Procurement mechanisms play a crucial role in supporting long-duration energy storage (LDES) by providing financial security and incentives that help overcome market barriers. Here are some key aspects of how procurement mechanisms contribute to the development and integration of LDES:
Role of Procurement Mechanisms
- Financial Incentives and Certainty: Procurement frameworks can offer long-term revenue guarantees, which help reduce investment hurdles by providing stable income streams for companies investing in LDES technologies. This certainty is crucial for de-risking investments in emerging technologies.
- Market Participation and Competition: Procurement mechanisms can ensure that LDES technologies gain a foothold in the market by setting standards or requirements that incentivize their adoption. For example, demand commitment mechanisms can guarantee a market for LDES by setting specific prices for delivered electricity storage.
- Technology Neutrality: Many proposed procurement frameworks advocate for technology neutrality, allowing a broad range of storage technologies to participate. This diversity supports national decarbonization objectives by encouraging innovation across different types of LDES technologies.
- System Value Assessment: Effective procurement frameworks should consider the overall system value of LDES, including locational benefits and the ability to stabilize grid operations over extended periods. This approach ensures that investments are made in projects offering the greatest net value to the energy system.
- Policy and Regulation: Procurement mechanisms are often linked to policy and regulatory frameworks. States and governments can mandate procurement targets or goals for energy storage, which can be legally binding or aspirational, influencing how utilities implement these targets.
Mechanisms for Support
- Cap and Floor Pricing Mechanism: Used in places like Great Britain, this mechanism provides a price floor for LDES technologies, ensuring they receive a minimum income while allowing them to benefit from higher market prices if available.
- Renewable Portfolio Standards (RPS): Modifying existing RPS to require storage directly or to incorporate clean energy on an hour-by-hour basis can help ensure a market demand for LDES technologies.
Overall, procurement mechanisms play a critical role in fostering the growth of long-duration energy storage by addressing financial and regulatory challenges, which are essential for integrating these technologies into the energy mix effectively.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-role-do-procurement-mechanisms-play-in-supporting-long-duration-energy-storage/
