  The central question we seek to address in this paper is: How rapidly do the
operating cost benefits of grid-scale energy storage decline as installed
storage capacity increases? We use a 240-bus model based on the US Western
Interconnection, first optimally locating storage in the network and then
dispatching it in a unit commitment model with DC load flow. The model uses
storage to provide frequency regulation, load following, and arbitrage for each
hour of a study year, and we investigate a range of scenarios for fuel price
and renewables penetration. We find that value from long-term energy shifting
is negligible at all penetrations we investigate, but also that displacing
fossil-fueled generators from providing reserves is initially very valuable.
However, in most scenarios the value is negligible beyond 10 GWh of storage, or
the equivalent of roughly 6 minutes of average demand in the system. Above
penetrations of 4-8 GWh, storage operating cost benefits are less than
estimated capacity values for storage. We also show that storage has the
potential to increase overall carbon emissions in the electricity sector, even
when it is not providing significant amounts of arbitrage and is preferentially
providing regulation and load following services.
