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Predicting Total Capital Costs and Life Cycle Costs for Grid-Level Energy Storage Systems Open Access

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Predicting Total Capital Costs and Life Cycle Costs for Grid-Level Energy Storage SystemsElectric utility investors do not have a reliable tool to predict either the total capital costs or the life cycle costs of real-world electrical energy storage systems (ESSs). Total capital costs impact the amount of financial assets needed for initial investment. Life cycle costs are useful in projecting return on investment for ESSs that can cost multi-millions (U.S. dollars) to install.In the United States, legislative and regulatory requirements at the state and federal levels are the primary drivers for the use of grid-level energy storage. Nearly sixty percent of the states have developed mandates for the use of variable, intermittent renewable energy resources as part of their generation mix. These mandates, called Renewable Energy Portfolio Standards (RPSs), have due dates in the mid 2020s and come with potentially heavy fines for failure to implement. The applicable financial sector responsible to include renewables in the generation mix, which will necessitate the use of expensive electrical ESSs, is the investor-owned utility (IOU).Over the last decade, electric grid operators have discovered that in addition to using an ESS at generation, these systems are flexible enough to use at the transmission and distribution parts of the grid, providing more than the backbone for renewables like solar and wind power. Except for Texas, Hawaii, and Alaska, an ESS at transmission is an interstate exchange of wholesale electricity that is controlled by the Federal Energy Regulatory Commission (FERC). The FERC regulates interstate transmission and encourages competition in market settings. This agency developed several policies that require electric utilities to include ESSs in their tariff structures because of energy storage’s technical performance and ability to follow market signals. It is the IOUs who bear the financial burden of failing to include energy storage as a grid asset.While most literature on energy storage technologies tend to compare theoretical investment costs against operating costs, this research will provide a process to estimate the total capital cost (TCC) and the life cycle cost (LCC) of ESSs based on real-world, operational systems.

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