The role of compressed air energy storage (CAES) in future sustainable energy systems

Future sustainable energy systems call for the introduction of integrated storage technologies. One of these technologies is compressed air energy storage (CAES). In Denmark at present, wind power meets 20% and combined heat and power production (CHP) meets 50% of the electricity demand. Based on these figures, the paper assesses the value of integrating CAES into future sustainable energy systems with even higher shares of fluctuating renewable energy sources. The evaluation is made on the basis of detailed energy system analyses in which the supply of complete national energy systems is calculated hour by hour in relation to the demands during a year. The Danish case is evaluated in a system-economic perspective by comparing the economic benefits achieved by improving the integration of wind power to the costs of the CAES technology. The result is compared to various other storage options. Furthermore, a business-economic evaluation is done by calculating the potential income of the CAES technology from both spot markets and regulating power markets. The evaluation includes both historical hour by hour prices during a 7-year period on the Nordic Nord Pool market as well as expected future price variations. The conclusion is that even in energy systems with very high shares of wind power and CHP, neither the historical nor the expected future price variations on the spot market alone can justify the investment in CAES systems. Other storage technology options are significantly more feasible. CAES may operate both on the spot market and the regulating power market, which indicates potential feasibility. However, such strategy is highly risky because of the small extent of the regulating power market and if CAES is to become feasible it will depend on incomes from auxiliary services.