The true economic value of supply-side energy storage in the smart grid environment – The case of Korea

With the rapid increase in variable renewable sources in the power system, storage capacity is being considered as an effective solution, because its flexible charging-discharging characteristics enable the reduction of the variability of these sources. However, the value of energy storage has been estimated mostly based on arbitrage benefit, and this does not reflect the true contribution of energy storage to the power system, especially when it is integrated with high levels of wind generation. This study analyzes a more complete set of contributions made by energy storage toward reducing the total cost of supplying electricity to customers. A simulation based on a stochastic form of multi-period Security-Constrained Optimal Power Flow (SCOPF) is used to reflect the stochastic characteristics of wind resources. The results show that in addition to the arbitrage benefit, energy storage can generate an additional economic value by 1) reducing the variability of wind generation; 2) adopting more wind generation that is otherwise wasted because of high variability, and 3) lowering the peak capacity needed to meet system adequacy. Moreover, the results indicate that the benefit of energy storage is larger with higher wind generation capacity. •A complete set of contributions by storage in reducing system costs is analyzed.•A stochastic form of SCOPF identifies costs caused by wind variability.•Storage saves reserve cost by 48% in 2020 wind level by reducing wind variability.•Storage lowers generation cost by 2.1% in 2020 wind level by adopting more wind.•The benefit of storage capacity become larger with higher wind generation capacity.