IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v87y2015icp140-152.html
   My bibliography  Save this article

Is inexpensive natural gas hindering the grid energy storage industry?

Author

Listed:
  • Hittinger, Eric
  • Lueken, Roger

Abstract

Grid energy storage is a maturing technology and forecasts of the industry's growth have been promising. However, recent years have realized little growth in actual deployments of grid-level storage and several high-profile storage companies and projects have failed. We hypothesize that falling natural gas prices have significantly reduced the potential profit from many U.S. energy storage projects since 2009 and quantify that effect. We use engineering–economic models to calculate the monthly revenue to energy storage devices providing frequency regulation and energy arbitrage in several electricity markets and compare that revenue to prevailing natural gas prices. We find that flywheel devices providing frequency regulation were profitable in months when natural gas prices were above $7/mcf, but face difficulties at current prices (around $4/mcf). For energy arbitrage alone, we find that the breakeven capital cost for large-scale storage was around $300/kWh in several key locations in 2004–2008, but is around $100/kWh in the same locations today. Though cost and performance improvements have been continually decreasing the effective cost of energy services from storage, fundamental market signals indicating the need for energy storage are at or near 10-year lows for both energy arbitrage and frequency regulation.

Suggested Citation

  • Hittinger, Eric & Lueken, Roger, 2015. "Is inexpensive natural gas hindering the grid energy storage industry?," Energy Policy, Elsevier, vol. 87(C), pages 140-152.
    • Handle: RePEc:eee:enepol:v:87:y:2015:i:c:p:140-152
    DOI: 10.1016/j.enpol.2015.08.036
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421515300811
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2015.08.036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alexandre Kossoy & Klaus Oppermann & Alexandrina Platonova-Oquab & Suphachol Suphachalasai & Niklas Höhne & Noémie Klein & Alyssa Gilbert & Long Lam & Gemma Toop & Qian Wu & Markus Hagemann & Carlos C, "undated". "State and Trends of Carbon Pricing 2014," World Bank Publications - Reports 18415, The World Bank Group.
    2. Min, Brian & Golden, Miriam, 2014. "Electoral cycles in electricity losses in India," Energy Policy, Elsevier, vol. 65(C), pages 619-625.
    3. Drury, Easan & Denholm, Paul & Sioshansi, Ramteen, 2011. "The value of compressed air energy storage in energy and reserve markets," Energy, Elsevier, vol. 36(8), pages 4959-4973.
    4. Connolly, D. & Lund, H. & Finn, P. & Mathiesen, B.V. & Leahy, M., 2011. "Practical operation strategies for pumped hydroelectric energy storage (PHES) utilising electricity price arbitrage," Energy Policy, Elsevier, vol. 39(7), pages 4189-4196, July.
    5. Walawalkar, Rahul & Apt, Jay & Mancini, Rick, 2007. "Economics of electric energy storage for energy arbitrage and regulation in New York," Energy Policy, Elsevier, vol. 35(4), pages 2558-2568, April.
    6. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas & Weiss, Jurgen, 2009. "Estimating the value of electricity storage in PJM: Arbitrage and some welfare effects," Energy Economics, Elsevier, vol. 31(2), pages 269-277, March.
    7. In, Younghwan & Wright, Julian, 2014. "Loss-leader pricing and upgrades," Economics Letters, Elsevier, vol. 122(1), pages 19-22.
    8. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas, 2011. "A comparative analysis of the value of pure and hybrid electricity storage," Energy Economics, Elsevier, vol. 33(1), pages 56-66, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goteti, Naga Srujana & Hittinger, Eric & Sergi, Brian & Lima Azevedo, Inês, 2021. "How does new energy storage affect the operation and revenue of existing generation?," Applied Energy, Elsevier, vol. 285(C).
    2. Knudsen, Brage Rugstad & Foss, Bjarne, 2017. "Shale-gas wells as virtual storage for supporting intermittent renewables," Energy Policy, Elsevier, vol. 102(C), pages 142-144.
    3. Devlin, Joseph & Li, Kang & Higgins, Paraic & Foley, Aoife, 2017. "Gas generation and wind power: A review of unlikely allies in the United Kingdom and Ireland," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 757-768.
    4. Li, Huajiao & An, Haizhong & Fang, Wei & Jiang, Meng, 2017. "A theoretical cost optimization model of reused flowback distribution network of regional shale gas development," Energy Policy, Elsevier, vol. 100(C), pages 359-364.
    5. Bistline, John & Blanford, Geoffrey & Mai, Trieu & Merrick, James, 2021. "Modeling variable renewable energy and storage in the power sector," Energy Policy, Elsevier, vol. 156(C).
    6. Mauricio B. C. Salles & Junling Huang & Michael J. Aziz & William W. Hogan, 2017. "Potential Arbitrage Revenue of Energy Storage Systems in PJM," Energies, MDPI, vol. 10(8), pages 1-19, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zakeri, Behnam & Syri, Sanna, 2015. "Electrical energy storage systems: A comparative life cycle cost analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 569-596.
    2. McConnell, Dylan & Forcey, Tim & Sandiford, Mike, 2015. "Estimating the value of electricity storage in an energy-only wholesale market," Applied Energy, Elsevier, vol. 159(C), pages 422-432.
    3. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2016. "Valuation of energy storage in energy and regulation markets," Energy, Elsevier, vol. 115(P1), pages 1109-1118.
    4. Barbry, Adrien & Anjos, Miguel F. & Delage, Erick & Schell, Kristen R., 2019. "Robust self-scheduling of a price-maker energy storage facility in the New York electricity market," Energy Economics, Elsevier, vol. 78(C), pages 629-646.
    5. Shafiee, Soroush & Zamani-Dehkordi, Payam & Zareipour, Hamidreza & Knight, Andrew M., 2016. "Economic assessment of a price-maker energy storage facility in the Alberta electricity market," Energy, Elsevier, vol. 111(C), pages 537-547.
    6. Bradbury, Kyle & Pratson, Lincoln & Patiño-Echeverri, Dalia, 2014. "Economic viability of energy storage systems based on price arbitrage potential in real-time U.S. electricity markets," Applied Energy, Elsevier, vol. 114(C), pages 512-519.
    7. Ramteen Sioshansi & Paul Denholm & Thomas Jenkin, 2012. "Market and Policy Barriers to Deployment of Energy Storage," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    8. Antweiler, Werner, 2021. "Microeconomic models of electricity storage: Price Forecasting, arbitrage limits, curtailment insurance, and transmission line utilization," Energy Economics, Elsevier, vol. 101(C).
    9. Blanco, Herib & Faaij, André, 2018. "A review at the role of storage in energy systems with a focus on Power to Gas and long-term storage," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 1049-1086.
    10. Cutter, Eric & Haley, Ben & Hargreaves, Jeremy & Williams, Jim, 2014. "Utility scale energy storage and the need for flexible capacity metrics," Applied Energy, Elsevier, vol. 124(C), pages 274-282.
    11. Zafirakis, Dimitrios & Chalvatzis, Konstantinos J. & Baiocchi, Giovanni & Daskalakis, Georgios, 2016. "The value of arbitrage for energy storage: Evidence from European electricity markets," Applied Energy, Elsevier, vol. 184(C), pages 971-986.
    12. Tom Brijs & Frederik Geth & Sauleh Siddiqui & Benjamin F. Hobbs & Ronnie Belmans, 2016. "Price-Based Unit Commitment Electricity Storage Arbitrage with Piecewise Linear Price-Effects," Discussion Papers of DIW Berlin 1567, DIW Berlin, German Institute for Economic Research.
    13. Mauricio B. C. Salles & Junling Huang & Michael J. Aziz & William W. Hogan, 2017. "Potential Arbitrage Revenue of Energy Storage Systems in PJM," Energies, MDPI, vol. 10(8), pages 1-19, July.
    14. Boffino, Luigi & Conejo, Antonio J. & Sioshansi, Ramteen & Oggioni, Giorgia, 2019. "A two-stage stochastic optimization planning framework to decarbonize deeply electric power systems," Energy Economics, Elsevier, vol. 84(C).
    15. Arcos-Vargas, Ángel & Canca, David & Núñez, Fernando, 2020. "Impact of battery technological progress on electricity arbitrage: An application to the Iberian market," Applied Energy, Elsevier, vol. 260(C).
    16. Núñez, Fernando & Canca, David & Arcos-Vargas, Ángel, 2022. "An assessment of European electricity arbitrage using storage systems," Energy, Elsevier, vol. 242(C).
    17. Ruppert, Leopold & Schürhuber, Robert & List, Bernhard & Lechner, Alois & Bauer, Christian, 2017. "An analysis of different pumped storage schemes from a technological and economic perspective," Energy, Elsevier, vol. 141(C), pages 368-379.
    18. Metz, Dennis & Saraiva, João Tomé, 2018. "Simultaneous co-integration of multiple electrical storage applications in a consumer setting," Energy, Elsevier, vol. 143(C), pages 202-211.
    19. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2017. "Profitability, risk, and financial modeling of energy storage in residential and large scale applications," Energy, Elsevier, vol. 119(C), pages 94-109.
    20. Zafirakis, Dimitrios & Chalvatzis, Konstantinos J. & Baiocchi, Giovanni & Daskalakis, George, 2013. "Modeling of financial incentives for investments in energy storage systems that promote the large-scale integration of wind energy," Applied Energy, Elsevier, vol. 105(C), pages 138-154.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:87:y:2015:i:c:p:140-152. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.