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Faculty of Economics

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Newbery, D. G.

A simple introduction to the economics of storage: shifting demand and supply over time and space


Abstract: The literature on electrical energy storage (EES) is technical and complex which this paper aims to simplify. It quantifies the current scale, costs and value of different types of EES and compares them to peaking generators and interconnectors. Worldwide, dams have 2,700 times the storage capacity of pumped storage, which accounts for 99% of conventional EES, batteries making up the rest. Indirect use of hydro power, and in future, electric vehicles, adds to their value and if accessible at reasonable cost, would be cheaper than conventional EES. EES, peakers and DC interconnectors can offer flexibility services which considerably enhance their value, but hopes of a battery revolution enabling a smarter electricity system should not be exaggerated.

Keywords: electrical energy storage, interconnectors, flexibility services

JEL Codes: L94 Q41

Author links: David Newbery  


EPRG Paper Link: 1626

Open Access Link: