Economic Analysis of Battery Storage Systems: A Levelized Cost Approach

Stephen Comello and Stefan J. Reichelstein
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Stephen Comello: Stanford University
Stefan J. Reichelstein: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: We introduce and validate a measure of the Levelized Cost of Electricity Storage (LCOES). On a per kWh basis, this metric captures the economic break-even price required to charge and discharge electricity in N cycles per year, subject to the maximum power (dis)charge not exceeding the power rating of the storage system at any point in time. LCOES is shown to be instrumental in characterizing the optimal size of a battery that balances the initial investment expenditure with periodic savings from storing, and subsequently consuming, self-generated energy. We apply the model to residential solar customers in Germany and California, two jurisdictions with markedly different electricity pricing rules and policy support mechanisms for the adoption of battery storage.

Date: 2018-07
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