Net Present Value Analysis of a Hybrid Gas Engine-Energy Storage System in the Balancing Mechanism

Farhad Anvari-Azar, Dani Strickland, Neil Filkin and Harry Townshend
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Farhad Anvari-Azar: Viridis Power, 17 The Courtyard, Gorsey Lane, Coleshill B46 1JA, UK
Dani Strickland: Wolfson School, Loughborough University, Loughborough, Leicestershire LE11 3TU, UK
Neil Filkin: Viridis Power, 17 The Courtyard, Gorsey Lane, Coleshill B46 1JA, UK
Harry Townshend: Viridis Power, 17 The Courtyard, Gorsey Lane, Coleshill B46 1JA, UK

Energies, 2020, vol. 13, issue 15, 1-24

Abstract: There is the potential for hybridised gas engine-energy storage systems to participate in the Balancing Mechanism (BM) by offering a product that marries the advantages of both units. The higher price offerings are currently dominated by pumped storage (PS) assets. Given their high-flexibility, PS plants mostly offer at higher prices, but respond quicker and can run for a smaller minimum run time than a gas engine on its own. The operation of the hybrid system must match the operation of the pumped storage plants, to be able to claim a space in this part of the BM market including meeting a minimum run time and minimum start time. The business case is dependent on battery costs which in turn depend on size and operational strategy. This paper uses a case study approach to estimate Net Present Value of a hybrid system. The paper uses a mixture of publicly available data and industrially provided data within its analysis. The paper concludes that battery cost and lifespan are still issues and that battery-engine hybrids are not economic at present. There is indication in the modelling that under very favorable conditions such as low compound interest rates, an acceptance of offers above 7 times/day and low gas price, it is possible to see a return on investment of a lithium ion-based battery-gas engine hybrid.

Keywords: gas engines; energy storage; balancing mechanism; energy management; NPV (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
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