A Financial Algorithm for Computing the Levelized Cost (US$/MWh; €/MWh) of Storing Solar Electricity (LCOS) at a Grid Scale Energy Storage Plant (ESP)

This paper discusses the levelized cost (LC) method for computing the cost of storing solar electricity (LCOS) at a model grid scale (>1MW│>1MWh) energy storage plant (ESP). The paper presents an ESP LC algorithm. An ESP can provide for the daily, weekly or seasonal storage of solar electricity (energy). It can also provide ancillary services (voltage, frequency control, reactive power [var]) for the grid. This paper’s model ESP only provides daily storage. It does not provide any ancillary services. The LCOS algorithm equations are presented. For rapid computation, an Excel LCOS Algorithm Workbook is provided (FREE download).

The LCOS algorithm uses nine industry recognized ESP specifications (specs) (metrics) [independent variables] to compute the LCOS [dependent variable] of the stored solar electricity. These nine required specs include the ESP-LC of the solar electricity to be stored (LCOE) (US$/MWh), ESP-Power Output-MW, ESP-Daily Energy Storage Capacity-MWh/day, ESP-CapEx-US$/MWh, ESP-Efficiency-η, ESP-Operating Life-yrs and the ESP-Cost of Capital-%. Certain US$ values are converted in € for overseas readers. The nine required specs (assembled from published, complied or derived sources) for a Tesla Megapack battery (BatESP) and for the Cabin Creek (Clear Creek County, CO) Pumped Hydro Storage Plant (PumpESP) are used in the paper’s two case studies to demonstrate the LCOS algorithm. The two case studies also show the reader the work required and how to assemble the nine specs for a BatESP (PumpESP).

The paper’s LCOS algorithm gives the reader who has the nine required ESP specs, the ability to quickly do a sensitivity analysis to see how a change in any one of the nine specs can cause a change in the computed LCOS. The LCOS algorithm also allows the reader to do a quick “back of the envelope” verification of a commercial developer’s or an academic (industrial) researcher’s published LCOS. The paper is written so that readers who are or who have been graduate students at a university will first be able to learn about the technology of a BatESP (PumpESP); second, be able to understand the levelized cost (LC) method of computing the cost of storing solar electricity; third, be able to do the work required to assemble a data set of the nine required specs for a sample group of BatESP (PumpESP); and fourth, be able to use this spec data set with the paper’s Excel LCOS Algorithm Workbook to compute the LCOS for each BatESP (PumpESP) in the spec data set. After some experience in solar energy storage economics, the reader will realize that the algorithm’s computed LCOS minus the solar electricity’s LCOE is the additional (marginal) cost of storing the solar electricity.