The most effective incentives for promoting long-duration energy storage (LDES) focus on reducing costs, de-risking investments, creating supportive market conditions, and setting long-term policy targets. Key incentives include:
1. Cost Reduction and Efficiency Improvements
- Government programs aim to reduce LDES technology costs by 45-55% and improve round-trip efficiency by 7-15% by 2030, which makes LDES more competitive and attractive for investors.
2. Investment and Deployment Support
- Direct government investment and funding for large-scale demonstration projects help mitigate early-stage risks. Programs like the US Department of Energy’s $1 billion “Earthshot” initiative and the UK’s $100 million LDES demonstration competitions accelerate commercialization and cost reductions.
3. Long-Term System Planning and Clear Targets
- Establishing authoritative renewable energy and grid stability targets fosters investor confidence. Examples include California and New South Wales, which are setting clear goals to integrate renewables with adequate infrastructure planning.
4. Market Design and Revenue Mechanisms
- Creating market policies that value the unique benefits of LDES, such as capacity mechanisms and policies recognizing longer discharge durations, ensures investors can secure returns commensurate with risk. Arizona’s program, for instance, provides incentives for storage systems with more than five hours of discharge.
5. Scaling Ambitions and Economic Incentives
- Accelerating LDES adoption is critical to support grid decarbonization, reduce system costs, and improve resilience, with potential system cost savings of up to $540 billion annually and significant economic growth through job creation.
In summary, the most effective incentives combine policies that lower technology and deployment costs, provide funding to reduce investment risks, create market designs that fairly compensate long-duration storage, and offer clear long-term renewable energy integration targets to enable sustained market growth and private sector engagement.
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