To encourage longer-duration energy storage in existing capacity mechanisms, several incentives can be implemented:
Incentives for Longer-Duration Energy Storage
- Demand Commitment Mechanisms: These can be designed to provide a guaranteed market for long-duration energy storage (LDES) technologies by specifying a price per kilowatt-hour for delivered storage. This could include subsidies for utilities purchasing LDES at a capped price per kWh, which would de-risk investments in early-stage technologies while encouraging market competition.
- Modifications to Capacity Markets: Current regional capacity mechanisms often fail to incentivize longer-duration storage. Changes such as adjusting the capacity credit rules could encourage greater participation by LDES. For example, ensuring storage assets have enough stored energy to meet obligations without overcommitting them would increase stability.
- Renewable Portfolio Standards (RPS) Adjustments: Implementing storage portfolio standards or modifying RPS to require more clean energy on an hour-by-hour basis could promote LDES. This could be implemented through incentives for states adopting such standards, similar to how renewable standards are currently encouraged.
- Provision of New Value Streams: Offering new value streams that favor longer-duration storage can help shift the market’s value proposition. This could include services that are not yet well-compensated in existing markets but are crucial for grid resilience.
- Investment Incentives: Offering financial incentives for investment in LDES technologies can help reduce costs over time. As technologies scale, costs will decrease, making them more competitive.
Implementing these incentives requires collaborative efforts between regulatory bodies, investment entities, and industries to create a supportive infrastructure for longer-duration energy storage.
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