (2) The customers can decide the action of charging and discharging energy from purchased resources in the same way as they installed an individual ESS. (3) The information on the actions of each customer is sent to the VESS service provider (SP) through the communication infrastructures. (4) The VESS SP operates a centralized physical ESS to meet the needs of the aggregated actions of each customer. (5) The energy bill is settled through sub-metering between the grid operator, VESS SP, and customers. This service is similar to a cloud computing service because energy is homogeneous and able to be transmitted easily through the grid [17]. The VESS service reduces the barrier of the ESS cost due to the economies of scale. This is because the VESS service can install ESS with a larger capacity compared to the case of installing ESS individually. Increasing the installation capacity, the unit price of ESS is reduced. Moreover, customers don't always use all of their purchased resources. By modeling the underutilized condition of resources, a more effective VESS service strategy can be designed so that more ESS capacity is served than the installed ESS capacity for the operation of VESS. A few researches have been conducted on the VESS service. [PERSON] et al. introduced a VESS service that invests in electricity storage to arbitrage against time-of-use tariffs (ToUs) as an example of a sharing economy [16]. [PERSON] et al. suggested a decision-making rule for investment in a VESS, which is a shared pool of grid-scale energy storage resources for small consumers, and demonstrated the benefit with a case study [17].