Energy storage levelized cost assessment: Lithium-ion vs. combustion turbine

Following the levelized cost approach suggested by the DOE in its “Electricity Storage Handbook”[1], we will demonstrate that the higher net revenues for Lithium-based energy storage offset its higher costs to such a degree as to make the residual capacity values between a combustion turbine and energy storage comparable. Financial investors, typically adopt only a levelized cost of electricity approach in order to evaluate the economic viability of energy storage projects, completely ignoring the difference between power (`capacity') and energy (`electricity') produced. A combustion turbine is typically a capacity resource, and therefore its power has much more economic value than the energy that it generates. On the other hand a lithium-ion battery-based energy storage system (ESS) delivers both energy and power services to the grid, with greater flexibility and higher utilization rates, making it a more cost-effective asset of the electricity value chain.