Market structures significantly influence energy storage deployment through multiple interconnected barriers:
1. Inadequate Revenue Streams
Existing electricity markets often lack mechanisms to compensate storage for its unique capabilities (e.g., fast response times, dual charging/discharging roles). Markets primarily designed for traditional generation fail to value flexibility and grid-balancing services, reducing storage’s profitability compared to fossil fuel plants or renewables paired with fossil backups.
2. Competition with Subsidized/Established Technologies
Storage competes in markets where renewables and fossil fuels benefit from historic subsidies, priority dispatch, or market rules favoring predictable generation. For example, capacity markets often prioritize conventional plants, leaving storage reliant on ancillary services (e.g., frequency regulation) with limited revenue potential.
3. Ownership and Operational Conflicts
Market structures categorize storage ambiguously—as generation, load, or transmission assets—creating regulatory confusion. In regions like ISO/RTO markets, transmission owners face restrictions on operating storage to prevent market manipulation, stifling deployment by regulated utilities.
4. Market Design Limitations
- Regional Fragmentation: Smaller markets (e.g., non-ISO utilities) lack scale to justify storage investments, while larger markets (e.g., CAISO’s Energy Imbalance Market) dilute localized storage value.
- Ancillary Service Saturation: As storage penetration grows in niche markets (e.g., frequency regulation), prices drop, eroding long-term revenue.
- Time Horizon Mismatch: Markets often prioritize short-term pricing, undervaluing storage’s long-duration grid resilience benefits.
5. Cost Recovery Challenges
Storage’s hybrid nature complicates cost allocation between regulated (grid services) and competitive (energy trading) functions. Utilities struggle to recover upfront costs through tariffs or market participation, especially when storage competes with cheaper grid upgrades.
By addressing these structural issues—through improved market definitions, hybrid compensation models, and granular pricing for flexibility—governments and regulators could accelerate storage adoption.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-role-do-market-structures-play-in-the-barriers-to-energy-storage/
