Long Duration Energy Storage is essential for deeply decarbonized power systems, but price caps create a “missing money” problem—well-designed capacity markets can help stabilize revenues and encourage investment, though challenges remain under ultra-strict carbon targets.
As we push toward deep decarbonization of power systems, renewable energy (like wind 🌬️ and solar ☀️) will dominate electricity generation. But here’s the catch: these resources are variable. Sometimes we have too much sun and wind, and sometimes—during “energy droughts”—we don’t have enough.
The need for this is met by Long Duration Energy Storage (LDES). Unlike short-term batteries (good for 1–4 hours), LDES can discharge energy for 6 hours or even hundreds of hours! This makes it a game-changer for bridging multi-day gaps in renewable supply. ⚡
But while the technology is promising, one big problem stands in the way: how do we pay for it?
In electricity markets, prices often get capped to avoid extreme spikes during scarcity. While this protects consumers from huge bills, it creates what researchers call the “missing money” problem.
👉 For storage operators, price caps mean they don’t earn enough during rare scarcity events to cover the high upfront investment of LDES.
For short-term batteries, subsidies and revenue from multiple services (like frequency regulation) have helped. But LDES needs longer, deeper discharges, which don’t align with these quick, high-frequency markets.
So the question is: Can capacity markets (where resources get paid just for being available) fix this problem for LDES?
The study, from Imperial College London, tackled exactly this. They built a two-stage stochastic equilibrium model (don’t worry, we’ll break that down) and applied it to a Great Britain-based case study using 40 years of weather and demand data.
The researchers asked:
Think of the model like a giant electricity market simulator 🎮:
The twist: The model introduces duration-based accreditation. This means LDES doesn’t just get a flat credit—it gets a reliability value that increases with its discharge duration. 📈
As emission limits got stricter (down to 0.1 gCO₂/kWh), the system increasingly relied on LDES to cover gaps when wind and solar fell short. The optimal LDES duration jumped from 19 hours at modest targets to 100+ hours at near-zero emissions.
Takeaway: The deeper the decarbonization, the longer the storage we need.
When price caps were applied, LDES could miss out on 15–50% of its required revenue. Why? Because those rare high-price events that justify LDES investment got suppressed.
Interestingly, as decarbonization deepened, the problem got a bit better. Why? With more renewables, charging LDES became cheaper (lots of surplus wind/solar), and discharging became more valuable (since gas with CCS became expensive due to carbon costs).
Capacity markets—where resources are paid simply for being available—did reduce missing money and smoothed revenues. Well-calibrated CMs gave near-efficient investment signals in many cases.
But here’s the catch: in ultra-decarbonized systems, their effectiveness dropped. Why?
Capacity credits didn’t always match what LDES really contributed.
Price caps distorted revenues not just in scarcity hours but also in regular operations, making LDES less profitable.
Without CMs, LDES revenues were wildly volatile. Most years showed losses, while a few years had huge profits. This “lottery ticket” profile is risky for investors.
With capacity markets, revenues became more stable ✅—a big plus for attracting financing. Still, volatility remained higher in ultra-decarbonized scenarios.
If regulators underestimate LDES’s capacity credit, investment falls short, leading to more unserved energy and higher prices.
If they overestimate, systems may over-invest, which reduces efficiency.
Surprisingly, underestimation was worse than overestimation, because it starved the system of much-needed capacity.
So, what does this mean for the future of long duration energy storage?
Researchers suggest several pathways:
This research highlights that LDES is not just a technical solution, but also a market design challenge. Without smarter ways to pay for it, we risk underbuilding one of the key tools for a reliable, fully decarbonized grid.
As the energy transition accelerates, the economics of long duration energy storage will shape the stability and affordability of future power systems. 🔋⚡🌍
For engineers, policymakers, and investors alike, the message is clear:
👉 If we want net-zero electricity, we must fix the missing money problem and unlock the full potential of LDES.
Long duration energy storage is the backbone of a renewable future, but it needs smarter markets, fairer credits, and risk-sharing mechanisms to thrive. Without these, the energy transition may stall during its toughest hours—the ones when the sun and wind can’t deliver. 🌙🌪️
🔋 Long Duration Energy Storage (LDES) - Energy storage that can keep the lights on for 6+ hours (sometimes days!) by storing excess renewable power and releasing it later when demand is high or renewables are low.
⚡ Short Duration Energy Storage (SDES) - Typical batteries (like lithium-ion) that last 1–4 hours. Great for quick fixes like frequency control or daily peaks, but not for multi-day gaps.
🏭 Capacity Market (CM) - A system where power plants and storage get paid just for being available to ensure reliability, not only for the electricity they sell. Think of it as an insurance policy for the grid.
💸 Missing Money Problem - When electricity price caps stop resources (like storage) from making enough money during rare high-price events, leaving them without enough revenue to cover costs.
🧾 Capacity Accreditation (CA) - The method used to decide how much reliability credit a resource gets in the capacity market. For storage, this often depends on how long it can discharge.
📉 Revenue Volatility - Big swings in annual profits or losses. For LDES, some years might mean losses, while rare “energy drought” years could bring huge windfalls—making it risky for investors.
🌬️ Variable Renewable Energy (VRE) - Energy sources like wind and solar that depend on the weather. They’re clean but unpredictable, which is why storage is so important.
🏭 CO₂ Emission Cap - A regulatory limit on the total greenhouse gas emissions allowed from power generation. Stricter caps push systems toward more renewables and storage.
💡 Value of Lost Load (VOLL) - An estimate of how much society values reliable electricity, measured as the cost of blackouts per megawatt-hour not served. It’s super high, which shows how critical electricity is.
Source: Adam Suski, Elina Spyrou, Richard Green. Missing Money and Market-Based Adequacy in Deeply Decarbonized Power Systems with Long-Duration Energy Storage. https://doi.org/10.48550/arXiv.2508.20913
From: Imperial College London; Imperial College Business School.
