Comment: Running up that Hill—Long Duration Energy Storage in the I-SEM

By Steph Unsworth, Senior Research Associate for Ireland I-SEM

What is long duration energy storage (LDES), and what is its role?

Although there is no universally agreed definition of what constitutes LDES, in the 27 October 2023 Call for Evidence, Eirgrid stated a view of LDES as storage with a minimum duration of 8 hours. Our core assumption is that LDES covers
8–96 hours, effectively filling the gap between short duration storage cycling on daily basis and seasonal storage—a gap currently filled by carbon-intensive thermal generation.

This duration is particularly useful in a windy market, such as the I-SEM, where almost half the annual demand is met by wind generation. Daily cycling is perfect for solar generation, with storage soaking up excess power in the midday solar peak and discharging during the evening stress periods where prices are much higher. This is called load shifting and can help storage make a large profit. However, wind is not nearly as predictable, and we can go days without any significant wind output. Let’s look at the beginning of December 2023 as an example.

For a couple of days, wind generation in the island of Ireland was practically non-existent, resulting in an increase in thermal generation to ensure demand is met. Then immediately after, the wind was back and on 6 December 2023, wind generation hit an all time high of nearly 4.6 GW produced instantaneously. Due to various system limitations, some of this would have been dispatched down. If we imagine the future with higher wind penetration, we can easily see ourselves running into issues of oversupply, but if LDES were in play, it could meet demand in low wind periods, providing cheap, green power over a couple of days, and recharge using what would otherwise be dispatched down wind generation.

Depending on technology, LDES could also provide DS3 system services. Quick response times can allow for participation in frequency reserve services while long durations can allow for participation in ramping margin services, a service almost completely satisfied by thermal today. Some technologies can also provide inertia and reactive power, which can help alleviate some of the island constraints, such as the MinGen requirement—which, again, helps us reduce our dependence on thermal faster and aid the pathway to Net Zero.

LDES encompasses a variety of technologies which can be broadly split into four buckets:

Mechanical, e.g. pumped hydro storage (PSH), liquid air energy storage (LAES), compressed air energy storage (CAES)
Electrochemical, e.g. Li ion batteries, redox flow batteries
Thermal, e.g. molten salt storage
Power to gas, e.g. hydrogen electrolysis

For our presented analysis, we focussed on mechanical and electrochemical technologies to store and dispense electrical power.

How do the benefits and costs stack up?

In the role of long duration storage, it is useful to outline four key needs of decarbonising the grid and how long-duration storage is well positioned to address those needs. They include:

Firm capacity provision, e.g. load shifting to provide power during stress events

Flexible capacity provision, e.g. the ability to ramp up and ramp down very quickly
The alleviation of grid constraints
Grid stability provision to provide energy security

Load shifting aims to better match supply and demand patterns, charging in high renewable, low-cost periods and discharging during the high demand and typically high-cost periods, so let’s look at the effects of charging and discharging separately.

Charging—renewable generation is high and prices are low.

The charging of LDES preferentially increases demand in these periods. This increases prices that renewables capture and increases the volumes of renewables exported to the grid by avoiding curtailment and constraints, improving the economics for renewables across the island. This could result in merchant projects becoming more viable, reducing the need for renewable support schemes, but higher capture prices also reduce the payout required by the Government to renewable generators which are on a support scheme, ultimately reducing the PSO costs borne by the consumer.

Discharging—renewable generation is low and prices are high.

LDES can discharge to meet any demand shortfall, replacing the thermal generation which would normally ramp up during these periods. By avoiding the generation of expensive, peaking assets, prices are reduced in these periods. And by providing this capacity adequacy, the capacity requirement for security of supply within the Capacity Remuneration Mechanism (CRM) is reduced, decreasing spending in this market and avoiding the deployment of large new-build thermal assets. By replacing peaking assets in balancing too, further costs can be avoided within the Balancing Mechanism.

Putting it all together…

Our analysis shows us LDES can help us deploy more renewables by improving its investment case and deploy less thermal generation, massively helping us on our path to Net Zero. And in the process, it can reduce our electricity bills by reducing spending in the Balancing Mechanism, CRM, and the PSO levy. However, LDES itself does not come for free and will require support, the level of which will have a huge impact on whether our electricity bills go down or not.

Now, how do we deploy LDES?

The consensus in that room in Dublin was that storage of at least four hours in duration could be deployed as early as 2027, however, eight-hour duration storage is more likely to be seen in the early 2030s. But the main driving force behind this deployment will be the type of support LDES can receive and when the barriers to deploy will be alleviated. Some of the key barriers include:

The inability to submit a negative FPN and therefore charge (is expected to be rectified in 2025 through the Scheduling and Dispatch Programme);
Financing difficulties given both the long lead time and long lifetime, making current investment case models unsuitable for LDES;
Long queues for a grid connection, with no explicit prioritisation for LDES, and the inability to secure firm access;
Prohibitively high import network charges for storage which render many energy trading models uneconomic; and
A lack of support, with the CRM being the only viable route to market to date, which is unsuited to LDES given the price is based on new fossil fuel plants.

As a technology with low commercial maturity, the capital expenditure for LDES is huge, and the revenue achievable by energy arbitrage is simply not enough to recover those costs. Combine that with a high level of risk, given the technology is relatively unproven, and we get ourselves into a bit of a predicament. The Eirgrid LDES Call for Evidence outlined these three support structures to overcome these difficulties:

Refine current mechanisms, such as the CRM or DS3
A storage support scheme

Long-term contracts for flexibility services

The preference of the group was for a storage-specific support scheme to provide certainty over revenue streams while still allowing assets to dispatch within the market without TSO instruction. There is curiosity from various industry players in the I-SEM about the ongoing LDES consultation in GB, as it is looking at a dedicated cap-and-floor support scheme for LDES. In short, the cap-and-floor scheme provides a minimum revenue certainty for investors (floor) to provide debt security and a regulated limit (cap) on revenues to avoid excessive returns, in terms of annual gross margin.