Design limits and investment risks of mid-term storage under uncertain market conditions

Jonathan Stelzer, Katharina Esser, Thorsten Weiskopf, Armin Ardone, Valentin Bertsch and Wolf Fichtner

No 79, Working Paper Series in Production and Energy from Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP)

Abstract: The transition to a net-zero energy system requires large-scale integration of variable renewables, increasing demand for flexibility beyond short-term batteries and seasonal hydrogen. Emerging storage technologies feature cost structures that position them between these options, offering discharge durations of several hours to a few days, here referred to as mid-term storage. However, their economic feasibility depends strongly on their techno-economic parameters and evolving market dynamics. Identifying profitable and robust storage configurations under uncertain future market conditions is therefore crucial to bridge the perspectives of technology developers and investors. We employ the agent-based electricity market model PowerACE, which explicitly represents market participants as interacting decision-making agents. Using mean-reverting stochastic representations of fuel prices and renewable generation, we capture the impact of uncertainties on storage profitability from an individual investor's perspective. The analysis determines the maximum capital expenditure that still yields economically viable storage configurations across relevant combinations of techno-economic parameters. The results reveal that profitability is limited under current cost conditions, as the marginal contribution of storage capacity declines sharply with higher storage durations. At the same time, higher round-trip efficiency not only improves returns but also reduces market risk. Balancing efficiency, costs, and duration is essential for mid-term storage competitiveness, while risk-based assessments can guide robust technology and investment decisions.

Keywords: Energy storage; Electricity markets; Investment risk; Capital expenditure; Storage technology design; Mean-reverting processes (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitiip:336783

DOI: 10.5445/IR/1000190070

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