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Evaluating economic feasibility of lithium-ion battery energy storage systems in future US electricity markets

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  • Cetegen, Shaylin A.
  • Gundersen, Truls
  • Barton, Paul I.

Abstract

Lithium-ion battery energy storage systems are widely deployed in today’s electricity grid; however, their long-term economic viability under evolving market conditions remains uncertain. This study applies a generalized net present value optimization framework to evaluate the economic viability of lithium-ion battery energy storage systems deployed across 18 United States electricity markets under eight decarbonization scenarios using projected electricity prices. By focusing exclusively on revenue from energy arbitrage, the analysis provides conservative baseline estimates of economic performance. Results indicate that lithium-ion battery energy storage systems are economically uncompetitive under all considered scenarios, with net present values ranging from –$144 million to –$80 million for optimally operated 100 MW/400 MWh systems. The associated levelized cost of storage ranges from $120 per MWh to $195 per MWh, depending on electricity market and scenario. Florida consistently yields the least negative net present values, making it the most favorable market evaluated. Sensitivity analysis shows that a 75% capital cost subsidy would be required for lithium-ion battery systems to achieve breakeven economics across all decarbonization scenarios. The modeling framework is extensible and can be adapted to evaluate other energy storage technologies, electricity markets, regulatory contexts, decarbonization pathways, and revenue strategies. It also enables systematic exploration of how specific interventions and policy mechanisms influence project economics.

Suggested Citation

  • Cetegen, Shaylin A. & Gundersen, Truls & Barton, Paul I., 2025. "Evaluating economic feasibility of lithium-ion battery energy storage systems in future US electricity markets," Energy, Elsevier, vol. 337(C).
    • Handle: RePEc:eee:energy:v:337:y:2025:i:c:s0360544225041118
    DOI: 10.1016/j.energy.2025.138469
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    References listed on IDEAS

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