The Potential of Energy Storage Systems with Respect to Generation Adequacy and Economic Viability

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Bradbury, Kyle Joseph


Pratson, Lincoln

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Intermittent energy resources, including wind and solar power, continue to be rapidly added to the generation fleet domestically and abroad. The variable power of these resources introduces new levels of stochasticity into electric interconnections that must be continuously balanced in order to maintain system reliability. Energy storage systems (ESSs) offer one potential option to compensate for the intermittency of renewables. ESSs for long-term storage (1-hour or greater), aside from a few pumped hydroelectric installations, are not presently in widespread use in the U.S. The deployment of ESSs would be most likely driven by either the potential for a strong internal rate of return (IRR) on investment and through significant benefits to system reliability that independent system operators (ISOs) could incentivize.

To assess the potential of ESSs three objectives are addressed. (1) Evaluate the economic viability of energy storage for price arbitrage in real-time energy markets and determine system cost improvements for ESSs to become attractive investments. (2) Estimate the reliability impact of energy storage systems on the large-scale integration of intermittent generation. (3) Analyze the economic, environmental, and reliability tradeoffs associated with using energy storage in conjunction with stochastic generation.

First, using real-time energy market price data from seven markets across the U.S. and the physical parameters of fourteen ESS technologies, the maximum potential IRR of each technology from price arbitrage was evaluated in each market, along with the optimal ESS system size. Additionally, the reductions in capital cost needed to achieve a 10% IRR were estimated for each ESS. The results indicate that the profit-maximizing size of an ESS is primarily determined by its technological characteristics (round-trip charge/discharge efficiency and self-discharge) and not market price volatility, which instead increases IRR. This analysis demonstrates that few ESS technologies are likely to be implemented by investors alone.

Next, the effects of ESSs on system reliability are quantified. Using historic data for wind, solar, and conventional generation, a correlation-preserving, copula-transform model was implemented in conjunction with Markov chain Monte Carlo framework for estimating system reliability indices. Systems with significant wind and solar penetration (25% or greater), even with added energy storage capacity, resulted in considerable decreases in generation adequacy.

Lastly, rather than analyzing the reliability and costs in isolation of one another, system reliability, cost, and emissions were analyzed in 3-space to quantify and visualize the system tradeoffs. The modeling results implied that ESSs perform similarly to natural gas combined cycle (NGCC) systems with respect to generation adequacy and system cost, with the primary difference being that the generation adequacy improvements are less for ESSs than that of NGCC systems and the increase in LCOE is greater for ESSs than NGCC systems.

Although ESSs do not appear to offer greater benefits than NGCC systems for managing energy on time intervals of 1-hour or more, we conclude that future research into short-term power balancing applications of ESSs, in particular for frequency regulation, is necessary to understand the full potential of ESSs in modern electric interconnections.





Bradbury, Kyle Joseph (2013). The Potential of Energy Storage Systems with Respect to Generation Adequacy and Economic Viability. Dissertation, Duke University. Retrieved from


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