Solar Energy 206 (2020) 171–180

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Solar Energy
journal homepage: www.elsevier.com/locate/solener

Microeconomics of electrical energy storage in a fully renewable electricity T

system
David Timmonsa, , Khalil Elaheeb, Ming Lina
⁎

a
Department of Economics, University of Massachusetts Boston, USA
b
Mechanical and Production Engineering Department, The University of Mauritius, Reduit, Mauritius

ARTICLE INFO ABSTRACT

Keywords: The problem of climate change requires a transition to carbon–neutral energy. Given the variability of key
Decarbonization renewable energy sources such as solar photovoltaics (PV) and wind, fully renewable electricity systems require
Renewable energy economics some form of energy storage. But as described in this study, the economics of electrical energy storage are
Energy storage complex. Many reports on cost of electricity storage confuse the cost of charge/discharge power in kW with the
Pumped hydroelectric storage
cost of energy storage potential in kWh. These parameters vary greatly and create fundamentally different cost
Battery storage
structures for different storage technologies. A case study from the island-nation of Mauritius demonstrates that
simulation of a complete electricity system is needed to minimize cost of energy storage, and finds that reservoir-
type storage such as pumped hydroelectric (PHES) is less expensive than using batteries for the storage re-
quirements modeled. Large reductions in battery prices make them more competitive, but do not greatly reduce
total costs. PHES is a fully mature technology, and is more widely available than may be assumed. Policy makers
can thus be confident that commitments to deploy renewable energy do not depend on development of new
storage technology or reduction of battery prices.

This project was supported by a Fulbright Program grant sponsored by article about a utility shifting to natural gas states that “The utility
the Bureau of Educational and Cultural Affairs of the United States plans to get 7 percent of its power from solar by 2021, but says that
Department of State and administered by the Institute of International until storage technologies improve, gas will form the backbone of its
Education (IIE). energy mix…” (Plumer, 2019).
While better (or less expensive) batteries would be useful, and
battery technology is a critical component for decarbonization in sec-
1. Introduction
tors such as transportation, we show in this study that energy storage in
the electric utility sector may be dominated by reservoir storage options
Mitigating climate change requires providing most of society’s
such as pumped-hydroelectric storage (PHES). This is a mature tech-
electricity from carbon-neutral sources. Ambient sources such as solar
nology, used in electric grids since 1929 (Evans et al., 2012). Given its
and wind energy are renewable and carbon neutral in operation, but
cost structure (described in Section 2.3), PHES will likely remain
their availability varies over time. It is widely acknowledged that in-
competitive despite improvement of battery technology. And accom-
creasing energy storage is one approach to greater penetration of
modating variability of sources such as solar and wind does not depend
variable sources. In this paper we review microeconomic principles for
exclusively on energy storage; source complementarity, inclusion of
optimizing energy storage in a system with predominantly variable
dispatchable sources, demand-side management, and designed over-
sources, we report results from a case study in Mauritius incorporating
building also play critical roles in meeting demand while reducing the
these principles, and we discuss policy implications for renewable en-
energy storage requirement (Perez et al., 2019; Solomon et al., 2019).
ergy development.
There is a vast literature on electricity storage technologies, but only
A widely repeated misconception is that energy storage technology
a small portion of these studies focuses on the specific question of
is not sufficiently developed to support fully renewable electricity sys-
storage in a fully renewable electricity grid, which requires different
tems, and that broad deployment of wind and solar power depends on
energy storage services than current electric grids dominated by fossil
future battery development. For example, a recent New York Times
fuels. Reported energy storage prices sometimes vary widely, and it can

⁎
Corresponding author.
E-mail address: david.timmons@umb.edu (D. Timmons).

https://doi.org/10.1016/j.solener.2020.05.057
Received 8 September 2019; Received in revised form 29 April 2020; Accepted 19 May 2020
Available online 08 June 2020
0038-092X/ © 2020 International Solar Energy Society. Published by Elsevier Ltd. All rights reserved.
D. Timmons, et al. Solar Energy 206 (2020) 171–180

Nomenclature OPEX Operating expenditure

PHES Pumped hydroelectric storage
Abbreviations PV Photovoltaic

AC Alternating current Variables

CAPEX Capital expenditure
CAES Compressed air energy storage α Capital recovery factor
CF Capacity factor Cf Cost, fixed
DC Direct current Cv Cost, variable
H2 Hydrogen ht Hours in a time slice
kW Kilowatt (power measure) K Capital cost
kWh Kilowatt hour (energy measure) KE Capital cost, energy storage
LCOE Levelized cost of energy KP Capital cost, power conversion
LCOES Levelized cost of electricity system kWhD Discharged kWh per year
LCOS Levelized cost of storage kWhS System annual electricity demand
Li Lithium MWht MWh generated in a time slice
MW Megawatt (power measure) r Discount rate
MWh Megawatt hour (energy measure) T Useful life of a capital good

be difficult to make meaningful comparisons between prices reported
from different sources (Jülch, 2016). We suggest three main reasons for
these discrepancies. First, some storage technologies and prices have
changed quickly; in such cases, only the most recent studies are re-
levant. Second, prices for technologies such as PHES vary with scale
and local conditions. But a third and more fundamental problem is that
studies report storage costs using different metrics, including capital
cost based on charge–discharge power (e.g. $/kW capacity), capital cost
based on energy storage potential ($/kWh), and levelized cost of sto-
rage (LCOS; $/kWh per unit of energy actually stored). And each of
these metrics can be defined differently, leading to different conclusions
about costs. In Section 2 we propose specific definitions for storage
power and energy costs, which are consistent with needs for optimizing
storage in a fully renewable electricity system.
In Section 3, a case-study model of a fully renewable electricity
system on the island-nation of Mauritius demonstrates that at current
prices, the cost-minimizing solution relies exclusively on PHES for the
energy storage requirements modeled, and that this energy storage
accounts for 7.0% of total renewable electricity production cost. We test
reductions of lithium (Li) battery prices, and find that batteries enter
the optimal solution with large price reductions, but that this does not
greatly reduce cost compared to the base case using PHES.
Several policy implications arise from this study, as we discuss in
Section 4. Most importantly, policy makers should be confident that
energy storage technology is already available to support a transition to
variable renewable energy sources.
Given the problem of climate change, there is an urgent need to
replace legacy fossil-fuel systems with renewable energy sources. Fully
renewable electricity systems require some form of energy storage. But
the economics of electricity storage are often misunderstood. This study
applies economic principles to the problem of grid electricity storage to
assist in planning cost-effective energy storage for the renewable energy
transition.
1.1. The energy storage problem
In engineering terms, power is a flow measured in watts, while
energy is an accumulation of flows over time, measured in watt hours.
This distinction is crucial for energy storage economics, because po-
tential storage devices must be described in terms of both power and
energy parameters. Lazard (2018), for example, describes a commer-
cial/industrial-scale battery as having a 1 MW power rating (can be
charged or discharged at a rate of 1 MW), and an energy rating of 2
MWh. The ratio of MWh to MW equals hours of storage (in this ex-
ample, 2), which varies considerably depending on the application.
Consider a simplified example of a renewable electricity system
with all energy obtained from solar photovoltaics (PV), an identical
solar insolation pattern on each day, a PV capacity factor1 (CF) of 0.25,
a constant 1 MW of demand, and the use of energy storage. Daily en-
ergy consumption is 24 MWh.2
As illustrated in Fig. 1, to supply energy needed, the solar power
rating must be 4 MW.3 Solar intensity is sufficient to meet the 1 MW
demand directly for perhaps 8 h per day, so demand will be met from
storage for approximately 16 h. The maximum discharge rate needed is
1 MW (to meet demand at night), but the more important constraint is
the storage charging requirement, which is 3 MW.4 In this case the
required storage is approximately 16 MWh energy and 3 MW power, or
5.3 h of storage.
This is a simplified example that includes only one energy source
(PV), constant weather conditions, constant demand, and no energy
curtailment. In actual renewable electricity systems, none of these
conditions hold, and computer simulation is the only practical way to
determine the power and energy requirements for storage.
Furthermore, the objective is not simply to meet demand, but rather to
meet demand at the minimum cost, given various energy production
and storage options.
1.2. Review of relevant literature
There are many studies of energy storage technologies and costs,
cataloging energy storage options including pumped hydroelectric
storage (PHES), compressed air energy storage (CAES), flywheels, ca-
pacitors, conventional batteries, flow batteries, fuel storage with fuel
cells, and thermal storage (Beaudin et al., 2010; Dunn et al., 2011;
Evans et al., 2012; Schoenung and Hassenzahl, 2003). Many studies
also discuss storage applications such as maintaining power quality,
shifting loads in time, and bulk power management, with technologies
appraised for suitability in such applications (Díaz-González et al.,
2012; EPRI, 2010; Sundararagavan and Baker, 2012). While con-
ceptually useful, a limitation of the application-driven approach to
technology selection is that the applications are not mutually exclusive,
i.e. a storage technology needed for bulk power management may also
be used for load shifting and to improve power quality. For a fully
1
Capacity factor is the portion of maximum energy production actually ob-
tained over period of time, which must be less than or equal to 1.
2
1 MW x 24 h = 24 MWh.
3
4 MW x 24 h x 0.25 CF = 24 MWh.
4
(4 MW maximum PV power) – (1 MW demand) = 3 MW, assuming no
curtailment.

172
D. Timmons, et al.
Fig. 1. Schematic supply, demand, and storage for fully solar electricity generation.
renewable electricity system, the question is which storage technology
or combination of technologies should be used to minimize the total
cost of the system.
From a cost-minimization perspective, energy storage must be op-
timized for both power and energy: as in the example in Section 1.1, we
need to know both MW and MWh requirements. Costs for power and
energy must thus be reported separately. Several studies adhere to this
practice (Jülch, 2016; Lazard, 2018; Schoenung and Hassenzahl, 2003;
Sundararagavan and Baker, 2012; Zakeri and Syri, 2015), providing the
necessary information for economic optimization.
A few studies look specifically at the economics of energy storage in
electricity systems that are fully renewable, or nearly so. Solomon et al.
(2017) advocate a system-level approach, noting that storage require-
ments depend on factors including portion of variable generation
sources, resource complementarity in time, possibilities for generation
curtailment, and criteria selected for grid reliability and reserve re-
quirements. In reviewing studies of energy storage in grids dominated
by variable sources, the authors find that for up to 90% use of variable
sources, the optimum stored electricity potential is perhaps one day of
electricity consumption (Solomon et al., 2017).
The approach of Child et al. (2018) in modeling the European
electricity grid is similar to ours: an optimization model is used to
choose among different electricity generation and storage technologies
to arrive at a cost-minimizing portfolio for which supply always meets
or exceed demand. Like our study, Child et al. show that a fully re-
newable electric grid is feasible with a combination of dispatchable
sources, variable sources, and nonbiomass energy storage equal to ap-
proximately 1.5 days of average consumption. However, results for the
composition of storage technologies differ markedly from ours due to
different cost assumptions, as we discuss in Section 3.
2. Methods and data
2.1. Microeconomics of energy storage
Several common microeconomic concepts apply to the problem of
minimizing cost in an electricity system with variable renewable
sources.
Kilowatt hours of electricity are identical, so electricity storage
devices are potential substitutes for each other. For example, multi-day
storage can also provide storage needed at minute and hour time scales.
An electric grid operator should make cost-reducing energy pro-
duction or storage substitutions whenever possible, but such substitu-
tions must be considered at a system level. For example, if biomass
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Solar Energy 206 (2020) 171–180
energy is available, this may substitute for both energy production and
storage. One cannot determine how much energy storage is optimal
without knowing the availability and cost of biomass (and similar al-
ternatives).
At the minimum total cost, the equimarginal principle applies. In its
simplest from, this says that the marginal costs of all energy production
and storage technologies should be equal at the minimum total cost.
However, the application of the equimarginal principle is more complex
in a system with variable sources (Timmons, 2018). Given source
variability, marginal costs for energy alternatives are equal only under
critical design conditions, which are the times when it is most difficult
to supply energy. Optimal system design is determined by difficult
conditions—times without much wind or sun—rather than by average
conditions.
Many renewable energy sources are capital intensive and can thus
be treated as fixed costs. Most of the expense is for initial construction,
with no fuel and little operating expense. The same may be true for
energy storage. Costs may be similar regardless of how much a specific
energy generating or storage asset is used.
Most storage technologies exhibit economies of scale, i.e. cost per
unit falls as scale increases. This may suggest using a small number of
large electricity storage facilities, though costs of transmission and
needs for local grid stabilization and resilience must also be considered.
This combination of microeconomic factors drives particular con-
figurations for renewable energy and storage systems, for example, it
explains why energy storage skews toward large reservoir sources with
relatively low cost for energy storage (as compared to battery storage).
First, there are some circumstances in which using stored energy from
large reservoirs has the lowest marginal cost. Since reservoir-type sto-
rage has near-zero operating costs, if storage is constructed for these
difficult circumstances, it costs virtually nothing to use at other times,
and it is easily substituted for other energy and storage sources.
Reservoir-type sources may thus be the least costly option for energy
storage (also depending on environmental and other costs).
2.2. Cost definitions
Since energy storage devices are available at vastly different scales,
a way is needed to normalize devices for cost comparison. For example,
EPRI (2010) provides system costs in $/kWh (or CAPEX per kWh):
K
(1)
kWh
where K is total capital cost, and kWh is the energy potentially stored in
D. Timmons, et al. Solar Energy 206 (2020) 171–180

the device. Similarly, EPRI (2010) also provides storage costs in $/kW
(or CAPEX per kW):
K
kW
where kW is the power charge–discharge rating of a device. A problem
with these metrics is that they conflate the costs of energy storage with
charge–discharge costs: equations 1 and 2 both include all capital costs,
and there is no fixed ratio of kWh/kW (no standard number of hours)
for an energy storage device.
Energy and power attributes and costs may be usefully dis-
aggregated. For example in a battery system, the power conversion
system determines the power rating, and the storage module (the bat-
tery) determines the energy storage potential. Using a given power
conversion system, one could buy a larger or smaller battery, depending
on the quantity of energy storage required (within limits). Similarly, for
a given PHES turbine-generator, a smaller or larger energy storage re-
servoir could be constructed.
Power and energy costs must be considered separately to optimize
an energy system. We thus use the energy-cost measure:
KE
kWh
where KE includes only capital cost associated with an energy storage
module (as well as proportional balance of plant costs), and similarly,
the power-cost measure:
KP
kW
where KP includes only the capital cost for the power conversion
system. Distinguishing capital costs in this way allows the costs to be
considered separately for optimization, where both power and energy
expenditures are optimized.
Levelized cost of storage (LCOS) is another commonly used metric
(Jülch, 2016). For example, the widely-cited energy storage cost report
from Lazard (2018) focuses on LCOS. In a system where annual energy
use is constant (or nearly so), LCOS can be defined as:
(KE + KP ) + Cf Cv
LCOS = + system (Sundararagavan and Baker, 2012), which consists of an in-
kWhD kWh
where KE and KP are capital costs for energy and power respectively, Cf
is fixed cost, kWhD is energy discharged over the course of a year, and
Cv is variable operating cost. A capital recovery factor α is used to
annualize the capital costs:
r (1 + r )T
=
(1 + r )T 1
where r is a discount rate and T is the expected life of the energy storage
device in years.
LCOS is useful for comparing storage technologies, but only if these
(2) technologies are used in identical applications. LCOS suffers from the
same conflation of power and energy costs described above, and the
denominator kWhD creates an additional complexity. Annual kWh dis-
charged depends on storage cycling, which may vary greatly between
applications, and optimal kWhD cannot be determined without a system
model. Reported LCOS statistics often include the cost of energy to
charge the storage as a variable cost, which also varies greatly. For
these reasons, LCOS itself is not an appropriate statistic for optimizing
energy storage (though some LCOS reports, e.g. Lazard (2018), include
KE and KP statistics which are useful optimization inputs).
LCOS is similar to the more-common metric of levelized cost of
energy (LCOE). In this study, our objective is to minimize LCOES, or
energy cost for the electricity system as a whole. This can be defined as:
I
i=1
((KEi + KPi ) i + Cfi + Cvi )
LCOES =
kWhS (7)
where i is an index of energy production or storage technologies, kWhS
is annual system kWh consumed, and the other terms are as defined
(3) above.
2.3. Cost of energy storage technologies
The ultimate cost of energy storage is the sum of power and energy
costs plus operating cost, divided by the quantity of energy stored (Eq.
(4) (5)). But the more relevant question is how energy storage can be used
to minimize the total cost of energy in a system (Eq. (7)). To determine
this, we must consider power, energy, and operating costs separately, as
well as storage efficiency, which we describe here for characteristic
storage types. Results in Section 3 show each technology’s role in the
context of minimizing the cost of a renewable electricity system in
Mauritius.
2.3.1. Battery-type storage
Power costs for battery storage relate to the power conversion
(5) verter to transform DC battery power into AC grid power, and the re-
verse. These are electronic components that have fallen greatly in price
over recent years. Of the energy storage alternatives, we see in Table 1
that battery-type storage has the lowest power costs for charging and
discharging, i.e. it is relatively inexpensive to move energy in and out of
batteries. A battery’s electronic power system can also respond very
quickly to generation surpluses or deficits in the electric grid, so a
(6) battery is useful for applications that require quick response but little

Table 1
Representative costs for different types of electricity storage.
Capital Cost, Power (KP) Capital Cost, Energy (KE) Fixed operating cost, power Fixed operating cost, energy Life, years Efficiency (%)
USD/kW USD/kWh USD/kW USD/kWh (T)

Battery Type Storage

Lia 105 316.00 2.30 5.17 20 88
Leadb 206 370.00 9.61 12.95 10 72
Reservoir Type Storage
PHESc 2,743 11.62 57.14 na 40 81
CAESd 866 16.67 6.00 na 30 70
Fuel Type Storage
e
H2, geological 1,263 0.49 27.00 na 15 43
H2, steel tanke 1,263 19.00 27.00 na 15 43

Table notes:
a
Lazard (2018), 10 MW (EPC omitted).
b
Lazard (2018), 1 MW (EPC omitted).
c
Mauritius (Timmons et al. 2019).
d
Calculated from EPRI (2010).
e
Steward et al. (2009).

174
D. Timmons, et al.
total energy.
While battery-type power costs are low, energy costs are high
(Table 1), i.e. batteries are an expensive way to hold energy for an
extended period (though costs have been declining quickly). Lazard
(2018) provides cost estimates for lithium (Li) batteries, lead and ad-
vanced lead batteries, vanadium flow batteries, and zinc-bromide flow
batteries, all technologies which are sufficiently commercialized that
cost data are available. Costs are similar to those for the Li and lead
batteries shown in Table 1 (though Lazard does not provide dis-
aggregated KE and KP costs for all battery technologies). Note that en-
ergy costs are currently on the order of 20 times greater than for re-
servoir storage types.
Storage efficiency is somewhat higher than reservoir storage, and
can exceed 90%, i.e. less than 10% of energy may be lost in the charge-
store-discharge cycle.
2.3.2. Reservoir-type storage
Reservoir-type storage represents a fundamentally different ap-
proach from chemical storage of energy in batteries. For example with
PHES, energy is stored as water in a high-elevation reservoir. When
there is energy demand, water is released to a lower-elevation reservoir,
giving up potential energy in conventional hydroelectric turbines that
generate electricity. When surplus electricity is available, energy is used
to pump water from the lower reservoir back to the upper.
The cost structure of reservoir-type storage also differs from bat-
teries, as can be seen in in Table 1. PHES power conversion is accom-
plished with a mechanical pump/turbine (typically a single reversible
unit; Yang and Jackson, 2011) coupled with a motor/generator rather
than with electronic components. These mechanical components are
responsible for much greater power costs (KP) for reservoir storage than
for batteries, on the order of 20 times greater.
On the other hand, reservoirs at elevation can hold large quantities
of energy at KE costs only a fraction of those for batteries, as seen in
Table 1. The potential energy in stored water depends both on the
volume of water and on the head (vertical difference) between re-
servoirs; a reservoir contains more potential energy with greater head.
If reservoir capital cost is constant, KE increases as head falls. Lin (2019)
shows that KE increases sharply as head falls below 200 m, though as
shown in Table 1, KE could be increased considerably and still be less
than for batteries.
Many authors remark that potential PHES sites are not widely dis-
tributed (Beaudin et al., 2010; Esteban et al., 2012; Schoenung and
Hassenzahl, 2003), while several authors disagree (Díaz-González et al.,
2012; Rehman et al., 2015; Yang and Jackson, 2011). Yang and Jackson
(2011) remark that PHES use has been limited more by environmental
issues and uncertainty about market conditions than by availability of
suitable sites.
Unlike battery storage, PHES costs vary by site. Available head is
one factor, and new reservoirs may be needed in upper, lower, or both
locations. Construction costs vary depending on conditions such
geology, permeability of reservoir soils, land cover, land cost, and
permitting cost.
PHES costs in Table 1 costs reflect assumptions for our Mauritius
case study. We assume 335 m head, and given the existence of large
high-elevation storage reservoirs there, assume construction of only
lower reservoirs at the cost of a recent reservoir construction project in
the country (Havumaki, 2018). We use a power cost from a consultant
report on potential hydropower cost in that country (Kantor
Management Consultants, 2008; adjusted for inflation). In Table 2 we
compare the resulting power and energy costs to other published fig-
ures (some of which report ranges derived from other studies).
The main condition needed for PHES is a place for two ponds with a
vertical difference of perhaps 200 m over a short horizontal span. This
condition is widely found around the world. And with sufficient
transmission capacity, storage facilities may be located far from elec-
tricity consumers.
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Solar Energy 206 (2020) 171–180
PHES also requires water, but unlike a hydropower facility, the
same water may be used repeatedly; water is moved between elevations
rather than consumed, and replacement water is needed only because of
evaporation and leakage. Lin (2019) models PHES on the relatively dry
island of Rodrigues, and includes the cost of a small seawater desali-
nation plant to provide replacement water for the PHES, increasing
annual storage cost by 6.4% over the same system without desalination.
In other settings, a small stream or groundwater supply might provide a
similar quantity of replacement water. Some projects have considered
using wastewater from municipal treatment plants for PHES (Yang and
Jackson, 2011).
PHES has typically been developed at large scales of
1000–4000 MW (Evans et al., 2012), but can be found at mini, micro,
and pico-scales, including plants that supply only a few households
(Rehman et al., 2015). Smaller-scale plants will likely have greater costs
than large-scale plants. PHES has been used to stabilize small isolated
electric grids such as island grids. El Hierro in the Canary Islands of
Spain has a wind farm coupled with a PHES of 6 MW charge capacity
and 11.3 MW discharge capacity, which supplies most of the island’s
electricity (Godina et al., 2015).
A region with hydroelectric resources might have sufficient energy
storage behind hydroelectric dams without needing PHES (Child et al.,
2018). In other areas, there may be potential to convert existing hy-
droelectric facilities to PHES (Adams, 2018). Rather just supplying
electricity on demand, hydroelectric turbines converted to PHES could
also pump water back into reservoirs, storing energy for later use.
Compressed air energy storage (CAES) is another promising re-
servoir-type technology. As shown in Table 1, CAES power and energy
costs may both be less than PHES, making it a strictly dominant tech-
nology (if both costs were lower, this technology would always be
used). But CAES technology is not extensively deployed, with only two
utility-scale examples in the world (Zakeri and Syri, 2015), so cost es-
timates are unreliable. And both of the existing examples use natural
gas to reheat compressed air as it expands, an approach that is not
strictly renewable. Adiabatic CAES does not use natural gas, but costs
are even less certain. For the current model, we thus include only PHES.
2.3.3. Fuel-type storage
A final relevant storage strategy is using electricity to produce
chemical fuels such as hydrogen, methane, or methanol (Burkhardt and
Busch, 2013; Gahleitner, 2013). Chemical fuels may be stored in-
definitely at low cost, yielding a low KE value.
Hydrogen storage is perhaps the best known fuel-storage technology
(Steward et al., 2009). Hydrogen in water can be separated from oxygen
through electrolysis, stored in tanks or geological formations, and re-
combined with oxygen to release energy in a fuel cell or combustion
engine. With underground storage in geologic formations, the high
energy density of hydrogen or methane results in very low storage cost
per unit of energy (Table 1). But the combination of electrolysis and
fuel cells currently has low energy conversion efficiency, with an ex-
pected loss of approximately 60% of energy in power conversion for
storage (Table 1).
Table 2
Capital cost comparisons for PHES power and energy.
Source Capital cost, power Capital cost, energy
(KP) USD/kW (KE) USD/kWh
This study 2,743 11.62
Sundararagavan and Baker 2,000 12.00
(2012)
Díaz-González et al. (2012) 1,100 16.50
Rehman, Al-Hadhrami, and Alam 800 10.50
(2015)
Zakeri and Syri (2015) 581 68.00
Jülch (2016) 833 27.75
D. Timmons, et al. Solar Energy 206 (2020) 171–180

Greater conversion efficiencies and/or lower conversion costs in the

future could make hydrogen or other forms of fuel storage viable for
renewable electricity systems. Renewable energy systems based on
variable supply will have times when energy production is curtailed due
to excess solar and/or wind energy (Perez et al., 2019). During these
times, the cost of electricity is effectively zero, which could make hy-
drogen attractive in spite of low conversion efficiencies. Power costs
may be partly mitigated by using a larger electrolyzer (inexpensive) to
charge storage and a smaller fuel cell (expensive) to discharge stored
energy. Combined thermal and electricity production from stored hy-
drogen (not included in our model) may also have potential to increase
efficiency and reduce costs in regions with significant thermal loads.

2.4. Storage economics in an energy system Fig. 3. Hypothetical annual storage exceedance.

Storage cost in an energy system depends on how the storage is

used. In Fig. 2 we illustrate how levelized cost of storage (LCOS) for
PHES and Li batteries changes with the storage requirement in hours,
based on the cost parameters shown in Table 1 and an assumed op-
eration regime (but note that LCOS varies greatly with the number of
storage cycles). For durations of less than 6 h, Li batteries have lower
cost, but this cost rises quickly as more hours are required. By contrast,
PHES cost is nearly constant for any number of hours in the scenario
illustrated, and has costs less than Li batteries for storage durations of
7 h or greater.
Consider also a hypothetical annual storage exceedance function,
where there are a small number of hours with large power charge or
discharge requirements, and more hours with lower power needs, as
shown in Fig. 3. Since the vertical axis is power in MW and the hor-
izontal is hours, areas in the figure can be interpreted as energy in
MWh. The energy for area A, with high power requirements for few
hours, is least expensively provided by batteries, and similarly, the
energy for area C with low power for many hours is best supplied by
reservoir storage. The important question from Fig. 3 is whether area B
should be supplied by battery or reservoir storage. Using batteries re-
quires increasing power from (p2-p1) to p2, while using reservoir sto-
rage would increase hours from (h2-h1) to h2. Which option is less
expensive depends on the shape of the storage exceedance function and
the cost parameters for battery and reservoir technologies. From Fig. 3,
it is clearly possible for one technology to provide almost all of the
energy storage services, for example, if reservoir storage is used to
supply both areas C and B.
2.5. Mauritius optimization model
2.5.1. Mauritius description
Mauritius is an island nation in the south Indian Ocean, with a land
area of 2040 km2 and approximately 1.3 million inhabitants. The island
is fully electrified, with annual consumption of 3132 GWh in 2018, 21%
of which was from renewable sources (Statistics Mauritius, 2019). Most
electricity is generated from coal and oil, and fossil fuels are also used
in transportation, manufacturing, agriculture, and household cooking.
Mauritius is useful as a case-study site, being a small-scale re-
presentation of the more complex problem of a global transition to
renewable energy. Mauritius has no domestic fossil fuels, but is well
situated for solar, wind, biomass, some hydropower energy, and ver-
tical relief suitable for PHES. From a renewable energy perspective,
anything (except geothermal) is possible, so the question is what
combination of renewable energy sources and energy storage minimizes
cost while meeting demand at all times.
Biomass in Mauritius comes chiefly from sugarcane bagasse, sugar
being the principle agricultural crop. Bagasse already accounts for
about 14% of electricity production and the majority of renewable
energy production (Statistics Mauritius, 2019). The sugar industry also
produces bioethanol fuel on a small scale, which could be expanded.
Approximately 23% of the island is forested, which could be sustainably
managed for additional biomass production. As with biomass produc-
tion anywhere, sustainable production is not assured, and must be
managed.
Hydropower currently accounts for about 4% of electricity genera-
tion (Statistics Mauritius, 2019). As at the world scale, hydropower is
renewable, inexpensive, and dispatchable, but is limited in supply.
Year-round irrigation and drinking water is provided to the island by
large reservoirs at greater than 500 m elevation. We assume that these
may have potential for dual use as PHES reservoirs, though we have not
specifically evaluated reservoirs for this purpose. Engineering, agri-
cultural, social, human health, energy, and land-use criteria are all re-
levant to the question of water reservoir use.

Fig. 2. Levelized Cost of Storage* for Lithium Batteries (Li) and Pumped Hydroelectric Storage (PHES).

176
D. Timmons, et al.
2.5.2. OSeMOSYS model
For this study we use an OSeMOSYS model (Open-Source Energy
Modeling System; Howells et al., 2011) to represent the Mauritius
electricity system in the year 2040 and determine the optimum energy
production and storage components for fully renewable generation. In
this section we present a brief description of the model and input data; a
full model description is available in Timmons et al. (2019).
The model includes time slices for each day and night of the year, or
730 time slices (365 × 2). Time slices for days represent the hours
8:00–16:00, when insolation is potentially sufficient to meet demand.
For each time slice where electricity generation exceeds demand,
electricity can be stored, subject to available charging capacity and the
available quantity of electricity storage. Similarly, electricity can be
removed from storage if needed to meet demand in a subsequent time
slice. The time structure of the model precludes making conclusions
about balancing of supply and demand within time slices, though in-
cluded storage can be used within time slices (e.g. within a day).
The OSeMOSYS linear programming solver identifies the cost-
minimizing quantities of both generating and storage resources for
which electricity supply equals or exceeds demand in each time period,
subject to constraints on land, fuels, etc. We annualize all capital costs
using a capital recovery factor (Eq. (6)) and an 8% discount rate, and
include both fixed and variable operating costs. Cost assumptions for
generating sources are shown in Table 3.
For variable sources such as solar and wind, generating performance
enters the model as capacity factors (CF) for each time slice:
MWht
CF =
ht (8)
where MWht is electricity production estimated for 1 MW of capacity in
a particular time slice, and ht is hours in the time slice. Solar and wind
capacity factors are calculated from observed ambient conditions in
each time slice.
Given data availability, we combine data from different sources and
years. For example, solar data are from 2017 to 2018, wind data are
from 2010 to 2011, river-flow data are from 2009 to 2010, and demand
data are from 2015. We construct a composite year; solar, wind, hydro,
and demand conditions are all observed on the same calendar days,
albeit in different years.
Solar data is from stations at Goodlands (north), La Mivoie (west),
and Souillac (south) (Solarmap, 2017). Daily capacity factors range
from 0.03 to 0.29, with mean capacity factors of 0.173, 0.169, 0.147,
for the north, south, and west respectively.
Wind data are measured at Plaine Sophie (Suzlon-Padgreen, 2012),
Table 3
Cost parameters for electricity generation.
Capital cost, USD
Photovoltaic panels, ground-mount utility scale, per kW 1238
Wind turbines, per kW 2066
Hydroelectric and pumped storage plants, per kW 2743a
Pumped storage reservoir, per potential kWh 12b
Lithium battery AC charge/discharge power, per kW 107c
Lithium battery energy storage, per potential kWh 376c
Solid fuel plants, per kW 2850
Bioethanol power plants, per kW 650d
Municipal solid waste plant, per kW 9250e
Costs from Lazard (2017) except as noted.
a. Kantor Management Consultants (2008), adjusted for inflation.
b. Havumaki (2018).
c. Lazard (2018).
d. Assumed same cost as diesel internal-combustion generator.
e. Carnegie Clean Energy (2017).
f. Assumed same as solid fuel plant.
g. Based on best site monitored at Goodlands (Solarmap, 2017).
h. Capacity factors for dispatchable sources determined within model.
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Solar Energy 206 (2020) 171–180
a site slated for development of a new wind farm with Suzlon 2.1 MW
turbines. Data observed at 60 m are adjusted for the Suzlon 90 m hub
height. Time-slice capacity factors range from 0.0 to 1.0, with a mean
value of 0.29.
We model hydroelectric water as an aggregate flow into a single
reservoir based on observed data from a representative gauging station
on the Central Plateau (station J04; Ministry of Energy and Public
Utilities, 2011). We assume that a 12% increase in net hydroelectricity
is feasible (Elahee, 2013), with all new capacity in pico or micro-hydro
plants.
For pumped hydro storage, we assume use of existing upper re-
servoirs on the Central Plateau and construction of new lower re-
servoirs. Reservoirs may be charged by both river flow and storage
pumps.
We include a waste-to-electricity plant of 30 MW and force this
plant into the model solution, since waste disposal is the plant’s primary
purpose.
Mauritius currently has several biomass electricity plants collocated
with sugar processing facilities. During the six-month sugar harvest
season (approximately July-December), these plants burn primarily
sugarcane bagasse (crushed cane residue), and currently burn coal
during the six-month non-harvest season. To replace coal, the model
includes off-season biomass sources including domestic biomass crops,
domestic wood chips, and imported wood chips. Biomass assumptions
and costs are provided in Timmons et al. (2019). The model also in-
cludes bioethanol produced from domestic sugar as a potential fuel for
electricity generation in engines or turbines.
Daily electricity demand data for the 2015 data year are provided
by the Central Electricity Board (CEB). To reflect possible demand in
the 2040 model year, we use demand growth assumptions from the
Mauritius Renewable Energy Agency (MARENA).
We use a base scenario to identify the optimum mixture of PHES, Li
batteries, and H2 storage at current costs, and to observe storage charge
and discharge patterns over the model year. We then decrease Li bat-
tery KE costs in 10% increments to determine the extent to which Li
battery technology may be preferred if prices fall in the future.
3. Results and discussion
Overall results for fully renewable electricity generation in
Mauritius are shown in Table 4, given base cost assumptions. The
minimum-cost scenario includes more capacity for solar PV capacity
than for any other source, though solar wind generate almost identical
quantities of energy. Biomass from various domestic and imported
Fixed operating cost, USD/kW Mean annual capacity factor
g
10.50 0.173
35.00 0.289
57.14a nah
na na
2.30 nah
5.17 na
50.00 nah
10.00 nah
50.00f 0.950
D. Timmons, et al. Solar Energy 206 (2020) 171–180

Table 4 also fails to enter the optimum solution. Hydrogen stored in geologic
Results: Mauritius renewable electricity generating costs. formations has a much lower KE cost (Table 1), and our base-model
MW capacity GWh generation % GWh solution for Mauritius would include 41 MW of electrolysis power
(storage charge), 17 MW of fuel-cell power (storage discharge), and 3.6
Wind turbines 475 1112 27 GWh of storage potential, reducing total cost by 0.25% compared to the
Solar PV, utility scale 785 1120 27
base case with only PHES. Given the small change in total cost and the
Hydropower and PHES 114 130 3
Lithium batteries 0 na na
lack of data about suitability of Mauritian geology for hydrogen sto-
Hydrogen storage 0 na na rage, we exclude this result. But it is worth noting that hydrogen is on
Municipal solid waste plant 30 250 6 the cusp of economic viability, given low enough energy storage cost
Solid fuel plant 280 (KE), despite relatively high power cost (KP) and low conversion effi-
fuel: sugarcane bagasse 453 11
ciency.
fuel: cane tops and leaves 147 4
fuel: domestic wood chips 120 3 Results are summarized in Fig. 5. The horizontal axis labels show
fuel: biomass crop 75 2 both the Li price-reduction input (KE) and the corresponding result in
fuel: imported wood chips 626 15 system levelized cost of energy (LCOES). With a 50% reduction in Li
Liquid fuel plant 334
battery price, LCOES falls to only $0.129 from $0.130/kWh, less than a
fuel: bioethanol 61 2
Total 2018 4094 100
1% reduction in total cost. At 90% Li energy price reduction, LCOES
falls to $0.111/kWh, a 15% reduction in cost.
As indicated in Fig. 5, the composition of the generating portfolio

Fig. 4. Storage charge and discharge for Mauritius model year.

sources provides the greatest quantity of energy. LCOES (system LCOE)
is estimated at $0.130/kWh, similar to the current cost of generating
electricity in Mauritius. See Timmons et al. (2019) for a complete dis-
cussion of these results.
Total storage is equal to 0.5 days of average demand. As seen from
the striped pattern in Fig. 4, storage is typically charged during the day
and discharged at night. Solid black areas of Fig. 4 indicate consecutive
time slices with continuous charging (positive numbers) or discharging
(negative numbers). The longest continuous period of storage discharge
occurs at the end of July, with storage discharged for 3 consecutive time
slices (2 nights and 1 day), due to the combination of below-average
solar insolation and wind during those days.
With the occasional need for multi-day energy storage, PHES is the
only energy storage technology to appear in the base-model cost-
minimizing solution, given its low energy (KE) cost in relation to battery
storage. While PHES costs are sensitive to local conditions, our results
arise more from the price structure of reservoir vs. battery storage
(differences in power and energy costs) than from the particular price of
PHES that we assume for the Mauritius case study. We also test our
power cost (highest in Table 2) with the median reservoir cost reported
by Zakeri and Syri (2015; highest in Table 2) and find that reservoir
storage is still used exclusively.
While Li batteries have low power costs (KP), their current energy
costs preclude their use when energy must be stored for more than a
few hours. However, the model time-slice structure likely results in an
underestimate of the need for Li batteries to match supply and demand
within the day and night time slices (Timmons et al. 2019).
Fuel-type storage as represented by hydrogen stored in steel tanks
changes significantly with the price of battery energy storage. With less
expensive batteries, the proportion of solar PV capacity grows mark-
edly,5 while wind energy production declines and biomass generation
capacity falls somewhat. Lower battery prices allow for substitution of
more-variable PV for less-variable wind and biomass, without in-
creasing total cost.
In their study of energy storage optimization for a fully renewable
European grid, Child et al. (2018) reach different conclusions for sto-
rage composition of a 2050 scenario, with fuel in the form of synthetic
methane providing 82% of the nonbiomass energy storage, batteries
providing 16% of storage, and PHES providing just 2%. These results
can be traced to assumptions about cost reductions by 2050, with
synthetic methane technology assumed to decrease 60% in price by
2050, and Li batteries assumed to decrease 88%. While we agree that
future technology improvements and price reductions for energy sto-
rage are likely, the extent and timing of improvements is uncertain, and
predicting storage price paths is problematic for making current policy
decisions.
4. Conclusions and policy implications
As suggested by the results of the scenarios for decreasing battery
prices, the optimum use of any particular technology depends on its
own price and the prices of all other technologies in an energy system.
5
We have assumed sufficient land availability and constant marginal cost for
all sources, which could affect these results.

178
D. Timmons, et al.
Fig. 5. Mauritius optimum generation and storage portfolios at different price reductions for Li batteries.
For example, the optimum amount of PV energy depends on the price of
PV, the price of Li battery storage, the price of wind energy, etc. This
implies that transitions to fully renewable electric grids should be stu-
died at a holistic system level.
Prices for storage batteries and fuel conversion technologies are
widely expected to fall in the future, including prices for Li batteries,
hydrogen fuel cells, and a host of competing technologies. But the level
of price reductions and the timing of these are impossible to predict. We
make no prognostications about how likely a 50% reduction in Li bat-
tery costs might be, but a transition to a fully renewable electricity
system does not depend on energy storage price reductions, at least
where PHES has costs similar to those in Mauritius. In the case study,
even a 50% reduction in Li battery prices had virtually no impact on the
total cost of renewable energy. Policy makers should be confident that a
transition to fully renewable electricity systems is feasible with current
technology at current prices.
Pumped hydropower storage has been widely viewed as a tech-
nology with limited expansion potential, though this conclusion may
have been based more on the characteristics of legacy fossil-fuel sys-
tems than on emerging renewable systems. A few studies report new
interest in developing PHES facilities, as well as some new approaches
to this historic technology (Rehman et al., 2015; Yang and Jackson,
2011; Zakeri and Syri, 2015). It has been suggested that “…lack of
public awareness of the benefits of bulk electricity storage is a con-
siderable barrier for PHES development” (Yang and Jackson, 2011, p.
842). The same authors observe that closed-loop and off-stream PHES
designs do not impact existing aquatic ecosystems, thus reducing en-
vironmental problems and increasing probability of public acceptance
for PHES. The temporal patterns of variable wind and solar generation
as well as the cost structure of PHES suggest it as a strong candidate for
fully renewable electricity systems. Policy makers can encourage re-
search on potential PHES sites, ensure a stable market for electricity
storage services, develop clear environmental standards for PHES, and
provide public education on the emerging need for energy storage.
Though not focuses in our study, other considerations are environ-
mental and local labor-market effects of battery production.
Environmental issues with Li batteries are widely reported (Peters et al.,
2017), and batteries have relatively short lives with recycling or other
disposal costs at end of life. These issues are particularly problematic
(and potentially costly) in an island setting such as Mauritius. In many
regions, relying on battery storage also implies buying technology from
outside of a region, potentially affecting trade balance and local job
179
Solar Energy 206 (2020) 171–180
creation. While PHES power equipment may be imported, the civil
works associated with reservoir construction would typically create
jobs in the areas where they are built.
This study provides economic analysis of portfolios of electricity
sources and electricity storage that minimize the cost of supplying re-
newable electricity, which is needed to mitigate the problem of climate
change. A fully renewable electric grid is shown to be feasible with
current electricity storage technology in the form of PHES. Policy ma-
kers face many challenges around creating appropriate incentives for
developing renewable energy and required storage infrastructure.
While there remain many hurdles to deploying renewable energy sys-
tems, a transition to renewable electricity does not require developing
new energy storage technologies.
Declaration of Competing Interest
The authors declare that there is no conflict of interest.
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