Comparing Contract-Based Support Mechanisms for Long-Duration Energy Storage
arXiv:2605.18582
Abstract
Long-duration energy storage (LDES) faces significant revenue volatility that impedes investment. This paper evaluates four contract-based support mechanisms using an equilibrium model with risk-averse investors and incomplete risk markets. Applied to a stylized 2035 Great Britain case, we find that all mechanisms can achieve the targeted LDES capacity but differ substantially in cost-effectiveness and risk-aversion sensitivity. Contracts that eliminate revenue volatility achieve the lowest costs but may weaken operational incentives, while contracts that preserve market exposure maintain incentives at higher costs.
Accepted for presentation at the 22nd International Conference on the European Energy Market (EEM26), Trondheim, Norway, 2026