Net Present Value Analysis of a Hybrid Gas Engine-Energy Storage System in the Balancing Mechanism

Abstract

There is the potential for hybridised gas engine-energy storage systems to participate in the Balancing Mechanism (BM) by offering a product that marries the advantages of both units. The higher price offerings are currently dominated by pumped storage (PS) assets. Given their high-flexibility, PS plants mostly offer at higher prices, but respond quicker and can run for a smaller minimum run time than a gas engine on its own. The operation of the hybrid system must match the operation of the pumped storage plants, to be able to claim a space in this part of the BM market including meeting a minimum run time and minimum start time. The business case is dependent on battery costs which in turn depend on size and operational strategy. This paper uses a case study approach to estimate Net Present Value of a hybrid system. The paper uses a mixture of publicly available data and industrially provided data within its analysis. The paper concludes that battery cost and lifespan are still issues and that battery-engine hybrids are not economic at present. There is indication in the modelling that under very favorable conditions such as low compound interest rates, an acceptance of offers above 7 times/day and low gas price, it is possible to see a return on investment of a lithium ion-based battery-gas engine hybrid.

Standalone and Hybridised Flywheels for Frequency Response Services: A Techno-Economic Feasibility Study

“…A positive NPV means that the installation is economically viable and can expect to provide a return in excess of the discount rate utilised. NPV is calculated using Equation (2) [55] where C investment is the initial investment in the system, C revenue is the yearly income (GBP), N is system lifetime in years, and d is the discount rate. The NPV is primarily affected by the discount rate d which is impacted by factors such as interest rates, inflation and debt levels.…”