The value of energy storage in South Korea's electricity market: A Hotelling approach

Anastasia Shcherbakova, Andrew Kleit, Joohyun Cho

Research output: Contribution to journalArticlepeer-review

38 Scopus citations

Abstract

In this study we evaluate the economic potential for energy arbitrage by simulating operation and resulting profits of a small price-taking storage device in South Korea's electricity market. As demand for electricity continues to grow, maintaining a balanced power system at all times has become more challenging in Korea and other developed nations. Along with demand response programs and increased renewable energy utilization, energy storage devices may provide a viable way to contribute to diurnal peak demand shaving. In some parts of the U.S. storage arbitrage has proven to be profitable. Treating a battery's ability to charge and discharge as a scarce resource, we apply the Hotelling (1931) rule to determine a strategy for maximizing the value of the battery. Results show that present market conditions in South Korea do not provide sufficient economic incentives for energy arbitrage using sodium-sulfur (NaS) or lithium-ion (Li-ion) batteries, with the capital cost of the storage devices exceeding potential revenues.

Original languageEnglish (US)
Pages (from-to)93-102
Number of pages10
JournalApplied Energy
Volume125
DOIs
StatePublished - Jul 15 2014

All Science Journal Classification (ASJC) codes

  • Building and Construction
  • Energy(all)
  • Mechanical Engineering
  • Management, Monitoring, Policy and Law

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