IDEAS home Printed from
   My bibliography  Save this article

Is inexpensive natural gas hindering the grid energy storage industry?


  • Hittinger, Eric
  • Lueken, Roger


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

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

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

    References listed on IDEAS

    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 Other Operational Studies 18415, The World Bank.
    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 are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. repec:gam:jeners:v:10:y:2017:i:8:p:1100-:d:106071 is not listed on IDEAS


    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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.