Energy storage power station profitability

Operational Models: From "peak-valley arbitrage" to "carbon credit monetization," the profit models of commercial and industrial energy storage are becoming increasingly diversified. These new models not only provide investors and users with more choices and opportunities but also drive the continuous development of energy storage technology.

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.

While energy storage is already being deployed to support grids across major power markets, new McKinsey analysis suggests investors often underestimate the value of energy storage in their business cases.

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.

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.

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.