Current market mechanisms often fail to support long-duration energy storage (LDES) because they provide insufficient economic incentives for investing in systems capable of storing energy for ten or more hours. Here are several key issues:
- Lack of Incentives in Capacity Markets: Existing regional capacity mechanisms predominantly focus on shorter durations, typically up to four hours, because fossil generation can mitigate most unexpected gaps in wind and solar output. There are limited financial rewards for developing storage solutions that can provide energy over longer periods.
- Revenue Limitations: Storage operators primarily generate revenue through short-term strategies like price arbitrage or providing ancillary services such as frequency regulation. These opportunities are geared more towards short-duration storage, providing little financial motivation for investing in long-duration solutions.
- Complex Remuneration for Multi-Day Storage: Developing market mechanisms that adequately compensate LDES systems, particularly those that might only be used during rare multi-day periods of low renewable energy output, poses a significant challenge. It involves creating complex and costly financial structures to ensure these assets remain viable.
- Dependence on Government Initiatives: Much of the current development and procurement of LDES are driven by government policies, subsidies, and specific tenders rather than purely market-driven forces. Without strong policy support, the economic case for LDES remains weak, making it harder to attract investment.
In summary, while there is a growing need for LDES to stabilize grids with increasing renewable energy penetration, current market structures fail to adequately incentivize the development of such technologies, highlighting the need for new and innovative market mechanisms.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-current-market-mechanisms-fail-to-support-long-duration-energy-storage/
