How does new energy storage affect the operation and revenue of existing generation?

Abstract

As energy storage is integrated into grids through policies or market forces, it has an effect on the dispatch, economics, and retirement of other generators. While the complementary relationship between storage and renewables is well-known, the effect of storage additions is not necessarily limited to renewables. This work models the system effects of new storage on the generation, operating income, and retirement of power plants at three levels of increasing complexity. First, we evaluate the marginal effects of storage on generation sources without any effects on market prices or dispatch. Second, we use a dispatch model to study bulk storage in New York Independent System Operator (NYISO), Midcontinent ISO (MISO), and California ISO (CAISO), allowing storage to shift dispatch patterns and affect the operation/income of existing generators. Third, we examine the mid- and long-term effects on the generation fleet by accounting for the retirement of power plants that lose sufficient annual revenue from new storage. Results suggest that marginal new storage increases coal generation and decreases natural gas generation in the West and Midwest, and does the opposite in New England and California. With bulk storage additions, the operating income of all other generating units is reduced unless retirement is included. With retirements considered, the least flexible generation—coal, nuclear, and solar—gain the most operating income with storage. In all cases, simple cycle gas turbines lose the most operating income as they are offset by storage during the discharge phase and then retired in the long term.