US capacity markets currently compensate long-duration energy storage (LDES) assets at the same rate as two- to four-hour lithium-ion batteries, despite their ability to deliver power for ten hours or more, creating a structural financing gap that prevents LDES projects from securing investment. Raafe Khan, head of energy storage at Camelot Energy Group, warns that until market rules explicitly value duration — rewarding the ability to shift energy across days rather than merely hours — developers cannot build bankable revenue models for technologies such as flow batteries, thermal storage, or compressed air. The disconnect is most acute in organized markets like PJM and ISO-NE, where capacity accreditation methodologies still rely on effective load carrying capability (ELCC) curves calibrated for short-duration resources.
The problem stems from a fundamental mismatch: capacity markets were designed to ensure resource adequacy during peak hours, not to procure seasonal or multi-day reliability. As grids absorb more wind and solar, the need for storage that can bridge extended periods of low renewable output — dunkelflaute events lasting several days — grows urgent. Yet today’s ELCC frameworks assign diminishing marginal value to each additional hour of duration beyond four, effectively capping the revenue stack for LDES. Investors, unable to forecast capacity payments beyond the near term, apply higher discount rates or walk away entirely.
Khan argues that reform must come from both market operators and regulators. FERC Order 841 opened wholesale markets to storage participation, but it did not mandate duration-differentiated products. Some ISOs are experimenting with seasonal capacity ratings or multi-day reliability products, but progress is fragmented. A coherent national framework — or at minimum, coordinated regional approaches — would allow LDES to monetize its unique value proposition: firm capacity over 10, 20, or 100 hours. Without it, the United States risks stranding a critical decarbonization tool at the demonstration phase while other jurisdictions, notably the EU with its proposed electricity market design reforms, move to explicitly reward long-duration flexibility.
The issue will take center stage at the Battery Asset Management Summit (BAMS) USA in Garden Grove, where Khan and other industry leaders will press for market designs that recognize duration as a distinct, compensable attribute. Until capacity payments reflect the physics of grid reliability — not just the economics of peak shaving — LDES will remain a solution in search of a business model.
Read the full report at Energy Storage News