How much profit can energy storage equipment bring

Where a profitable application of energy storage requires saving of costs or deferral of investments, direct mechanisms, such as subsidies and rebates, will be effective. For applications dependent on price arbitrage, the existence and access to variable market prices are essential.

Although academic analysis finds that business models for energy storage are largely unprofitable, annual deployment of storage capacity is globally on the rise (IEA, 2020). One reason may be generous subsidy support and non-financial drivers like a first-mover advantage (Wood Mackenzie, 2019).

Investment in energy storage can enable them to meet the contracted amount of electricity more accurately and avoid penalties charged for deviations. Revenue streams are decisive to distinguish business models when one application applies to the same market role multiple times.

Recent deployments of storage capacity confirm the trend for improved investment conditions (U.S. Department of Energy, 2020). For instance, the Imperial Irrigation District in El Centro, California, installed 30 MW of battery storage for Frequency containment, Schedule flexibility, and Black start energy in 2017.

Building upon both strands of work, we propose to characterize business models of energy storage as the combination of an application of storage with the revenue stream earned from the operation and the market role of the investor.

In application (8), the owner of a storage facility would seize the opportunity to exploit differences in power prices by selling electricity when prices are high and buying energy when prices are low.