In an electricity grid with large wind penetration additional system balancing costs are incurred due to the intermittent nature of wind. In this work, we evaluated the benefits of using storage for providing standing reserve as part of the overall reserve needs, in terms of savings in fuel cost and CO2 emissions associated with system balancing, compared to other solutions. We found that providing a greater part of the increased reserves needed from standing reserve in the form of pumped hydro storage increases efficiency of system operation and reduces the amount of wind power that cannot be absorbed. (c) 2005 Elsevier B.V. All rights reserved.