Business Models and Profitability of Energy Storage

Felix Baumgarte,Alexander Rieger,Gunther Glenk

doi:10.2139/ssrn.3421370

Felix Baumgarte, Alexander Rieger + Show 1 more

Open Access

https://doi.org/10.2139/ssrn.3421370

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Abstract

Storage technologies – such as batteries or hydrogen – are crucial for a transition towards a low-carbon economy as they complement intermittent wind and solar power generation without the emission of carbon dioxide to the atmosphere. Rapidly growing shares of these renewables, combined with the requirement for profit of potential investments, make clarity on business models and profitability of energy storage both urgent and essential. Here we identify the business models of conceivable storage applications, match them with available storage technologies via overlapping operational parameters and systematically examine opportunities and barriers for profitability, including supportive policy measures and priorities for research and development. Existing technologies could meet the need for storage in the power market, but widespread profitability relies on advances in both economic utilization and technological innovation.

Highlights

As the reliance on renewable energy sources rises, intermittency and limited dispatchability of wind and solar power generation evolve as crucial challenges in the transition toward sustainable energy systems (Olauson et al, 2016; Davis et al, 2018; Ferrara et al, 2019)
Since electricity storage is widely recognized as a potential buffer to these challenges (Fares and Webber, 2017; Kittner et al, 2017; Davies et al, 2019), the number of advancements in energy storage technology and the amount of deployed capacity have rapidly grown in recent years (Schmidt et al, 2017; Comello et al, 2018; Sutherland, 2019; Blanc et al, 2020)
Others have reviewed the range of potential applications of storage technologies, that is, the services that storage facilities can perform in power systems (Koohi-Kamali et al, 2013; Kousksou et al, 2014; Palizban and Kauhaniemi, 2016). Building upon both strands of work, we propose to characterize business models of energy storage as the combination of an application of storage with the revenue stream earned from the operation and the market role of the investor

Summary

Introduction

As the reliance on renewable energy sources rises, intermittency and limited dispatchability of wind and solar power generation evolve as crucial challenges in the transition toward sustainable energy systems (Olauson et al, 2016; Davis et al, 2018; Ferrara et al, 2019). Others have reviewed the range of potential applications of storage technologies, that is, the services that storage facilities can perform in power systems (Koohi-Kamali et al, 2013; Kousksou et al, 2014; Palizban and Kauhaniemi, 2016) Building upon both strands of work, we propose to characterize business models of energy storage as the combination of an application of storage with the revenue stream earned from the operation and the market role of the investor. Such business models can be used to systematically differentiate investment opportunities, to assess which storage technologies are capable of serving a business model, and to review the profitability of individual combinations of business models and technologies

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