How do market mechanisms need to evolve to support multi-day energy storage

To support and fully integrate multi-day energy storage into electricity markets, market mechanisms need to evolve in several critical ways:

1. Shift Toward Multi-Interval and Time-Granular Markets

Current electricity markets often operate with hourly or shorter intervals (e.g., 15 minutes). For multi-day storage, markets must span multiple intervals and longer durations to appropriately value the ability to store energy for days rather than hours. Mechanisms for multi-interval markets that accommodate both generation and storage participants enable more truthful bidding and optimized dispatch of storage resources over extended periods.

2. Long-Term Revenue Certainty and Stable Market Signals

Multi-day storage requires significant capital investment, so long-term revenue stability is essential to improve project bankability and reduce financing costs. This can be provided through mechanisms such as:

• Long-duration capacity contracts (e.g., 10-15 years) rewarding storage for capacity contributions to grid security.
• Technology-neutral support schemes that provide predictable, stable revenues irrespective of specific technologies, to attract diverse investments and encourage innovation.
• Combining multiple revenue streams from energy markets, ancillary services, and capacity payments to diversify risk for storage operators.

3. Proactive Regulatory Reform and Clear Asset Classification

Regulators must develop clear, consistent frameworks that recognize energy storage as distinct assets with both generation and load characteristics. Rules should simplify interconnection and participation procedures for storage and remove barriers that currently hinder multi-day storage deployment. Regulatory clarity and technology-neutral, performance-based frameworks encourage investor confidence by rewarding the actual value storage provides to grid reliability, resilience, and decarbonization.

4. Evolution of Market Design to Value Storage’s Multifaceted Benefits

Traditional energy markets often undervalue storage because they focus on short-term energy balancing. Future market designs must:

• Accurately value diverse storage services, including time-shifting energy over multiple days, providing long-duration backup, and supporting grid flexibility.
• Enable co-optimization of energy, capacity, and ancillary services markets to maximize storage revenue potential.
• Incorporate longer market timeframes and granularity to capture storage’s ability to defer generation or renewable curtailment over days.

5. Greater Financial Innovation and De-risking Mechanisms

To scale multi-day storage, financial markets must develop instruments such as tax credits, long-term contracts, and other incentives that reduce upfront costs and investment risks. Programs like the U.S. Inflation Reduction Act’s tax equity and credit transferability markets have already improved financial viability for energy storage. Similar mechanisms can accelerate multi-day storage deployment globally.

In summary, market mechanisms must evolve to enable multi-day energy storage by adopting multi-interval trading frameworks, guaranteeing long-term and technology-neutral revenue streams, reforming regulatory environments for clarity and inclusiveness, and designing markets that fully capture storage’s multifaceted value. These changes collectively reduce investment risk, unlock new revenue streams, and drive widespread deployment, supporting a more resilient, decarbonized electricity system.