The economic and environmental assessment of electricity storage investments. Any need for policy incentives?

Abstract

This study contributes to the current discussion on the economic viability of new investments in electricity storage technologies, its environmental impact in terms of CO2 emissions and level of renewables in the system and some policy related questions. The analysis is based upon a price-taker model under perfect price forecast simulating the dispatch of a marginal pumped-hydro storage (PHS) plant. The operation of a PHS, despite being costs minimizing, does not guarantee optimality in terms of environmental impact. Policy support should be granted if the social value of the investment would at least compensate the negative results of the private profits.