California Seeks to Establish Long Duration Energy Storage Demand

Long duration energy storage (LDES) remains a critical component of a grid powered primarily by renewable energy. LDES consists of electricity storage systems capable of discharging at full power for 6 hours or longer. These projects represent the next level of storage technology beyond those used for grid stability services and daily energy shifting. Guidehouse Insights has covered the current state and future prospects of the LDES market, which has seen significant hype yet few projects built. 

The majority of the existing LDES projects operating globally are pumped hydro storage plants. This proven technology is a key component of many grid systems, and new projects are continuing to be built and planned. Despite the impact of pumped hydro, the LDES market has been slow to develop. LDES technologies are almost always more expensive than shorter duration systems on a dollar per kilowatt basis, with overall project costs scaling as duration increases. Furthermore, real demand and market signals have not occurred for developers of the technology. However, recent policies proposed in California may finally be changing the market for LDES. 

Creating Market Demand

California has a relatively high penetration of renewable energy on its grid and some of the most ambitious goals in the world. The need for LDES has always been on the horizon in the state, which has been a hotbed of new energy storage technology and project development. 

The California Public Utilities Commission recently announced a new proposal for interim greenhouse gas reduction goals for 2030. An optimal power system portfolio has been modeled that will allow achievement of these goals. This portfolio includes substantial increases to solar, wind, and energy storage capacity. Most notably, the plan identifies the specific need for 1 GW of LDES by 2026. 

New Technologies Competing for New Opportunities

Storage industry stakeholders have pushed for changes to California’s energy storage rules for years. The state determined that a 4-hour duration was optimal for new grid storage projects, which have mostly been designed for daily peak shaving services. As renewable energy penetration increases and conventional power plants are retired in the state, the need is emerging for new forms of energy storage capable of cost-effectively discharging for 1 day or longer. 

New technologies are racing to prove their technical and economic viability to compete for the potentially massive LDES market. While nearly all storage technologies can discharge slowly over a long duration, most are not economical when designed and operated in that manner. Technologies capable of cost-effective long duration operating include flow batteries, thermal energy storage, and compressed air. Some technologies have seen more success than others. Liquid air energy storage technology provider Highview Power recently announced several commercial scale plants, demonstrating the ability to provide long duration storage outside of small pilot plants. These include a 50 MW/400 MWh project offering an 8-hour discharge duration. 

There is no shortage of competition or opportunities for companies that are working to bring cost-effective long duration technologies to market. However, changes to regulations and market structures are required for the grid to reap the benefits of LDES. Current market rules in nearly all regions do not incentivize utilities or developers to build storage systems with durations greater than 4 hours. Potential changes include establishing grid service products and capacity markets that provide reliable revenue streams for new projects. With its newly proposed policies, California is taking the necessary steps to benefit from LDES and achieve its clean energy goals.