Performance-based Incentives and Up-Front Rebates for Energy Storage
Performance-based incentives and up-front rebates for energy storage are two distinct types of incentives with different structures and benefits:
Up-Front Rebates
- Definition: These are direct payments provided to customers upon the installation of an energy storage system.
- Benefits:
- Reduce the initial cost barrier for customers, making energy storage systems more affordable.
- Immediately offset a substantial portion of the installation costs.
- Often tied to specific conditions, such as participating in a passive dispatch program where batteries help reduce grid stress during peak times.
- Example: In Connecticut, up-front rebates can cover up to 50% of the battery’s cost, requiring enrollment in a passive dispatch program.
Performance-Based Incentives
- Definition: These incentives are payments provided over time based on the actual performance of the energy storage system.
- Benefits:
- Encourage optimal system performance by compensating for grid services provided.
- May lead to additional income if the system exceeds minimum performance requirements.
- Align with long-term benefits like reducing greenhouse gas emissions and enhancing grid stability.
- Example: In Connecticut, performance incentives require participation in active dispatch programs. Customers receive payments based on the energy stored and dispatched during peak times, potentially for up to 10 years.
Summary Comparison
| Characteristics | Up-Front Rebates | Performance-Based Incentives |
|---|---|---|
| Payment Timing | Paid immediately upon installation | Paid periodically over time based on performance |
| Payment Structure | Fixed amount based on capacity or cost | Variable amount based on system usage and grid contributions |
| Eligibility Conditions | Often tied to enrollment in utility programs or specific conditions | Requires active participation in grid services |
| Long-Term Impact | Reduces upfront costs, encouraging initial adoption | Motivates optimal system operation to maximize incentives |
Overall, up-front rebates encourage initial adoption by reducing costs, while performance-based incentives promote ongoing system efficiency and grid support.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-performance-based-incentives-differ-from-up-front-rebates-for-energy-storage/
