Support schemes for utility-scale energy storage: a comparative analysis

To incentivize investment in large-scale energy storage, policymakers must develop instruments that mitigate the substantial market-related revenue risks faced by storage operators. This paper uses real-life German electricity wholesale price data to evaluate the impact of two innovative, price-dependent support instruments — a percentage markup on the discharging price and a minimum discharging price — on investment returns. To demonstrate the impact of technology-specific cost structures, the paper compares a lithium-ion battery system with a compressed air energy storage system. The paper shows that these instruments effectively improve investment returns and are more cost-efficient than traditional capacity remuneration schemes at expanding storage capacity. Furthermore, they do not compromise the system-friendliness of storage activity. Rather, they enhance storage availability during periods of market volatility. • Simulations of the impact of price support on the returns to energy storage. • Price support is more efficient than capacity payments in raising storage capacity. • Price support does not undermine system-friendliness of storage activity. • Effects of support measures are specific to storage technologies.