Is electricity storage profitable? More work needed on modelling

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Is electricity storage a profitable investment? – this is a question to which there is no universal answer and there needs to be more work done on the modelling, according to a recent study from the European Joint Research Centre (JRC) and Electricité de France (EDF).

The report, Assessing Storage Value in Electricity Markets, is aimed to present the “state of the art” regarding research on the economics of electricity storage and is based on analysis of more than 200 publications on the subject.

Three particular aspects are focused on – the methodologies used, the profitability results obtained, and the impact of regulation on storage economics.

The report differentiates between two broad categories of studies. Engineering studies aim to assess the value of an investment without modelling the whole system, while system studies represent the effect of storage on the entire energy supply system. Recent engineering studies seem pessimistic about the possibility to earn sufficient revenues to pay back the significant investments in power and reserve markets, although some additional value pools have been identified. System studies identified storage value in many cases, but a negative impact is possible if the deployment of storage requires additional investment in grid or generation infrastructure.

Evaluating the economic value of future electricity storage requires making assumptions about storage regulations. These may range from fees and technical instructions, ownership questions or fundamental market regulation. Small technical rules can have a large impact on the viability of storage. In fact, any change in regulations will have an impact on electricity storage as the current frameworks for large-scale storage are not centrally regulated. New developments in the power system, such as the integration of renewable energy sources, will influence the discussions on storage and matters like ownership and operation of storage devices.

Among the recommendations are to study more systematically how storage could simultaneously provide services to different actors in the power system, how future improvements of techno-economic parameters could influence the business case, and how “out-of-the-box scenarios” could impact the case for storage. There is also a need to better understand the role of storage for distribution grids.

Access the report HERE.