Comprehensive effectiveness assessment of energy storage incentive mechanisms for PV-ESS projects based on compound real options

Nowadays, the photovoltaic-energy storage system (PV-ESS) has not achieved large-scale development. The role of ESS incentive mechanisms has been emphasized for promoting the diffusion of PV-ESS technology. Therefore, to explore reasonable ESS incentive mechanisms in China, this paper develops a compound real options model by considering the flexibilities and uncertainties of the investment and operational stage. The impact of the carbon emission trading market, auxiliary service market, and different ESS incentive policies and their synergistic actions on PV-ESS investment have been explored by considering the social welfare of all related stakeholders. Moreover, a sensitivity analysis on the scale of expanding the investment and incentive intensity for ESS is conducted. The results show that the electricity price subsidy is more favorable for investing in the PV-ESS project. The investment will be brought forward 2 years compared to the situation without incentive policy. In addition, from the perspective of social welfare, the effects of the combinations of three ESS incentive policies are better than any single ESS policy, and the project value and social welfare increases by at least 3.46 and 7.99 million yuan, respectively. Illustrative examples can provide references for the government and investors in promoting the construction of PV-ESS projects. (c) 2021 Elsevier Ltd. All rights reserved.

Automated summary

This paper investigates the influence of ESS incentive mechanisms on PV-ESS investment, using a compound real options model to consider flexibilities and uncertainties. It finds that electricity price subsidy is most favorable for investment, and the combination of three ESS incentive policies yields better results than any single policy, leading to increased project value and social welfare.