Investment and risk appraisal in Energy Storage Systems: a real options approach

Article English OPEN
Locatelli, G ; Invernizzi, DC ; Mancini, M (2016)
  • Publisher: Elsevier
  • Subject:
    acm: ComputerApplications_COMPUTERSINOTHERSYSTEMS

The increasing penetration of variable renewable energy is becoming a key challenge for the management of the electrical grid. Electrical Energy Storage Systems (ESS) are one of the most suitable solutions to increase the flexibility and resilience of the electrical system. This paper presents an innovative methodology for the appraisal of the investment in ESS. The methodology is based on the Real Option Analysis and it is able to properly consider investment risks and uncertainties as well as the options available for the investor. The paper assesses the value of the option to wait for a change in the market conditions before investing and re-evaluates the profitability of the investment after each step of the development of the ESS project. In order to exemplify relevant results, this method is applied to the UK energy market and assesses the technical and economic feasibility of investing in ESS operating price arbitrage and Short Term Operating Reserves. The results show that the implementation of the Real Option Analysis increases the economic performance of ESS. Nevertheless, ESS still requires limited incentives to be economically viable.
  • References (6)

    “ market: Benefits assessment a vol. 81, pp. 1 1W4, 2014. [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15]

    “ P [Accessed: 01-Dec-2014]. Int. J. Electr. Power Energy Syst., vol. [33] [35] [37] [39] [40] [43] [44] [45] [46] [47] [49] Energy Procedia, vol. 39, pp. 193 1W98, 2013.

    “ P Appl. Energy, vol. 97, pp. 249 2W54, Sep. 2012. E. a. Martínez- “ renewable energy generation pp. 2087 2W094, May 2011.

    investments under different Eur. J. Oper. Res., vol. 220, no. 1, pp. 225 2W37, Renew. Sustain. Energy Rev., vol. 15, no. 4, [70] S.-C. Lee and L.- “

    Renew. Sustain. Energy Rev., vol. 15, no. 5, pp. 2185 2W198, Jun. 2011. [71]

    “ Energy Econ., vol. 33, no. 1, pp. 79 8W7, Jan. 2011. [72]

  • Metrics
    views in OpenAIRE
    views in local repository
    downloads in local repository

    The information is available from the following content providers:

    From Number Of Views Number Of Downloads
    White Rose Research Online - IRUS-UK 0 212
Share - Bookmark