The Economics of Energy Storage in 14 Deregulated Power Markets

Abstract

In a regulated market large scale storage of electrica l energy, for example by pumped storage, time shifts the generation of power and has been used to defer ge neration investment. In a deregulated market power storage, when used for energy rather than as a source of spinning or standby reserve or frequency control, is a simple economic proposition: power is purc hased during periods of low price and rege nerated and resold during period s of high price. In this study historica l diurn al price pattern s in 14 deregul ated markets are ana lyzed to give an initial prediction of the economic incentive for energy storage. We rank the 14 marke ts based on avai lable revenue and potentia l return on investment: the incenti ve to store energy varies significantly between mark ets. The differences between markets arise becau se of different diurnal pattern s of power price. Diurnal price patterns in turn reflect a complex set of factors in a market, including generat ion mix , market design and participant behaviours.