Current capacity markets generally fail to incentivize long-duration energy storage (LDES) primarily because they are designed around traditional grid stress events characterized by short, peak-demand periods rather than extended periods of under-generation that are more typical in renewable-heavy grids. Capacity markets reward resources for being available to supply power during brief peak load times, but do not adequately value the sustained, multi-hour or multi-day energy delivery that LDES provides.
More specifically:
- Capacity markets focus on incentivizing “instantaneous power” availability, rather than the continuous ability to serve electrical load over extended durations. This means long-duration storage systems, which can discharge energy over many hours to days, are undervalued because capacity payments don’t reflect their unique reliability contribution during prolonged renewable intermittency or grid stress.
- Current market structures lack integrated resource planning tools and methodologies to properly recognize and compensate the full value of long-duration storage in supporting grid reliability. As a result, standalone LDES projects struggle economically under existing market designs lacking reforms to reward their operational profile.
- While some states with large renewable penetrations (California, Texas, New York) have near-term growth potential for LDES, widespread deployment at scale is hindered by the need for concrete reforms in capacity market rules and regulatory frameworks.
In summary, the mismatch arises because capacity markets remain focused on short-term capacity adequacy (peak power availability) instead of the longer-duration reliability and resilience needs that accompany a grid with high variable renewable energy penetration. Until markets evolve to recognize and compensate these attributes, long-duration energy storage will face economic barriers despite its critical role in a clean energy future.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-current-capacity-markets-fail-to-incentivize-long-duration-energy-storage/
