Financial incentives play a crucial role in enhancing the economic viability of liquid air energy storage (LAES). Here’s a breakdown of their significance:
Key Aspects of Financial Incentives for LAES
- Economic Viability without Subsidies: Under current conditions, LAES is often not economically viable without additional support. It faces challenges such as high initial investment costs and competition from established storage technologies like lithium-ion batteries and pumped hydro.
- Impact of Subsidies: Studies have shown that financial incentives, particularly capital cost subsidies, can significantly improve the economic viability of LAES. Providing subsidies between 40% and 60% on capital expenditures can make LAES viable across various scenarios, as they reduce the financial burden on investors.
- Discharge Subsidy Policies: Discharge subsidy policies are particularly effective in promoting LAES investments. These policies can advance investment timing by at least one year, making them more attractive than investment subsidies or technology learning effects alone.
- Market Conditions and Pricing Structures: The effectiveness of financial incentives is also influenced by regional market conditions and pricing structures. Regions with high price volatility and demand for stored energy may benefit more from LAES, especially with targeted subsidies.
- Comparison to Efficiency Improvements: While technical improvements in efficiency are important, they have a limited impact on the economic viability of LAES compared to financial incentives. Researchers highlight that subsidies can immediately make LAES more viable, whereas efficiency gains might take longer to yield significant financial benefits.
In summary, financial incentives are essential for overcoming the economic hurdles faced by LAES, offering a more immediate path to viability compared to gradual improvements in efficiency.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-role-do-financial-incentives-play-in-the-economic-viability-of-liquid-air-energy-storage/
