Profitability, risk, and financial modeling of energy storage in residential and large scale applications

• Published in: Energy (Oxford) 2017-01, Vol.119, p.94-109
• Main Authors: Berrada, Asmae, Loudiyi, Khalid, Zorkani, Izeddine
• Format: Article
• Language: English
• Subjects: Alternative energy; Arbitrage; Cost benefit analysis; Demand; Economic analysis; Economic viability; Economics; Electric industries; Energy consumption; Energy storage; Feasibility studies; Industrial plants; Optimal modeling; Peak demand; Peak load; Power consumption; Power plants; Profitability; Project feasibility; Renewable energy; Residential energy; Risk analysis; Risk assessment; Scale (ratio); Sensitivity analysis; Sensitivity assessment; Stability; Storage systems; Viability
• ISSN: 0360-5442; 1873-6785
• DOI: 10.1016/j.energy.2016.12.066

The increasing share of renewable energy plants in the power industry portfolio is causing grid instability issues. Energy storage technologies have the ability to revolutionize the way in which the electrical grid is operated. The incorporation of energy storage systems in the grid help reduce this instability by shifting power produced during low energy consumption to peak demand hours and hence balancing energy generation with demand. However, the deployment of some energy storage systems will remain limited until their economic profitability is proven. In this paper, a cost-benefit analysis is performed to determine the economic viability of energy storage used in residential and large scale applications. Revenues from energy arbitrage were identified using the proposed models to get a better view on the profitability of the storage system. Moreover, the feasibility of energy storage projects relies on the readiness of investors to invest in the project. This willingness is significantly affected by several factors such as the risk of the innovative storage concept. To analyse the profitability risk associated with such energy project, a sensitivity analysis is performed in this study. •Viability of storage used in residential and large scale applications is studied.•Gravity storage is considered profitable for large scale applications.•Investment risks associated with gravity energy storage are discussed.•Impact of major risks is investigated in the sensitivity analysis.