Current capacity markets fail to adequately support long-duration energy storage (LDES) primarily due to structural and economic challenges embedded in market design and regulatory frameworks. Key reasons include:
- Lack of Standalone Economics Support: No electricity market in the U.S. currently supports the standalone economics of long-duration energy storage systems. Unlike shorter-duration storage or traditional generation assets, LDES systems, which can discharge energy for 10 to over 160 hours, do not fit well into prevailing capacity market rules and products that reward availability and peak capacity for much shorter durations.
- Inadequate Market Designs for Multi-Day Storage: Capacity markets and modeling tools have traditionally been designed around shorter-duration resources and system peak events lasting only a few hours. This misalignment means that the value streams and compensation mechanisms do not recognize or remunerate the unique capability of LDES to provide inter-day and multi-day grid reliability and renewable integration services.
- Regulatory and Market Navigation Challenges: LDES technologies, such as iron-air batteries (100+ hours of storage) and flow or zinc batteries (up to 12 hours), face difficulties in navigating existing regulatory policies and power markets that haven’t evolved to price or procure the essential long-duration services they provide. Vertically-integrated utilities and markets adding extensive renewables need LDES, but the current market incentives do not reflect their long-term grid resilience contributions.
- Market Incentives Favor Shorter Duration Assets: Capacity markets generally focus on ensuring resource availability during peak demand periods, which are often a few hours long. This timeframe suits fast-response and short-duration storage or generation but undervalues the multi-day storage duration required to handle prolonged renewable intermittency or seasonal shifts.
In summary, existing capacity markets are structurally oriented toward short-duration reliability and fail to capture the full value proposition of long-duration energy storage. This results in an economic environment where LDES cannot compete effectively or justify investments based solely on current market mechanisms, despite its critical role in supporting a renewable-heavy, net-zero grid.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-current-capacity-markets-fail-to-support-long-duration-energy-storage/
