This work seeks to quantify the benefits of using energy storage toward the reduction of the energy generation cost of a power system. A two-fold optimization framework is provided where the first optimization problem seeks to find the optimal storage schedule that minimizes operational costs. Since the operational cost depends on the storage capacity, a second optimization problem is then formulated with the aim of finding the optimal storage capacity to be deployed. Although, in general, these problems are difficult to solve, we provide a lower bound on the cost savings for a parametrized family of demand profiles. The optimization framework is numerically illustrated using real-world demand data from ISO New England. Numerical results show that energy storage can reduce energy generation costs by at least 2.5 %.
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