Falling costs of lithium-ion (Li-ion) batteries have
made them
attractive for grid-scale energy storage applications. Energy storage
will become increasingly important as intermittent renewable generation
and more frequent extreme weather events put stress on the electricity
grid. Environmental groups across the United States are advocating
for the replacement of the highest-emitting power plants, which run
only at times of peak demand, with Li-ion battery systems. We analyze
the life-cycle cost, climate, and human health impacts of replacing
the 19 highest-emitting peaker plants in California with Li-ion battery
energy storage systems (BESS). Our results show that designing Li-ion
BESS to replace peaker plants puts them at an economic disadvantage,
even if facilities are only sized to meet 95% of the original plants’
load events and are free to engage in arbitrage. However, five of
19 potential replacements do achieve a positive net present value
after including monetized climate and human health impacts. These
BESS cycle far less than typical front-of-the-meter batteries and
rely on the frequency regulation market for most of their revenue.
All projects offer net air pollution benefits but increase net greenhouse
gas emissions due to electricity demand during charging and upstream
emissions from battery manufacturing.