Can your current valuation model accurately capture the full lifetime value of a grid-scale storage asset in real-time energy markets?
Precisely determine the complete business value of battery technologies by modeling day-to-day technological and market-based risks, development and operational costs, net present value, and lifetime revenue potential.
Grid-scale storage assets are increasingly considered to be cost-effective alternatives to traditional fossil fuel generation, not only for managing the intermittency of renewable resources, but also for managing voltage fluctuations within the system. And with steady advances in renewable generation and market pressures from FERC Order #755 (which says ISOs must fairly compensate quick-responding resources such as electrochemical batteries and other storage methods), the need for accurate valuation of grid-scale storage technologies grows stronger all the time.
The Problem with Standard Models
But traditional production cost models are not well-suited to accurately valuing time arbitrage of storage assets because future trading values are tied to uncertain price spreads that change every hour or less. Traditional models only calculate values based on system averages rather than considering extreme peak days, which is when storage is most valuable. This makes traditional models highly sensitive to input assumptions and causes them to generate widely different results based upon small price changes. As a result, battery technologies are regularly undervalued or incorrectly valued because the models are not designed to assess storage assets.
The Importance of Time Arbitrage
In order to accurately capture extreme arbitrage values you must understand both the intrinsic and extrinsic value of a storage time spread. While calculating intrinsic values is as straightforward as determining today's known price, extrinsic valuation must consider all the uncertain potential spreads from today to the end of the life cycle of that product. When combined, the intrinsic and extrinsic values equal the total revenue that you can achieve by owning or holding that storage asset.
Unlike traditional integrated resource planning models that look at average values and impacts of an overall portfolio within a system, Gridstore accurately values storage assets using the same supply side methods that are used to price traditional energy resources, contracts, supply options and derivatives. So you can turn your storage assets and combinations into fungible products that can be traded in energy markets. This creates new opportunities for realizing revenue and cuts your risks by using traditional energy markets to buy, sell, and hedge the output of your storage assets.
How to Use GridStore
Specifically, GridStore simulates the operation of a battery in day-to-day energy markets to calculate the potential of technological and price constraints associated with operating in that market and the total potential revenue from having that resource. So you can build an accurate business case that considers the intrinsic and extrinsic value of storage and the full spectrum of risks and opportunities associated with the storage asset.
For example, suppose a subdivision wants to develop its own small-scale microgrid with a photovoltaic system and battery large enough to supply a group of houses. GridStore can help you to understand if the benefits will outweigh the costs by modeling to determine who benefits, how much they benefit, and whether or not the community can support the costs associated with building that technology. Gridestore clarifies the full business value, including revenue potential, net present value, risks, distribution of value, and costs associated with developing such a microgrid system.
What is more, GridStore helps you understand how regulators will consider that technology compared to supply side products that are traded on open markets, so you’ll know early on if you have an effective cost recovery or rate case should you develop a storage-based portfolio.
A Broader Valuation Product
But GridStore isn’t only designed to value batteries. Its basic underlying algorithms are good for valuing all kinds of energy assets. It’s a powerful tool for understanding how much the time arbitrage is worth from any type of storage asset. So you can use it to precisely and accurately determine the revenue potential, risks and value associated with purchasing, operating, or hedging any grid scale asset.
Find the Value for Yourself
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