Optimal investment in an energy storage system

enewable energy production plays a crucial role in the energy transition. However, many renewable energy sources are intermittent, and there is often a mismatch between energy production and consumption, which can be partially solved by storage. In this paper we investigate the investment decision in a photovoltaic (PV) power plant coupled with a Battery Energy Storage System (BESS), namely an Energy Storage System (ESS). We aim to investigate the relationship between the net present value (NPV) of the investment and the technical implications related to the maximum amount of energy to be stored while also accounting for the impact of energy prices. In our setting an ESS is connected to the national power grid. Energy can be produced, purchased from the grid, stored, self-consumed, and fed into the grid. PV production and energy consumption loads evolve stochastically over time. In addition, as BESSs are costly, the energy stored has an opportunity cost, which depends on the prices of energy purchased from the grid and energy fed in and sold to the grid, respectively. However, BESS can significantly contribute to increasing ESSs' managerial flexibility and ESSs' value. We investigate the optimal size of a BESS that minimizes ESSs' net operating costs. We also provide insights into the optimal operating strategy of an ESS. Our results show that the net operating costs of an ESS are relatively small. They decrease for increasing selling prices of energy, whereas they increase with increasing volatility of the stock of energy stored in the battery.