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Cost-Effectiveness of Energy Storage in California: Application of the EPRI Energy Storage Valuation Tool to Inform the California Public Utility Commission Proceeding R. 10-12-007

EPRI has developed an innovative methodology for quantifying the value of grid energy storage opportunities. The EPRI Energy Storage Valuation Tool (ESVT) — simulation software developed to support this methodology — enables preliminary economic analysis prior to more resource-intensive analytical efforts. This report describes applications of the methodology and tool to analyze a range of energy storage cases, including different uses, technologies, locations, and future electricity market scenarios. The analyses were performed to inform stakeholders of the California Public Utility Commission (CPUC) regulatory proceeding investigating the cost-effectiveness of energy storage in approximately 30 different cases.
These scenarios covered three different general use cases, including transmission-connected bulk energy storage, short-duration energy storage to provide ancillary services, and distribution-connected energy storage located at a utility substation. Within these use cases, several input sensitivities were tested for their impact on storage cost-effectiveness, including energy storage duration, technology, durability, market scenario, and project start year. The input assumptions were provided by the CPUC technical staff, with support from a core stakeholder working group, including energy storage and utility representatives. The results of the analyses were reported using a number of technical and economic outputs and summarized in terms of lifetime net present value and breakeven capital cost of energy storage. Under the assumptions provided by the CPUC, the majority of cases returned benefit-to-cost ratios of greater than one, and the majority of cases returned breakeven capital cost of energy storage ranging from $1,000 to $4,000/kW installed. These results represent an early phase of energy storage valuation analysis, quantifying the direct costs and benefits over the lifetime of the energy storage system. The results do not consider indirect impacts on the functioning of the broader electric system or environmental impacts.

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