The journey to net-zero An action plan to unlock a secure, net-zero power system Published in June 2022 by the LDES Council. Copies of this document are available upon request or can be downloaded from our website: www.ldescouncil.com. This work is independent, reflects the views of the authors, and has not been commissioned by any business, government, or other institution. The authors of the report confirm that: 1. There are no recommendations and/or any measures and/or trajectories within the report that could be interpreted as standards or as any other form of (suggested) coordination between the participants of the study referred to within the report that would infringe EU competition law; and 2. It is not their intention that any such form of coordination will be adopted. Whilst the contents of the report and its abstract implications for the industry generally can be discussed once they have been prepared, individual strategies remain proprietary, confidential and the responsibility of each participant. Participants are reminded that, as part of the invariable practice of the LDES Council and the EU competition law obligations to which membership activities are subject, such strategic and confidential information must not be shared or coordinated – including as part of this report. Contents Acronyms4 Executive summary 1. Introduction 5 8 2. Policy toolbox Preface Key considerations Motivation and context Types of policy and regulatory tools Role and value of this report Policy tool assessment framework Overview of LDES solutions Assessment of identified tools 17 Barriers to LDES adoption 3. Policy modelling 40 4. Pathways forward 47 Illustrative business case example Market archetypes LDES societal value creation potential Planning the journey to net-zero power Gas price sensitivity 5. Conclusion 53 Appendix55 Reference examples of policy and regulatory support 55 58 Assessments of individual mechanisms The journey to net-zero | An action plan to unlock a secure, net-zero power system Acronyms 4 C&F Cap & Floor LDES Long Duration Energy Storage CCfD Carbon Contract for Difference LMP Locational Marginal Pricing CfD Contract for Difference MW Megawatt CM Capacity Market MWh Megawatt-hour COD Commercial Operation Date NPV Net Present Value COP Conference of Parties PPA Power Purchase Agreement DSO Distribution System Operator R&D Research & Development EAC Energy Attribute Certificates RAB Regulated Asset Base ESS Energy Storage Systems RFP Requests for Proposals FiT Feed-in tariff ROI Return on investment FOAK First-Of-A-Kind T&D Transmission & Distribution Gt Giga tonnes TSO Transmission System Operator IPCC Intergovernmental Panel on Climate Change TTF Title Transfer Facility IRP Integrated Resource Plan WACC Weighted Average Cost of Capital The journey to net-zero | An action plan to unlock a secure, net-zero power system Executive summary Long Duration Energy Storage (LDES) provides a source of flexible energy that countries will need to achieve fullydecarbonized, secure, reliable, and affordable power grids. While there are limited policy frameworks in place today to catalyse industrialization of the sector, a range of time-tested policies can enable the rapid large-scale manufacturing and deployment of this new energy resource – by acting now, policymakers and regulators can embark on the journey to net-zero. Renewable energy will play a critical role in decarbonizing the power grid and increasing energy security, but this large-scale transition will require new sources of flexibility to ensure reliable energy supply. Globally, the energy transition increasingly has multiple narratives – climate change, energy security, and energy affordability – with the transition away from oil, gas, and coal seen as a significant lever for achieving the above. However, replacing these sources of energy – and the dispatchability they provide – will not be as straightforward as simply adding renewable capacity to the system. The world will need new sources of flexibility that are compatible with a lowcarbon society. There are a variety of sources of low-carbon flexibility, including demand response, power grid expansion and optimization, and energy storage of various durations. The precise mix of resources will vary by region, but the path to netzero power will require combining these sources of flexibility. With greater