Energy Storage Economics

Cost Components and Trends

Clarity on costs is a critical component of energy storage economics. That includes what is included in the scope of the cost and how costs are communicated.
File:Es101cost1.png
Other generation resource costs are often communicated on a $/kW basis, but energy storage has both power and energy components and the normalized cost will vary with duration. This is highlighted in two examples below.
File:Es101cost2.png

File:Es101cost3.png

Grid Services and Uses

Energy storage has many capabilities:

• Capacity Resource: Firm power
• Flexibility Resource: Fast response and ramping
• Backup Resource: Energy reserve
• Power Quality Resource: 4-quadrant watts and VARs

The table below list the grid services energy storage can support.
File:Es101app.png
Transmission-connected storage may provide:

• Generation capacity (resource adequacy)
• Black start
• Virtual transmission capacity
• Energy time-shifting
• Ancillary services

Distribution-connected storage may provide:

• Virtual distribution capacity
• Enhance power quality
• Resiliency / backup power / microgrid
• Upstream transmission impacts – either costs or benefits

Customer-connected storage may provide:

• Customer bill savings: Retail time-of-use tariff energy shifting, Demand charge management
• Backup power
• Upstream T&D impacts – either costs or benefits

Modeling Energy Storage

Challenges to modeling energy storage include:

• Storage is not yet a common grid asset
• Rules and regulations are still evolving
• Benefit stacking is appealing, but is it possible?
  • More services = more value
  • More services = more requirements
  • Can these requirements be satisfied?
• Storage value analyses are site-specific
• Complex co-optimization between storage technologies, objectives, and constraints

Understanding Service Compatibility

• Energy Storage Services Hierarchy
  • Energy storage services only flow from bottom up, customer storage may provide distribution and transmission-level services, but transmission storage can NOT provide distribution or customer services
• Reliability vs. Economic
  • Reliability takes priority (e.g. T&D deferral higher priority than market services)
  • Long-term planning constraints take priority to economic optimization and constraints roll-up; Multi-year >> Annual >> Monthly >> Day-ahead >> Real-time
• Local vs. System Level
  • Local objectives generally supersede system objectives when there is a conflict (e.g. T&D deferral higher priority than resource adequacy) although should be designed so that reliability services never conflict

EPRI Tools to Support Valuation Modeling
StorageVET
DER-VET