An analysis of electrical storage demand and cost in South Australia

The State of South Australia (SA) currently has twice as much variable renewable electricity (VRE) as the country (Portugal) with the highest proportion globally. This analysis of the relationship between storage and VRE takes account of the evidence of generators' response to market prices in their dispatch decisions. It finds that increasing VRE penetration to around 90 % of end use consumption will be affordable with storage (energy) capacity equal to 0.00044 % of annual demand. However a strategy to fully decarbonise supply through VRE and storage has implied carbon abatement costs far above estimates of the Social Cost of Carbon. This is because very large amounts of seldomly used storage is needed to come close to fully decarbonising supply. Storage costs at around one twentieth current costs reductions will make full decarbonisation through VRE and storage affordable. Pursuing other (non-storage) avenues for decarbonisation such as encouraging a stronger temporal association between electricity demand and VRE supply, zero carbon dispatchable generation, and stationary energy system use of storage in electric vehicles, will be valuable. • Relatively small amounts of storage can significantly extend the penetration of variable renewable electricity in electricity markets. • Very large amounts of seldom-used storage is needed to fully decarbonise markets that rely only on variable renewable supply. • Accounting for the effect of market prices on generation dispatch is needed to assess the economics of storage in electricity markets.