Working Paper

Does Electricity Storage Innovation Reduce Greenhouse Gas Emissions?

Sep 7, 2016 | Joshua Linn, Jhih-Shyang Shih

Summary

While public policy and innovation in large-scale electricity storage are anticipated to reduce costs and improve performance, the effect of storage costs on greenhouse emissions depends on the supply responsiveness of fossil and renewable generators.

Key Findings

  • Under typical US conditions, lower electricity storage costs are more likely to reduce emissions when wind investment responds to electricity prices, and less likely to reduce emissions when solar investment responds to electricity prices.
  • Introducing a pricing on carbon dioxide emissions may increase the likelihood that lower storage costs will reduce emissions.
  • Policies incentivizing storage investment and R&D subsidies that reduce storage costs have ambiguous effects on emissions in the medium run.
  • Storage investment is positive when storage costs approximately half of what it did in 2010. This suggests that further storage innovation will be needed for storage to be economically viable for arbitrage purposes.

Abstract

In the electricity sector, innovation in large-scale storage is anticipated to reduce costs and improve performance. The effect on greenhouse gas emissions of lower storage costs depends on the interactions between storage and the entire grid. The literature has disagreed on the role of storage in reducing emissions. Using a stylized model, we show that the effect of storage costs on emissions depends on the supply responsiveness of both fossil and renewable generators. Under typical conditions in the United States, lower storage costs are more likely to reduce emissions when wind investment responds to equilibrium electricity prices and when solar investment does not. Simulations of a computational model of grid investment and operation confirm these predictions. Moreover, because of its effect on coal and natural gas–fired generation, introducing a carbon dioxide emissions price may increase the likelihood that lower storage costs will reduce emissions.