Title: The economic and environmental assessment of electricity storage investments. Any need for policy incentives?
Publisher: EEIC 2016 Proceedings
Publication Year: 2016
JRC N°: JRC99252
ISBN: 978-989-97531-4-3 (online)
URI: http://www.eeic2016.isel.pt/wp-content/uploads/2016/12/EEIC-2016-Proceedings-1.pdf
Type: Articles in periodicals and books
Abstract: This study contributes to the current discussion on the economic viability of new investments in electricity storage technologies, the associated environmental impact, measured in terms of changes in 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 forecasts simulating the dispatch of a marginal pumped-hydro storage plant. The optimization problem is solved with CPLEX 12.1 under GAMS and it is applied to the case study of two zones of the Italian power market, Sicily (SICI) and Rossano (ROSN). This case study is of particular interest because the zone SICI features the highest and most volatile price levels in the country. Additionally, the potential of wind and solar generation makes these regions a possible future leading producers of renewables in Italy. A storage plant is located in each zone and maximizes arbitrage profits from zonal price spread between off and on peak hours. The higher is the volatility of prices, the higher are private profits for the storage investor. In the first part of the study we compare the private investment opportunities of the two storage projects with the NPV approach. In the second part we assess the impact of storage operation on the level of CO2 emissions and renewable generation in the system. The net environmental impact is determined by the difference between the kg of CO2 of the power integrated during charging hours and the kg of CO2 displaced during discharging hours. In the same way we calculate the net renewable generation integrated by the storage. Results of the environmental impact assessment show an overall increase in CO2 emissions, with remarkable differences between zones and higher levels of renewable generation after storage is added to the system. The NPV results improve when both private and social values are considered, though they remain negative without changing the business case of both storage investment projects. We show that the operation of a PHS, despite being costs minimizing, does not guarantee optimality in terms of environmental impact. The investment analysis shows no reasons for public incentive to private storage investments in the two Italian zones. Policy support to the storage technologies should be granted if the social value of the investment would at least cover the negative results of the private profits assessment.
JRC Directorate:Energy, Transport and Climate

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