Is electricity storage systems in the Netherlands indispensable or doable? Testing electricity storage business models with exploratory agent-based modeling

TL;DR

This study uses agent-based modeling to evaluate the viability of electricity storage systems in the Netherlands, revealing limited profitability and highlighting the importance of technical and economic factors over market conditions.

Contribution

It introduces an exploratory agent-based model to analyze Dutch electricity storage business models under uncertainty, providing insights into their economic viability.

Findings

ESS is generally not profitable in most scenarios.

Wholesale arbitrage yields more profit than reserve capacity.

Technical and economic characteristics of ESS are more influential than market conditions.

Abstract

Electricity storage systems (ESS) are hailed by many scholars and practitioners as a key element of the future electricity systems and a key step toward the transition to renewables . Nonetheless, the global speed of ESS implementation is relatively slow, and among possible reasons is the lack of viable business models. We developed an agent-based model to simulate the behavior of ESS within the Dutch electricity market. We adopted an exploratory modeling analysis (EMA) approach to investigate the effects of two specific business models on the value of ESS from the perspective of both investors and the government under uncertainties in the ESS technical and economics characteristics, and uncertainties in market conditions and regulations. Our results show ESS is not profitable in most scenarios, and generally wholesale arbitrage business model leads to more profit than reserve capacity. In addition, ESS economic and technical characteristics play more important roles in the value of ESS than market conditions, and carbon pricing.