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I guess I'm just trying to introduce the idea that cheaper boring will reduce capital costs for pumped hydrostorage (see https://en.wikipedia.org/wiki/Pumped-storage_hydroelectricit... )

I don't think lithium ion batteries, which are optimized for their energy density (mass per joule), belong in grid storage situations where we should care mostly about lowest cost total capacity (regardless of round-trip losses) and lifetime.

Due to economies of scale resulting in continuous price declines they are the cheapest long term solution.

They also last much longer, can regularly use a wider range of their capacity, and take less maintenance than lead acid while being easier to transport and install. Part of this is better power management, but it’s also because they are useful even after significant reductions in capacity.

No, pumped hydrostorage is enormously cheaper, if you already have the dam. I also think some of your assertions about lead–acid batteries are wrong, but they're plausible.

Unfortunately, only finite amounts of existing dams with huge changes in elevation exist.

Beyond that “The round-trip energy efficiency of PSH varies between 70%–80%.” That’s a major ongoing cost, at say 6c / kWh * .25 * 365 * 15 years = 82$/kWh which is a large fraction of the Lithium Ion batteries costs. Though this increases if it’s used more than once a day, and decreases with unused reserve capacity.

Indeed, I think the finite amounts of existing dams are the reason people are looking to batteries.

Your point about the efficiency is interesting, although I didn’t understand it at first. I think you’re saying that the capital cost of the lithium-ion battery storage is partly defrayed by the higher efficiency of the storage system? Like, for each kilowatt-hour of Li-ion storage (with, let's say, a round-trip efficiency of 95%, although I think that's too high), you “get back”, say, 0.25 kWh every time you use it, that you would have lost if you'd stored that energy in pumped storage instead? So over, say, 15 years, you “get back” US$82 or so, at US$5.48 per year?

https://electrek.co/2018/11/20/tesla-gigafactory-battery-cel... claims that the battery cell cost is US$111 per kWh at the moment (though other manufacturers are still stuck around US$140), so that would work out to about a 5% annual IRR if the cells were the only cost; I think that in fact they are on the order of half the cost (though Tesla's blog post here doesn't actually list prices!) and so that would be a 2.5% or so IRR. Not enough to justify the battery investment on its own, but it would definitely be a significant boost to the project's ROI.

I have a couple of objections to that line of reasoning, one trivial and one serious.

The trivial objection is that the wholesale cost of electrical power, although it varies a lot, averages about half of the 6¢/kWh you're imputing. https://www.zmescience.com/ecology/climate/cheapest-solar-po... talks about the just-signed Atacama project at 2.9¢/kWh, which I think includes the cost of some storage. So the numbers are more like 1.25% IRR rather than the 2.5% I suggested above or the 5% you suggest.

The more serious objection is that, when you're filling up your utility-scale storage during hours of excess power production, you're not paying 6¢/kWh or 2.9¢/kWh. In fact, due to non-dispatchable “baseload” plants like coal and nuclear, it's common right now for the power plant to pay you to take the power, with the price typically around -4¢/kWh, which is the cost of burning it up in giant resistors. When instantly-dispatchable solar plants come to dominate power production, we can expect to see a price floor of 0¢/kWh. Maybe if a storage-plant operator is paying a solar-plant operator to leave their PV plants running, they'll have to pay 0.01¢/kWh or 0.1¢/kWh. But they won't be paying anywhere close to the average price of electrical energy. They'll be paying the marginal price of generating electrical energy when it is cheapest.

So that means that the amount of money you make from a utility-scale energy storage plant isn't going to be determined by how much energy you need to charge it up. Your round-trip energy efficiency could be 10% or 5% and you still wouldn't pay a significant percentage of your revenues to obtain that energy. What determines your revenues is how much energy you can release once you are selling energy rather than buying it. (And the quality of your trading strategy, of course; if you decide to wait to sell your energy until your LMPs go above US$45/MWh, and they sit at US$42/MWh all night long, you don't make any money.)

Round-trip energy efficiency only matters at all in the sense that it diminishes your effective storage capacity — if theoretically you have “1 MWh” stored, but when you turn it on, only 0.9 MWh flows to the grid, you only get paid for that 0.9 MWh, and that's what you need to pay your capex and opex with. But it only matters very marginally whether you had to buy 1.1 MWh or 2 MWh or 5 MWh or 10 MWh to charge up your storage facility.

Wholesale prices are location specific. The northeast has quite a bit of pumped storage, but it’s a poor location for solar power, and not that good for wind either. That wholesale market looks very different from say California or Texas. Further, you need infrastructure to transport power to and from the pumped storage and generation. Several ways or model this, but increased costs are the simplest.

Price inversions are also generally rare and location specific, pumped storage wants to operate every day and can’t wait for unusual events thus increasing their average prices. Further as you increase storage you change the local market reducing price swings. More to the point a company that’s building both generation and storage for say an island needs to build extra production to be guaranteed to fill up that storage. It’s only useful with surplus generation and guaranteed surplus is not free.

As to solar production prices that’s completely independent of wholesale prices. These deals involve low prices specifically because of the intermittent nature of solar power and it’s close correlation with other solar production. The fear for these operators is the wholesale market changing over the next 20 years with ever more and ever cheaper solar not how the current market operates.

It seems strange that you would reply to a comment where I'm talking about strategies for trading LMPs and how storage and highly dispatchable resources will change the energy markets and reduce price swings by informing me that “wholesale prices are location specific” and “you need infrastructure to [transmit] power to and from” and “as you increase storage you change the local market reducing price swings”. It suggests to me that you didn't understand what I was saying. Maybe you don't know what LMPs are?

Nothing I wrote was specific to a single kind of storage resource.

I haven't been involved with any of these solar IPPs or seen the terms of the PPAs, but while I think your characterization of the PPAs is mostly right, I don't think it's accurate to say that they're “completely independent of wholesale prices”. You've addressed the reasons for the IPP to seek a PPA, but those same reasons are disincentives for the counterparty. The buyer is specifically betting on the PPA price being lower than the LMPs over the life of the PPA, or at least not too much higher. That's why some of these PPAs include storage—it reduces the buyer's risk.

Also, BTW, negative LMPs are a different phenomenon from price inversions. Not sure if you're confused about the phenomenon or just the terminology. Negative LMPs are not rare; they happen nearly every night in some markets.

Thank you for exploring these questions with me!

By location specific I mean the geography and generation types heavily impact the market.

Areas with significant elevation drops conducive for pumped storage also tend to have a lot of hydro which is generally very dispatchable. The Great Plains have a lot of wind and are in significant need for energy storage, but they don’t see a lot of elevation drops.

Thus negative LMPs being rare for pumped storage.

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