Assessing the societal benefits of energy storage in electricity systems with large shares of renewables

Energy storage systems (ESS) can offer significant benefits to electricity systems and hence to society. Some of them include avoiding the costs of expensive centralized electricity generation and its environmental impact. However, existing electricity market arrangements aiming at rewarding these benefits present large externalities and therefore fail to reward well the true societal benefits of energy storage. In particular, ESS could be operated to avoid the emissions of polluting centralized generation. Thus, ESS could also avoid the damage cost of those emissions such as the social cost of climate change and the damage on population health. These large externalities are likely much higher than typically seen carbon taxes and prices. In this paper, we present an empirical assessment of the locational societal benefits of energy storage in a real electricity system that has a significant presence of solar and hydro power generation, and important transmission constraints. The assessment is performed via a linear programming model that is applicable for small scale ESS. Major conflicts were found between energy and emission arbitrage in zones with hydrothermal generation, yet strong synergies in zones with high solar generation. Transmission congestion has a significant impact on this. Energy storage benefits associated with the provision of reserve services are the highest source of societal benefit. Finally, it is shown that a battery system may be an attractive investment from a societal perspective.