Many countries have the ambition to increase the share of renewable sources in electricity generation. However, continuously varying renewable sources, such as wind power or solar energy, require that the power system can manage the variability and uncertainty of the power generation. One solution to increase flexibility of the system is to use various forms of energy storage, which can provide flexibility to the system at different time ranges and smooth the effect of variability of the renewable generation. In this paper, we investigate three questions connected to investment planning of energy storage systems. First, how the existing flexibility in the system will affect the need for energy storage investments. Second, how presence of energy storage will affect renewable generation expansion and affect electricity prices. Third, who should be responsible for energy storage investments planning. This paper proposes to assess these questions through two different mathematical models. The first model is designed for centralized investment planning and the second model deals with a decentralized investment approach where a single independent profit maximizing utility is responsible for energy storage investments. The models have been applied in various case studies with different generation mixes and flexibility levels. The results show that energy storage system is beneficial for power system operation. However, additional regulation should be considered to achieve optimal investment and allocation of energy storage.
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