Grid Energy Storage - Economics

Economics

Generally speaking, energy storage is economical when the marginal cost of electricity varies more than the costs of storing and retrieving the energy plus the price of energy lost in the process. For instance, assume a pumped-storage reservoir can pump to its upper reservoir water equivalent to 1,200 MW·h during the night, for $15 per MW·h, at a total cost of $18,000. The next day, all of the stored energy can be sold at the peak hours for $40 per MW·h, but from the 1,200 MW·h pumped 50 were lost due to evaporation and seeping in the reservoir. 1,150 MW·h are sold for $46,000, for a final profit of $28,000.

However, the marginal cost of electricity varies because of the varying operational and fuel costs of different classes of generators. At one extreme, base load power plants such as coal-fired power plants and nuclear power plants are low marginal cost generators, as they have high capital and maintenance costs but low fuel costs. At the other extreme, peaking power plants such as gas turbine natural gas plants burn expensive fuel but are cheaper to build, operate and maintain. To minimize the total operational cost of generating power, base load generators are dispatched most of the time, while peak power generators are dispatched only when necessary, generally when energy demand peaks. This is called "economic dispatch".

Demand for electricity from the world's various grids varies over the course of the day and from season to season. For the most part, variation in electric demand is met by varying the amount of electrical energy supplied from primary sources. Increasingly, however, operators are storing lower-cost energy produced at night, then releasing it to the grid during the peak periods of the day when it is more valuable. In areas where hydroelectric dams exist, release can be delayed until demand is greater; this form of storage is common and can make use of existing reservoirs. This is not storing "surplus" energy produced elsewhere, but the net effect is the same - although without the efficiency losses. Renewable supplies with variable production, like wind and solar power, tend to increase the net variation in electric load, increasing the opportunity for grid energy storage.

It may be more economical to find an alternative market for unused electricity, rather than try and store it in low AC to AC efficiency batteries. High Voltage Direct Current allows for transmission of electricity costing only 3% per 1000km.