**7.1 Energy storage systems costs**

The cost of large-scale mechanical storage devices is influenced by location. Pumped hydro systems need locations that can accommodate both a storage reservoir

#### *Energy Storage Efficiency DOI: http://dx.doi.org/10.5772/intechopen.109851*

and a sufficient elevation variation to produce potential energy. Compressed air energy storage (CAES), like pumped hydro systems, has been constrained by the availability of natural resources to supply low-cost air storage [54]. Calculation of related costs and operating prices for energy storage devices is a problem because of not only a wide variety of innovations but also a multitude of external factors.

In contrast to pumped hydro and compressed air systems, where the storage medium is virtually free, finding low-cost heat-retaining materials is crucial for thermal storage systems. Although heat may be stored directly as steam, molten salts are the most popular choice since they can reach greater temperatures [55].

Although most studies employ such a meter, there is no globally accepted standard or method for calculating the costs of energy storage, due to the fact that different metrics emphasize different aspects of storage cost and operation.

One way to make apple-to-apple comparisons between storage technologies is through the use of the Leveled Cost of Energy (in this case, the Leveled Cost of Storage or "LCoS"), where the technology per kWh is calculated as a function of the total project life cost divided by the expected lifetime power output. The cost of electricity in this calculation includes any capital expenses associated with electricity generation for direct consumption (ccap, gen), capital expenses for electricity generation that goes to storage (ccap, gen2stor), capital expenses for storage technologies (ccap,stor), fuel (pfuel), or purchased electricity (pelec) costs (accounting for generator-efficiency losses, gen, and round-trip-efficiency losses of storage charge and discharge, RTE), and to compute LCOE, costs may be discounted (using discount rate r) to find the net present value, which is then divided by the discounted quantity of energy provided during the system lifespan (**Figures 7** and **8**).

Whatever calculation is chosen, one important point to make when calculating the LCOE or LCOS is that the cost is also affected by the demand for electricity or stored energy. Although a storage system may be technically capable of cycling continuously for 24 hours a day, demand is determined by use patterns. This implies that even if a system is built to provide longer-duration storage, actual cycling behavior might mean that the charging and discharging cycles are frequently just a fraction of the installed capacity, limiting the power produced by the system and raising the levelized cost [54]. For example, where a compressed air energy storage (CAES) system may have a higher initial capital cost than a Li-ion battery system, the CAES system's lifetime power output is far higher than the Li-ion battery system (which normally lasts only 10 years), which reduces the LCoS [57].

However, the LCoS formula does not adequately represent other crucial points, including spatial limitations (vital for CAES and pumped hydro systems), safety issues about battery explosions, and technological features that are best suited for various applications. Seems that we are still in the process of creating or implementing a

$$L\text{COS} = \frac{\Sigma(Capital\_t + O\&M\_t + Fuel\_t) \cdot (1 + r)^{-t}}{\Sigma MWh\_t \cdot (1 + r)^{-t}}$$

**Figure 7.** *LCoS calculation [56].*

#### **Figure 8.**

*LCos calculation based on different storage types [57].*

formula for calculating energy storage efficiency that would take into account all the abovementioned parameters.

Other costs to consider are:

• Construction and commissioning

C&C expenses, also known as engineering, procurement, and construction (EPC) costs, include site design costs, equipment purchase/transportation costs, and labor/parts for installation [58]. Cost reductions for C&C are not likely to be as significant since these expenses are more mature than those that are more directly related to each technology. The cost of grid integration is primarily determined by the system footprint and weight (with discrete steps in costs), the degree of factory assembly versus on-site assembly (the total cost may be the same regardless of where the assembly occurs), and the architecture (open racks vs. containerized systems) [59]. The literature consensus C&C expenses were raised by 15% for the technology with the lowest energy density indicated as the highest liters per watthour (L/Wh). This figure was multiplied by the normalized volume per watt-hour multiplied by 0.33 to obtain a lithium-ion C&C cost of **€**100/kWh, which is somewhat higher than the **€**80/kWh reported by McLaren et al. [60]. While improvements have been achieved in recent years, the anticipated C&C cost of **€**100/kWh is on the low end of current forecasts, with minimal room for future cost reduction owing to "learning."

• Operations and maintenance

Expenses that are necessary to maintain the functionality of the storage system during the period of its economic lifespan are linked to the demand for energy. According to the available literature, fixed O&M costs for all battery chemistries range between 6 and **€**20 per kW-year, with the majority falling between **€**6 and **€**14 per kW-year [58]. While lithium-ion batteries may have higher costs for safety and battery management systems (BMSs), the larger size of other battery technologies can result in higher O&M costs, and their relatively safe operational characteristics contribute to lower O&M costs.
