Are energy policies for supporting low-carbon power generation killing energy storage?

Abstract

This paper explores the impacts of energy policies for supporting low-carbon infrastructure on the economic and financial performance of energy storage when coupled with a generator. The study sets in the UK context and the unit of analysis is the generator connected with energy storage. An analytical method is derived to assess the impact of policy schemes for low-carbon infrastructure on energy storage. The case study of energy storage systems coupled with a Small Modular nuclear Reactor (SMR) is quantitatively investigated in three scenarios: 1. SMR-only (the baseline); 2. SMR with thermal energy storage; and 3. SMR with Lithium-ion battery. For the strike price at 100 £/MWh, the net present value for scenarios 2 and 3 reduces from 562 M£ to 379 M£ and from 376 M£ to -1144 M£, respectively, when the energy storage capacity increases from 100 MWh to 1 GWh. As the net present value reduces with increased energy storage capacity (when coupled with generation), this work shows that low-carbon incentives are, unintentionally, barriers to the development of energy storage due to: (A) current generator incentives give a favourable return on investment and energy storage would diminish it; (B) energy storage cannot participate in generator only incentives.