How does the competition with shorter-duration storage systems affect the economic viability of LDES

Impact of Shorter-Duration Storage Competition on LDES Economic Viability

1. Market Incentives and Revenue Models
Shorter-duration storage systems, such as battery energy storage systems (BESS) with durations typically under 4 hours but extending to 6-10 hours, currently capture most market revenues through daily energy shifting and ancillary services like frequency regulation. These revenue streams are more predictable and frequent compared to LDES, which is primarily valuable during infrequent, multi-day intermittency events. Because most current capacity markets lack mechanisms to reward storage beyond about four hours, there is little economic incentive for developers to invest in longer-duration solutions today.

2. Utilization and Frequency of Use
Shorter-duration storage systems address the majority of predictable short-term fluctuations in wind and solar energy generation. Since these intermittency events are typically short, the need for multi-day storage is relatively rare, lowering the utilization rate of LDES assets. This low usage frequency makes it more challenging to justify investment purely on market revenues because LDES would often remain idle except during prolonged renewable shortfalls.

3. Capital Costs and Technology Maturity
Technologies like lithium-ion BESS benefit from mature supply chains, scalability, and rapidly decreasing costs due to ongoing advancements and economies of scale. They also offer high round-trip efficiencies (~88%) and modular deployment almost anywhere. In contrast, many LDES technologies, such as pumped hydro or liquid air energy storage (LAES), have higher upfront capital costs, longer development times, and sometimes geographic constraints (e.g., pumped hydro). These factors increase financing risk and reduce bankability, making LDES comparatively less economically attractive under current market frameworks.

4. Market Evolution and Future Opportunities
The future economic viability of LDES depends on the development of new market mechanisms that can adequately remunerate the unique value LDES provides—such as bridging multi-day renewable gaps and supporting grid reliability in a deeply decarbonized energy system. Without such market reforms or targeted incentives, LDES risks being sidelined despite its essential role in future net-zero grids projected to require hundreds of gigawatts of long-duration capacity by 2050.

5. Technology Improvements and Cost Reductions
Advancements in both shorter-duration and long-duration storage technologies are expected. For BESS, improvements in energy density, efficiency, cycle life, and cost reductions will strengthen their economic competitiveness even for relatively long discharges (6-10 hours). LAES and other LDES technologies are also being evaluated for economic viability through detailed modeling of future energy market prices, but their attractiveness depends on assumptions about market design and the ability to capture value during critical periods.

In summary, the competition from shorter-duration storage systems affects LDES economic viability by limiting current revenue opportunities, reducing frequency of use, and creating higher entry barriers due to capital costs and market structures. Overcoming these challenges will require new market incentives, policy support, and technological advancements to enable LDES to complement rather than compete directly with shorter-duration storage and to fulfill the critical role of multi-day renewable integration and grid reliability in the future energy system.