Evaluating Levelized Cost of Storage (LCOS) Based on Price Arbitrage Operations: with Liquid Air Energy Storage (LAES) as an Example

Abstract

Liquid air energy storage (LAES) is a novel proven technology that can increase flexibility of the power network, obtaining revenue through energy price arbitrage. To assess the economic potential of a variety of energy storage options, this study develops a cost research framework for LAES, which is also applicable to other energy storage technologies. For the calculation of Levelized Cost of Storage (LCOS), it is essential to evaluate the electricity purchasing cost and the total electricity generated. However, they are often estimated by simply assuming an average electricity price and an annual operating cycle in the previous studies. In this paper, a price arbitrage algorithm is developed, according to which decisions are made at each time step whether to charge, discharge or stand by. Thus, the electricity purchasing cost as well as the amount of electricity generated by the storage unit is determined and the LCOS of the energy storage system is calculated. Results show that the LCOS for a 25MW/125MWh LAES system is in the range 191-590 £/MWh, depending on different round-trip efficiencies and different costs set in three scenarios. If the round-trip efficiency is assumed to be 60%, the LCOS would in the range 191-294 £/MWh under the three scenarios.