Modeling of financial incentives for investments in energy storage systems that promote the large-scale integration of wind energy

The recent literature on applied energy has emphasized the role of energy storage in the electricity supply chain. However, absence of an integrated valuation framework for services provided by energy storage technologies, owed to its limited scope so far, hinders investments in such capital intensive systems. To this end, the feasibility of an alternative operation strategy for energy storage systems (ESSs), based on the use of wind energy surplus, is currently investigated. More precisely, valuation of the policy options available to promote wind-based ESSs is carried out, by employing, for the first time, a comprehensive socioeconomic cost-benefit model that takes into account – among others – initial investment subsidies and feed-in tariffs (FiTs) for ESSs. Pumped hydro and compressed air energy storage covering peak demand are examined, demonstrating that such systems may prove cost-effective if “socially just” FiTs are applied, with our findings however, also supporting the notion that a portfolio of policies can more effectively facilitate investments in the sector.