1. Insufficient Revenue Streams from Existing Markets
- Price arbitrage limitations: Current energy markets lack frequent or substantial price differentials to justify LDES investments alone, with profitability heavily dependent on growing variable renewable energy (VRE) penetration.
- Ancillary service competition: LDES competes with shorter-duration lithium-ion systems for services like frequency regulation, which typically require only 2-4 hours of storage, diluting LDES’s economic advantage.
- Uncompensated grid services: LDES technologies often provide multiple services (e.g., voltage support and grid inertia) simultaneously, but markets frequently remunerate only one, leaving value uncaptured.
2. Market Structure Limitations
- Capacity market design: Existing mechanisms prioritize fossil fuel backups for multi-day gaps, failing to incentivize storage beyond 4 hours.
- Short-term contracting: Ancillary service agreements often span days to months, creating uncertainty for long-term project planning.
3. High Costs and Underdeveloped Incentives
- Marginal capacity decline: Batteries face reduced effectiveness as VRE penetration increases due to finite duration, requiring more storage for similar grid benefits.
- Policy gaps: While governments (e.g., UK, Australia) are introducing LDES-specific mechanisms like cap-and-floor schemes, most programs remain experimental or limited to shorter durations (4-8 hours), delaying scalable solutions.
4. Critical Deployment Shortfalls
Current LDES deployment (120GW operational, 120GW planned) lags far behind the estimated 8TW needed by 2040, risking slower decarbonization and higher system costs from fossil backups.
5. Technological and Market Remuneration Complexity
Compensating LDES for rare, multi-day supply gaps in fully decarbonized grids presents unresolved challenges, as these assets may remain idle for long periods between critical uses.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-main-economic-challenges-for-long-duration-energy-storage-technologies/
