Future profitability assessment

This study reviews revenues for electricity storage in various applications across US and EU power markets. It matches the identified revenues to the respective application requirements and thereby produces an generalized overview of the revenue potential for electricity storage at various application requirements (i.e., discharge duration and discharge frequency). 

Matching revenue potential to future lifetime cost projections for discharged energy and power capacity reveals the profitability potential for electricity storage. 

Figure 1 – Economic market value for electricity storage discharged energy (left) and power capacity (right) relative to discharge duration and discharge frequency. Colours refer to revenue potential in US$/MWh (left) and US$/kW-year (right). Circled numbers represent the requirements of the 12 core applications introduced in the lifetime cost assessment. Frequency refers to full equivalent charge-discharge cycles per year.

Revenue 

Cost

Profitability

Figure 2 – Profitability for discharged electricity storage energy in applications with various discharge duration and annual cycle requirements for 2030 (right, green: profitable, other: unprofitable). Values are determined by substracting mean levelized cost of storage (LCOS) of most cost-efficient technology in any duration-frequency combination (middle) from mean revenue potential (left). The modelled electricity price is 50 US$/MWh. Discount rate is 8%. 

Revenue 

Cost

Profitability

Figure 3 – Profitability for providing electricity storage power capacity in applications with various discharge duration and annual cycle requirements for 2030 (right, green: profitable, other: unprofitable). Values are determined by substracting mean annuitized capacity cost (ACC) of most cost-efficient technology in any duration-frequency combination (middle) from mean revenue potential (left). The modelled electricity price is 50 US$/MWh. Discount rate is 8%. 

There seem to be three sweet spots for profitable business cases: for reimbursement of discharged energy above 4 hours duration and 300-1,000 cycles (e.g. peaker replacement, network investment deferral), and for reimbursement of power capacity at 1-4 hours duration and 10-100 cycles (e.g., capacity services) or . at less than 1-hour discharge and 100-2,000 cycles (e.g., frequency regulation). These applications minimise levelised storage cost, while offering sufficiently high revenues (Figure 2) or sharply increasing revenues for longer duration or higher frequency applications exceed the increasing annuitised capacity cost (Figure 3). 

These insights can help industry to focus business development as well as technology procurement activities and policy-makers to design purposeful regulatory frameworks and incentive schemes. 

Project in progress.

Oliver Schmidt

Centre for Environmental Policy (CEP)

​South Kensington Campus

Imperial College London

London SW7 2AZ, UK

tel: +44 79 345 487 36

e-mail: o.schmidt15@imperial.ac.uk

LinkedIn: www.linkedin.com/in/oliver-schmidt/