Which economic incentive is designed to encourage the use of energy storage for providing grid services?

Market participation and compensation for ancillary services is a primary economic incentive designed to encourage the use of energy storage for providing grid services. Ancillary services are support services that are necessary to maintain the stability and reliability of the electric grid. These services include frequency regulation, voltage support, spinning reserves, and non-spinning reserves. Energy storage systems can provide these services more efficiently and effectively than traditional generation resources. Market mechanisms allow energy storage system operators to bid their services into the market and receive compensation for providing these grid services. The compensation is typically based on the value of the services provided, which reflects the cost savings and reliability benefits to the grid. These market revenues can significantly improve the economic viability of energy storage systems and incentivize their deployment for grid support applications. Some regions also offer capacity payments, which compensate energy storage systems for their ability to provide reliable capacity during peak demand periods. These payments provide a stable revenue stream that further encourages the use of energy storage for grid services.