Investment decisions and strategies of China's energy storage technology under policy uncertainty: A real options approach

Bo Sun, Boyang Fan, Yifan Zhang and Jingdong Xie

Energy, 2023, vol. 278, issue PA

Abstract: Energy storage technology is one of the critical supporting technologies to achieve carbon neutrality target. However, the investment in energy storage technology in China faces policy and other uncertain factors. Based on the characteristics of China's energy storage technology development and considering the uncertainties in policy, technological innovation, and market, this study proposes a sequential investment decision model under two investment strategies and uses the differential equation method to solve the investment threshold and investment opportunity value of the energy storage technology. Then, taking energy storage participation in peaking auxiliary services in China as an example, we verify the model validity and analyze the impact of uncertainty factors and investment strategies. The findings of this study are as follows: 1) The frequency of policy adjustments and the magnitude of subsidy adjustments can both influence energy storage technology investments, but the magnitude of subsidy adjustments is more significant. 2) Technological innovation can offset the adverse effects of policy uncertainty 3) In the case of a relatively certain policy, the subsidy is at least 0.0246 USD/kWh to effectively incentivize investment. In the case of uncertainty about the policy adjustment frequency and the subsidy reduction intensity, the subsidy must reach 0.0311 USD/kWh.

Keywords: Energy storage technology; Policy uncertainty; Investment analysis; Investment strategy; Real options (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:278:y:2023:i:pa:s0360544223012999

DOI: 10.1016/j.energy.2023.127905

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