Storage Business Cases: Many Pitfalls, Rare Viability

by BJORN PETERS, Managing Director, CONTINENTAL COMMODITY CONSULTING (Germany)

It is generally believed that storage technologies are a prerequisite for a successful transition from fossil and nuclear fuels towards renewable energies such as solar and wind power. While this is not perfectly wrong, there are quite a few fallacies even among storage industry professionals that I observe frequently in my consulting practice; fallacies, which might and which do prevent the transition from a written business plan into a viable business. Storage might be very profitable, but only with the right precaution.

Cost center, no profit center

Firstly, energy storage itself does not generate profits. Storage is deployed to optimize a power supply system elsewhere. Whether the optimization through storage makes economic sense depends on the cost of the second-best solution. For example, for decades the pumped hydropower storage power plants in Germany used to be cash cows for utilities, since building additional power plants to cover peak power loads would have been far more expensive than hydropower storage plants. And the price differences for power between night and midday were so great that good profits could be realized. (Pumped storage uses „excess“ electricity at times of low power demand to pump water from a valley lake up to a mountain lake. If energy is required, the water is released and flows back down via turbines, thus generating electricity. The lakes are usually constructed artificially. Today, pumped storage is no longer profitable, a fact that will be discussed further below as well as the questionable notion of “excess” power.)

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