To incentivize private investment in long-duration energy storage (LDES), federal and state policies can leverage a combination of financial mechanisms, regulatory frameworks, and technological support:
Federal Policy Levers
- Tax Incentives:
- Investment Tax Credits (ITC) for clean energy projects, including LDES, as expanded under the Inflation Reduction Act (IRA), directly reduce capital costs.
- Manufacturing Tax Credits (e.g., the $10 billion Advanced Energy Manufacturing Project Tax Credit) lower production costs for LDES components and systems.
- Grant and Loan Programs:
- $8 billion in funding via the Bipartisan Infrastructure Law (BIL) for energy storage demonstrations and manufacturing supports early-stage technology deployment.
- DOE Loan Programs Office (LPO) could prioritize LDES projects for low-interest financing.
- Market Creation:
- Mandates or targets for LDES capacity in grid planning, akin to renewable portfolio standards, to ensure demand.
- Participation in wholesale markets through FERC Order 841 revisions to compensate LDES for grid services like capacity and resilience.
State Policy Tools
- Direct Funding:
- LDES-specific grants (e.g., California’s $270 million LDES Program) de-risk first-of-a-kind projects.
- Production-based incentives tied to MWh delivered over multi-day durations.
- Regulatory Reforms:
- Streamlined permitting for LDES installations to reduce development timelines.
- Cap-and-floor mechanisms (as proposed in the UK), guaranteeing revenue floors while capping excessive profits to balance investor returns and ratepayer costs.
- Procurement Requirements:
- LDES mandates for utilities to procure storage systems with 10+ hours of duration.
- Public-private partnerships for grid resilience projects, especially in disaster-prone regions.
Cross-Cutting Strategies
- R&D Support: Allocate funds for next-gen technologies (e.g., flow batteries, compressed air) through DOE’s Long Duration Storage Shot initiative.
- Supply Chain Investments: Leverage CHIPS Act funding to bolster domestic manufacturing of LDES components like electrolytes and membranes.
- Interagency Coordination: Align federal efforts (e.g., IRA, BIL) with state-level storage targets to avoid duplication and maximize impact.
Outcomes and Recent Precedents
- Public-private investment in LDES reached $43 billion from 2021–2024 due to federal incentives.
- The UK’s cap-and-floor model (2024) demonstrates how revenue guarantees can attract private capital without overburdening ratepayers.
- California’s LDES Program highlights the role of state funding in bridging the “valley of death” for non-lithium technologies.
By combining these measures, governments can reduce technology costs (projected to drop 45–55% by 2030) while improving round-trip efficiency, accelerating LDES adoption.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-can-federal-and-state-policies-incentivize-private-investment-in-ldes/
