Maximising the economic value of renewable and battery storage hybrids with revenue stacking

Abstract

As power systems add more wind and solar, electricity supply becomes less controllable and market prices become more volatile. A growing challenge is that renewable generators increasingly earn below-average market prices because their production is highly correlated, an effect known as “revenue cannibalisation” or declining “capture rates”. Co-locating battery storage with renewables is widely proposed to shift output to higher-value hours, reduce curtailment, and share grid-connection infrastructure, but the most profitable configurations remain unclear across markets and regulatory designs. This study asks when renewable-storage hybrid projects are economically superior to stand-alone renewables or storage, and which designs and operating strategies best protect revenues. We develop a revenue-stacking optimisation model with explicit efficiency losses and battery degradation to show that profitability depends more on market access and operating constraints than on location alone. Considering a UK case study, we find storage only becomes strongly profitable when it can both charge from the grid and stack revenues across markets. Four-hour discharge duration was most cost-effective, and stand-alone storage tends to be more profitable than co-located or hybridised systems. Extending the analysis across several world regions shows wide geographic variation. Stand-alone storage is favourable in Australian, Nordic and most US markets, while renewable-storage hybrids are superior in Europe, Texas, and parts of Japan. These results provide a practical map from market design and regulation to profitable hybrid architectures, helping investors and policymakers target storage where it most effectively stabilises renewable revenues and supports reliable decarbonisation.