Feature: Updated market designs, policies can accelerate US long-duration energy storage growth: expert

As US power markets currently fail to recognize the value of long-duration energy storage resources with capacity markets focused on short-term storage technologies, incentives are needed to value the wide range of ancillary services that long-term storage can offer, Julia Souder, CEO of the global non-profit Long Duration Energy Storage Council, said in an interview.

When asked about which long-duration energy storage technologies Souder expects to be commercialized first, she said that "we are seeing commercialization today of all types of long-duration energy storage, or LDES technologies," adding that all four families of LDES: electrochemical, chemical, thermal and mechanical are currently available in the market at a commercial scale.

LDES has been playing a role in our energy systems for a lot longer than people think, Souder said, adding that mechanical energy storage, in the form of hydroelectric dams, has been in operation since 1907 and currently provides 1,330 GW of power, according to the International Hydropower Association.

Electrochemical energy storage is one of the most widely recognized forms of storage, as lithium-ion batteries fall into this category, "which are playing an essential role in short-duration storage for our electric vehicles and energy grids," she said.

However, there are a range of forms of electrochemical LDES, such as flow batteries, which can provide 6-plus hours of storage and have been deployed globally at the utility-scale to support microgrids, Souder said.

"We're also at an inflection point for a number of chemical-based LDES technologies, with renewable energy being converted into sustainable fuels, which can subsequently be used to generate power," she said.

Thermal energy storage is also "ramping up," with commercial deployments demonstrating how the technology can support decarbonization of the heating sector, which accounts for around 50% of the global final energy consumption based on research conducted by the LDES Council in its Net Zero Heat report, Souder said.

Policymakers in about a dozen US states are talking about transitioning to networked geothermal systems that heat and cool buildings to supplant natural gas use, Zeyneb Magavi, co-executive director of the Home Energy Efficiency Team, told S&P Global Commodity Insights in a separate interview.

Flow battery deployment

Flow batteries are "scalable, provide a diverse range of grid services, can last for decades and avoid a number of the fire risk and supply-chain concerns that come with lithium-ion batteries," according to Souder.

Lithium-ion batteries are the most mature energy storage technology, "so our market structures have been built from the ground up to support the benefits that they provide." However, this creates challenges for alternative technologies, as energy markets are not built to reward flow batteries and other forms of LDES, Souder said.

"Given that barrier, the success we have seen for flow batteries and other forms of LDES to date is phenomenal," she added.

To accelerate that success, "we need an increase in funding to support flow and other LDES technologies," along with developing market structures that reward the "huge range of benefits they offer to our renewable energy systems," Souder said.

"At present, our market mechanisms are not keeping pace with the development of LDES technology, so that needs to be addressed urgently to accelerate decarbonization," she said.

US market development

The US has one of the most advanced LDES markets, with California, New York, and Texas leading the way. In the third quarter of 2022, there were record levels of deployment with 4.73 GWh of grid-scale storage installed, Souder said, adding that the pipeline for 2023 "is looking strong."

She added that according to the trade group's Net Zero Power report, the potential size of the market in the US could reach $1.3 trillion by 2050, while the recent US Department of Energy "Liftoff" report states that at the current growth rate for wind and solar power, "we are going to see a massive need for more longer duration energy storage that supports the acceleration of renewables and is crucial to delivering our climate targets."

Supporting policies, regulations

The Bipartisan Infrastructure Law provides $505 million in funding for LDES, with $350 million allocated to 11 demonstration projects, contributing to the goal of 100 GW of energy storage capacity by 2030, Souder said.

Additionally, she cited state-level support from California's Long-Duration Storage Program, which is putting $140 million toward grid reliability and the state's clean energy transition goals, and the Renewable Optimization and Energy Storage Innovation Program in New York.

Existing market structures fail to adequately recognize LDES value in terms of its energy-shifting capabilities and its "crucial role in providing system flexibility," Souder said.

"These markets lack the necessary incentives to encourage storage projects" that can offer durations of several hours (six to 20 hours), multiple days (three or four days), or even seasonal storage, where projects can store renewable energy collected during the summer and use it for heating or electricity during the winter, she said.

Grid-connected resources are also being held up by lengthy permitting and interconnection queues which need to be streamlined, Souder said. Several grid operators and states are currently working on those concerns.

"The definition and monetization opportunities of the LDES asset class will evolve over different stages of maturity," she said, adding that "it is essential to employ distinct policy tools during each horizon stage."