Performance incentives significantly reduce the net costs of deploying long-duration energy storage (LDES) by providing ongoing financial compensation tied to system performance. These incentives are structured to reward contributions to grid stability and operational efficiency:
Upfront vs. Performance Incentives
- Upfront incentives (e.g., $250–$350/kWh rebates) directly lower installation costs.
- Performance incentives are paid annually based on grid services, such as supplying power during peak demand. For example, Connecticut’s program offers up to $200/kW for summer events and $25/kW for winter events in Years 1–5, scaling to $115/kW and $15/kW in Years 6–10.
Cost Impact Over Time
A Connecticut case study shows that combining a $250/kWh upfront rebate with $59.16/kW annual performance payments (averaged over seasons and years) reduces costs by $841.60/kWh over 10 years for a three-hour system. This model lowers the effective cost of ownership and improves return on investment.
Alignment with Long-Duration Storage Goals
LDES technologies require 45–55% cost reductions by 2030 to compete with alternatives like natural gas peaker plants. Performance incentives accelerate adoption by bridging the gap between current costs (e.g., $1,100–2,500/kW) and projected 2030 targets ($650–1,100/kW) while improving round-trip efficiency (69% → 75% for intra-day systems).
Key Mechanisms
- Grid participation requirements: Systems must enroll in dispatch programs, ensuring revenue from services like peak shaving.
- Efficiency-driven payouts: Higher compensation during high-demand seasons (e.g., summer) encourages optimal utilization.
Incentives thus stabilize cash flow for operators, offsetting the high upfront costs of emerging LDES technologies like flow batteries or thermal storage.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-performance-incentives-affect-the-overall-cost-of-deploying-long-duration-energy-storage-solutions/
