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A simple introduction to the economics of storage: shifting demand and supply over time and space

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  • Newbery, D. G.

Abstract

The literature on electrical energy storage (EES) is technical and complex which this paper aims to simplify. It quantifies the current scale, costs and value of different types of EES and compares them to peaking generators and interconnectors. Worldwide, dams have 2,700 times the storage capacity of pumped storage, which accounts for 99% of conventional EES, batteries making up the rest. Indirect use of hydro power, and in future, electric vehicles, adds to their value and if accessible at reasonable cost, would be cheaper than conventional EES. EES, peakers and DC interconnectors can offer flexibility services which considerably enhance their value, but hopes of a battery revolution enabling a smarter electricity system should not be exaggerated.

Suggested Citation

  • Newbery, D. G., 2016. "A simple introduction to the economics of storage: shifting demand and supply over time and space," Cambridge Working Papers in Economics 1661, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1661
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    References listed on IDEAS

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    1. Ansar, Atif & Flyvbjerg, Bent & Budzier, Alexander & Lunn, Daniel, 2014. "Should we build more large dams? The actual costs of hydropower megaproject development," Energy Policy, Elsevier, vol. 69(C), pages 43-56.
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    Cited by:

    1. Greve, Thomas & Teng, Fei & Pollitt, Michael G. & Strbac, Goran, 2018. "A system operator’s utility function for the frequency response market," Applied Energy, Elsevier, vol. 231(C), pages 562-569.
    2. Kendall Mongird & Vilayanur Viswanathan & Patrick Balducci & Jan Alam & Vanshika Fotedar & Vladimir Koritarov & Boualem Hadjerioua, 2020. "An Evaluation of Energy Storage Cost and Performance Characteristics," Energies, MDPI, vol. 13(13), pages 1-53, June.
    3. Newbery, David & Pollitt, Michael G. & Ritz, Robert A. & Strielkowski, Wadim, 2018. "Market design for a high-renewables European electricity system," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 695-707.
    4. Anaya, K. & Pollitt, M., 2018. "Storage Business Models: Lessons for Electricity from Natural Gas, Cloud Data and Frozen Food," Cambridge Working Papers in Economics 1810, Faculty of Economics, University of Cambridge.
    5. Newbery, David, 2018. "Evaluating the case for supporting renewable electricity," Energy Policy, Elsevier, vol. 120(C), pages 684-696.
    6. Abrell, Jan & Rausch, Sebastian & Streitberger, Clemens, 2019. "Buffering volatility: Storage investments and technology-specific renewable energy support," Energy Economics, Elsevier, vol. 84(S1).
    7. Jan Abrell & Sebastian Rausch & Clemens Streitberger, 2022. "The Economic and Climate Value of Flexibility in Green Energy Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(2), pages 289-312, October.
    8. Xin Li & Konstantinos J. Chalvatzis & Phedeas Stephanides, 2018. "Innovative Energy Islands: Life-Cycle Cost-Benefit Analysis for Battery Energy Storage," Sustainability, MDPI, vol. 10(10), pages 1-19, September.

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    More about this item

    Keywords

    electrical energy storage; interconnectors; flexibility services;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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