How can energy storage be profitable?

Where a profitable application of energy storage requires saving of costs or deferral of investments, direct mechanisms, such as subsidies and rebates, will be effective. For applications dependent on price arbitrage, the existence and access to variable market prices are essential.

How do business models of energy storage work?

Building upon both strands of work, we propose to characterize business models of energy storage as the combination of an application of storage with the revenue stream earned from the operation and the market role of the investor.

Why should you invest in energy storage?

Investment in energy storage can enable them to meet the contracted amount of electricity more accurately and avoid penalties charged for deviations. Revenue streams are decisive to distinguish business models when one application applies to the same market role multiple times.

How does energy storage work?

Energy storage can be used to lower peak consumption (the highest amount of power a customer draws from the grid), thus reducing the amount customers pay for demand charges. Our model calculates that in North America, the break-even point for most customers paying a demand charge is about $9 per kilowatt.

What are the benefits of energy storage?

There are four major benefits to energy storage. First, it can be used to smooth the flow of power, which can increase or decrease in unpredictable ways. Second, storage can be integrated into electricity systems so that if a main source of power fails, it provides a backup service, improving reliability.

Is energy storage a profitable business model?

Although academic analysis finds that business models for energy storage are largely unprofitable, annual deployment of storage capacity is globally on the rise (IEA, 2020). One reason may be generous subsidy support and non-financial drivers like a first-mover advantage (Wood Mackenzie, 2019).