Investment value of power storage

Do investors underestimate the value of energy storage?

While energy storage is already being deployed to support grids across major power markets, new McKinsey analysis suggests investors often underestimate the value of energy storage in their business cases.

How does ownership affect the value of energy storage?

Abstract: Owners of renewable energy resources (RES) often choose to invest in energy storage for joint operation with RES to maximize profitability. Standalone entities also invest in energy storage systems and use them for arbitrage. In this paper we examine how these two forms of ownership affect the value of energy storage.

How does market power affect the value of energy storage?

However, when agents are able to exert market power or exhibit risk aversion, the value of energy storage can differ between the two ownership structures. Additionally, we discuss how differential pricing and market barriers influence the value of energy storage.

Are energy storage assets a good investment?

Storage assets therefore depend on price spreads, which tend to be higher with more imbalances. Imbalances, in return, are driven by more renewables. Energy storage is therefore well-positioned for an electricity market dominated by renewables and represents an interesting new asset class.

How much capital does it take to build energy storage?

Given the clean energy targets that we see across Europe by 2050, we in Global Banking & Markets believe that building all that energy storage capacity will take up to $250 billion in capital investment. This will require a mix between residential units and grid-scale energy storage.

What factors influence energy storage investment decisions?

In the numerical studies, we explore how factors such as seasonal price volatility, RES types, and the siting of energy storage influence investment decisions. Owners of renewable energy resources (RES) often choose to invest in energy storage for joint operation with RES to maximize profitability.