This paper investigates the techno-economic feasibility of the innovative concept of gravity energy storage, where heavy weights are raised and lowered in a water environment. Such eco-friendly systems can be implemented in existing flooded pits or quarries, by leveraging the important depth of these cavities. Moreover, in addition to their long lifetime, they have no visual impact on the landscape, and offer a lot of flexibility to the power system. In this work, we firstly present an analytical study of the storage solution, which allows deriving tractable mathematical constraints describing its operation, such as its nonlinear speed-power curves in both charge and discharge modes. These constraints are then integrated into the investment strategy of a merchant unit that seeks to maximize its profit by jointly participating in the energy and secondary reserve markets. The model is formulated within a stochastic framework to ensure robustness of sizing decisions in view of future market uncertainties. Results from a practical case study (on a natural cavity of 200 m) show that underwater gravity storage is a cost-efficient technology that offers payback periods of less than 10 years, mainly due to its intrinsic low capital costs estimated at around 100 €/kWh. List of Symbols and Abbreviations: n blocks , Number of installed blocks; n gm , Number of installed geared induction machines; φ CAPEX , Total investment costs of the storage system, €; φ OPEX ω,t , Total profit from storage operation in scenario ω at time t, €; n blocks ω,t , Number of blocks stored within the storage system in scenario ω at time t; p dis,res ω,t , p ch,res ω,t , Actual output power in discharge (dis) and charge (ch) modes after the real-time activation of reserves in scenario ω at time t, MW; p dis ω,t , p ch ω,t , Output power in discharge (dis) and charge (ch) modes committed in the energy market in scenario ω at time t, MW; p single,Á,res ω,t , Output power per induction machine in discharge (dis) and charge (ch) modes after the real-time activation of reserves in scenario ω at time t, MW; res dis ω,t ,res ch ω,t , Reserve capacity allocated in the upward secondary reserve market in discharge (dis) and charge (ch) mode in scenario ω at time t, MW; v dis ω,t ,v ch ω,t , Aggregated block speed (at the UGES level) in discharge (dis) and charge (ch) mode in scenario ω at time t, m/s; v single,Á ω,t , Block speed per induction machine in discharge (dis) and charge (ch) mode in scenario ω at time t, m/s; z dis ω,t ,z ch ω,t , Binary variables indicating the discharge (dis) and charge (ch) status in scenario ω at time t; Δ t , Optimization step, 1 hour; η dis , η ch , Efficiency of the storage system in discharge (dis) and charge (ch) modes; κ ω,t ∈ [0,1], Activation rate of the upward reserve; λ act ω,t , Price for activation of balancing reserves in scenario ω at time t, €/MWh; λ EN ω,t , Electricity price in the energy-only market in scenario ω at time t, €/MWh; λ res ω,t , Price for availability of reserve capacity in scenario ω at time ...