1. Incentivizing Extended Periods of Generation
- Modify Incentives: Current capacity markets primarily incentivize resources to be available during peak demand periods but fail to recognize the value of long-duration storage in supporting the grid over extended periods of under-generation. Reforming incentives to reward these capabilities can enhance grid reliability.
- New Definitions of Grid Stress: The concept of grid stress needs to be updated to include not just peak demand but also periods of extended low generation, which are typical in renewables-heavy grids. This would help in incentivizing long-duration storage to address these new stress scenarios.
2. Integrated Resource Planning
- Better Resource Planning Tools: Markets need integrated resource planning tools that can fully capture the value of long-duration storage. This includes methodologies and approaches that account for the unique contributions of storage technologies in ensuring grid stability over time.
- Assessment of Flexibility Needs: Similar to the EU’s approach, regional markets should conduct thorough assessments of their flexibility needs and set specific energy storage targets. This could involve strengthening the role of non-fossil flexibility in capacity mechanisms.
3. Market Design Adjustments
- Dedicated Flexibility Assessments: Conduct regular and dedicated flexibility assessments to anticipate future needs for long-duration storage solutions, especially as renewable energy shares grow significantly.
- Inclusion in Capacity Markets: Ensure that long-duration energy storage solutions are explicitly included and valued in capacity market designs, potentially by setting minimum targets for low-carbon flexible capacity.
4. Addressing Economic Challenges
- Competitive Pricing: The economic viability of non-lithium long-duration storage solutions faces challenges due to the competitive pricing environment, driven by declining costs of lithium-ion systems. Strategic partnerships and procurement strategies can help drive the adoption of alternative technologies.
- Regulatory Support for Innovation: Implement policies that encourage innovation and investment in diverse energy storage technologies, ensuring a robust market presence for solutions beyond lithium-ion.
5. Policy and Regulatory Reforms
- Consistent Regulatory Frameworks: Develop and implement consistent regulatory frameworks that support the deployment of long-duration storage across different regions. This includes addressing the current lack of support for standalone long-duration energy storage economics in most U.S. markets.
- Market Signals: Create clear market signals that promote investment in long-duration storage by providing stable returns, which could include mechanisms like tax incentives or subsidies for early adopters.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-can-capacity-markets-be-reformed-to-better-support-long-duration-energy-storage/
