The increasing penetration of variable renewable energy is becoming a key challenge for the management\udof the electrical grid. Electrical Energy Storage Systems (ESS) are one of the most suitable solutions\udto increase the flexibility and resilience of the electrical system. This paper presents an innovative\udmethodology for the appraisal of the investment in ESS. The methodology is based on the Real Option\udAnalysis and is able to properly consider investment risks and uncertainties as well as the options\udavailable for the investor. The paper assesses the value of the option to wait for a change in the market\udconditions before investing and re-evaluates the profitability of the investment after each step of the\uddevelopment of the ESS project. In order to exemplify relevant results, this method is applied to the UK\udenergy market and assesses the technical and economic feasibility of investing in ESS operating price\udarbitrage and Short Term Operating Reserves. The results show that the implementation of the Real\udOption Analysis increases the economic performance of ESS. Nevertheless, ESS still requires limited incentives\udto be economically viable.
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