ECONOMICS OF ENERGY STORAGE SYSTEMS: A REAL OPTIONS APPROACH FOR INVESTMENT APPRAISAL

Date

2025-4

Author

Tunç, Burcu

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Energy storage systems (ESSs) are gaining more importance with the increase in demand for a change in the patterns of energy generation and consumption associated with decarbonization and energy independence concerns. To promote further deployment of storage systems, Türkiye implemented significant regulatory measures in recent years. Despite those regulatory measures taken in recent years, there is a lack of investment especially in large-scale ESS deployments. Given their importance in enabling the increased penetration of renewable power sources, it is critical to understand the factors affecting ESS investment decisions and develop a realistic investment appraisal model. To meet both needs, this study adopted an integrated approach by mixing qualitative and quantitative methods to evaluate the investment appraisal of ESSs. The qualitative analysis showed that contrary to a positive net present value for the hybrid battery ESSs (BESSs), investors defer their investment decisions for more favorable conditions due to uncertainties stemming from the volatility in electricity price and investment costs, frequent changes in legislation, and the ever-changing nature of battery technology. Based on that background, a real options framework for option to wait is developed in the thesis considering electricity price and investment cost uncertainties. Results of the real options model revealed that the optimal investing strategy for a hybrid BESS is to invest immediately and not postpone the investment decision for a cost decrease and/or a revenue increase. The investment would be profitable anyway. The results are also robust to the most anticipated change in legislation.

Subject Keywords

battery energy storage systems, real options framework, option to wait, mixed approach, energy storage systems

URI

https://hdl.handle.net/11511/114159

Collections

Graduate School of Social Sciences, Thesis