Aug 29, 2006

Grid Basic on energy storage

Energy storage is economical when the marginal cost of electricity varies more than the energy losses of storing and retrieving it. For instance, 1.2 gigawatt-hours might be stored at night in a pumped-storage reservoir, at a cost of 1.5 cents/kilowatt-hour. The next day, 1 gigawatt-hour might be recovered, and 200 megawatt-hours lost, and sold at 4.0 cents/kilowatt-hour, for a profit of $22,000. If this profit can be realized on most days, and if the storage facility cost less than perhaps $100M, the operator makes a profit.

The marginal cost of electricity varies because of the varying economics of different kinds of generators. At one extreme, water from a dam can go through a turbine for little more than the cost of releasing it down a spillway, so the marginal cost of generation is nearly zero. Coal-fired and nuclear power plants are also low marginal cost generators, as they have high capital and maintenance costs but low fuel costs. At the other extreme, most peaking generators burn natural gas, which is expensive. Operators prefer cheaper electricity, so they run the low-marginal-cost generators most of the time, and run the more expensive ones only when necessary. This is called "economic dispatch".