The value of storage in electricity generation: A qualitative and quantitative review

Abstract

Abstract Electricity storage (ES) is a technology that can complement variable renewable generation in the widely sought low-carbon future. Given the several unique features of ES, it is important for utilities, investors, and regulators to understand how ES evaluation is conducted for effective deployment. Thus, this paper reviews how the literature associates a monetary value to ES technologies. It was found that evaluation has been done via the levelized cost of storage (LCOS) calculation, production-cost models, and market-based models. Each of these methods results in a monetary value different in nature: the LCOS provides a standalone average break-even cost, production-cost models provide overall cost savings gained for the entire power system from ES deployment, and market-based models provide the compensation that storage would receive if it were to compete in the market. Advantages and disadvantages of each method were discussed. The review revealed also that storage finds the most value in providing ancillary services. Given current market/regulatory restrictions, it is argued that in the near-term ES will be more valuable in vertically-integrated utilities as opposed to market environments. Finally, current ES deployment efforts can benefit from the previous renewables uptake that occurred in the past two decades.