New market mechanism needed for longer duration storage

A new market mechanism is needed to unlock investment in longer-duration energy storage technologies and achieve the needed levels of deployment, a report has said.

On 9 March, the Association for Renewable Energy and Clean Technologies (REA) published a paper on long-duration energy storage, exploring both the barriers and solutions for greater deployment of it in the UK. Encouraging take-up of short-duration storage technologies has not yet been matched by growth in longer duration. The report noted that as much as 40GW of storage will be needed by 2050, with National Grid ESO expecting that a “significant share” will come from longer-duration technologies.

Longer-duration energy storage projects are key to managing a grid with increasing variable generation and, subsequently, net zero. It can save costs, lead to a more stable energy supply and cushioning from price volatility. A larger, diverse portfolio of longer-duration storage projects in the UK would also enable greater security of supply. Despite these benefits, however, rollout of new projects has been limited with the existing market framework failing to provide certainty of income for investors, disincentivising deployment.

For the first batch of new longer-duration storage to be commissioned by 2030, action is needed now, with the report proposing a fundamental review of market design as desirable. Government, supported by Ofgem, should seek to establish a future-proof income stabilisation mechanism that de-risks investment in longer-duration energy storage and builds on the existing market arrangements. It determined the two models currently used to incentivise investment in renewables and ensure security of supply – the Capacity Market and CfDs – would not be appropriate for longer-duration storage. Income Floor and RAB, in contrast, were found to be more appropriate.

It called for BEIS to issue a call for evidence on how barriers stifling wider development of longer-duration energy storage projects can be overcome. This, it suggested, could be issued alongside the updated Smart Systems and Flexibility Plan, while government should also look to explore if there are any options to quickly removal regulatory barriers to longer-duration storage in the interim as developing a permanent market mechanism will take time.