Investigating the potential value of electricity storage through market mechanisms in Great Britain

The energy landscape of Great Britain is undergoing substantial changes, not least with rapidly increasing renewable generation and the closure of large fossil fuel plants. Energy storage has been advocated as an essential solution for mitigating the negative impact these changes may bring. Despite the apparent benefits, the uptake of energy storage in GB has been low, partly due to the uncertainty surrounding its economic feasibility. This study investigates the value of electricity storage as traded in currently available markets; three mechanisms are examined - a wholesale market, the Balancing Mechanism and the potential to provide ‘ancillary services’ to the System Operator. Optimisation models were developed to identify the maximum potential value in each market under a perfect foresight assumption, before applying a co-optimisation approach to assess a multi-market strategy. The sensitivity to perfect foresight was evaluated by testing simple storage management strategies. An econometric approach was then applied to examine the impact of increased wind generation on the markets and to extend this to a 20GW assumed scenario. The results showed that substantially larger revenues were generated under co-optimisation compared to single market participation; these were also shown to be more resilient to inter-annual variability and market constraints due to the flexibility of the storage system in adjusting participation accordingly. Cost data from previous studies suggests that such revenues are still insufficient to support the deployment of Lithium-Ion batteries and Vanadium-Redox flow batteries. Pumped Hydro Energy Storage was shown to be the most economically viable, followed by Compressed Air Energy Storage, Advanced Adiabatic Compressed Air Energy Storage and Iron-Chromium Flow batteries. Replacing perfect foresight with alternative strategies caught between 52%-62% of revenues, highlighting the importance of forecasting accuracy when drawing on optimisation models. A 20 GW wind penetration scenario showed a clear depressing effect on prices. However, in most cases examined, additional revenues were generated for storage due to the increased price volatility presenting greater arbitrage opportunities. These results imply that while energy storage can be viable, caution should be made in the choice of technology and operational strategy with a clear preference for the co-optimisation of revenues across the three market mechanisms considered