The Economics of Storage

1. The Economics of Storage Prabal Dutta and Mike He Many Reasons and Technologies for Storage Playing Temporal Arbitrage with Electricity • Market and Technology Trends • Energy costs rising • Storage costs falling • Classic “crossing curves” point • When a sufficient wholesale price difference exists • Buy when price is low • Convert and store • Reconvert and sell • To be economically viable • Marginal cost of storage • Must be less than • High-Low price difference • Key engineering factors • Cost of storage ($/kWh) • Rated lifetime (cycles) • Conversion efficiency • Power density • Energy density • Arbitrage. If price varies substantially and efficient market exists • Peak-to-Average. Reduce electricity rate by shaving peak load • Buffer Supply and Demand. When S/D inelastic or intermittent July 7, 2009: Ontario IESO Example Marginal Profit Potential w/ Current Technology • Profit = Revenue – Cost • Revenue: max wholesale price ($0.0423/kWh) • Costs: • Min wholesale price ($0.00352/kWh) • Uplift charges (typically < $0.005/kWh) • Storage cost per unit energy (CPUE): • Wholesale price ($CAD/MWh) • Min: $3.52 • Avg: $20.99 • Max: $42.32 • Range: $38.80 (> 12:1) • Average hourly demand • Min: 15,000 MW • Avg: 17,162 MW • Max: 19,570 MW • Range: 5,070 MW • Marginally profitable when: • $0.0423 – $0.00352 – $0.005 – CPUE > 0 • Requires: storage CPUE < $0.0338 • Storage CPUE figures for various technologies • Pumped Hydro(1) = $45/(0.70*3650) = $0.018/kWh • Thermal(1) = $65(/0.90*3650) = $0.020/kWh • Flywheel(1) = $300/(0.80*3650) = $0.103/kWh • Lithium Ion Battery = $300/(0.999*1200) = $0.250/kWh • NiMH Battery = $364/(0.66*1000) = $0.551/kWh • (1) Note: Assumes 10-year lifetime with daily cycling Marginal Profit Drops Quickly and Varies Power Density Matters: Small Window to Buy Mild Spring Weekend Day 1x  Power Density  Warm Summer Weekday 2x