Energy Storage and Renewable Generation: Perspectives from Economics, Technology, and Policy

Abstract

Interest in renewable energy has recently catapulted utility-scale electrical energy storage into the energy policy limelight. Storage is often considered the panacea for providing more energy from variable power sources, which can produce energy only with the wind or sun. Nonetheless, valuations of storage generally find it the service not to be worth the investment. Given the immense potential of energy storage to support the further integration of renewable energy and the reliability of the U.S. electricity grid in general, this thesis makes a comprehensive evaluation of storage from the three perspectives that matter most to a potential investor in energy storage: the available economic value, the available technologies, and the market and regulatory environment in which storage providers operate. The thesis begins with a breakdown of the infrastructure, services, and markets that comprise the power grid, and from this foundation builds a model of how storage may derive value by bolstering the reliability of the grid, supporting the integration of renewable energy, and shifting energy from times of low use to peak. It continues with a review of previous valuations of energy storage, finding that nearly all of these studies neglect one or more value streams afforded by energy storage, particularly its ability to reinforce the reliability of the energy system in the presence of renewable energy. Using a counterfactual analysis, the thesis goes on to evaluate how the private and social value of grid-scale storage changes under increasing renewable energy penetration, finding these values to increase significantly as more variable energy is introduced to the grid, although not so much that the installation of storage is guaranteed in the immediate future. Other factors that affect the role of storage on the grid are the available technologies and the relevant policies, both of which the thesis goes on to examine. It finds that several technologies, able to span the range of applications that confer value on storage, are ready to be implemented on the grid, but that in the absence of direct government incentives, very few have been. Although incomplete valuation is a possible explanation for this phenomenon, an examination of the experiences of energy storage with markets and the regulatory environment indicates that storage is unable to realize a significant amount of its value. As a result, the thesis finds that the regulatory environment must better align with the unique capabilities of energy storage in order to realize its increasing value.