Locating large-scale energy storage: spillover effects, carbon emissions, and balancing costs across Italy

Reaching net zero requires substantial large-scale energy storage systems (LESS) deployment. This strategy poses key challenges, including understanding how different LESS technologies compare in terms of both economic benefits and environmental impact, as well as analysing the complex interactions within and between markets when storage is deployed. To help shed light on these aspects, we investigate how LESS location, rated power, duration, and technology can affect welfare and carbon emissions in the Italian electricity system by modelling the day-ahead and the ancillary services markets. We considered lithium-ion batteries, pumped-storage hydro, and vanadium redox flow batteries. The results show that deploying LESS is always beneficial in the day-ahead market, but ancillary services costs can increase due to spillover effects because these markets run sequentially. Lithium-ion is the technology that yields the best social welfare increase. Location, rated power, and duration significantly impact carbon emissions, with changes ranging from −260 kgCO2 to 190 kgCO2 per MWh traded. These results suggest that LESS can help increase welfare and induce unintended consequences, such as spillovers across markets with a mixed effect on emissions. • Simulation of both day-ahead and ancillary services markets in Italy. • Deploying storage can increase balancing costs due to a spillover effect between these markets. • Emissions are significantly affected by storage location, technology, rated power, and duration. • Carbon emission changes can range between −260 kgCO2 and 190 kgCO2 per stored MWh traded. • Lithium-ion batteries with 100 MW rated power and 2h–4h duration are the most beneficial devices.