Several economic barriers hinder the widespread adoption of long-duration energy storage (LDES):
Economic Barriers to LDES Adoption
1. Lack of Economic Incentives
Currently, storage project developers have little economic incentive to invest in LDES. The primary revenue streams come from short-term operations such as price arbitrage and ancillary services, which do not support longer duration storage needs.
2. Inadequate Market Mechanisms
Existing market mechanisms, especially capacity markets, do not provide sufficient incentives for storage to extend beyond four hours. New mechanisms are needed to support longer durations and ensure adequate remuneration for LDES.
3. Complexity of Remuneration
Remunerating assets that are only used in rare emergency situations—such as multi-day solar and wind outages—is complex and costly. This challenges the economic viability of investing in LDES.
4. Supply Chain Issues
Critical inputs like semiconductors, metals, and lithium face shortages and rising prices, which can limit the production and deployment of energy storage technologies.
5. Regulatory Frameworks
In many regions, regulatory frameworks and electricity market structures do not adequately support or remunerate energy storage investors. Lengthy approval and integration processes can further slow deployment.
6. Investment Shortfalls
Despite the necessity of LDES for a decarbonized energy system, there is a significant shortfall in global deployment. Only a fraction of the needed capacity exists or is planned by 2035, hampering the transition to clean energy.
Solutions and Initiatives
- Policy Incentives: Governments are implementing policies like cap-and-floor mechanisms (e.g., UK) or auctions (e.g., Italy) to support LDES development.
- Market Mechanism Development: Efforts are underway to create market-based mechanisms that can adequately remunerate LDES, although challenges remain.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-economic-barriers-hinder-the-widespread-adoption-of-long-duration-energy-storage/
