Bookmark This! Six Long-Duration Energy Storage Technology Pathways, Three Revenue Models, and Prospects for Large-Scale Deployment

With multiple supportive policies being introduced, long-duration energy storage (LDES) is entering a period of significant growth opportunities!

Recently, the State Council of China issued the “15th Five-Year Plan Carbon Peak Action Plan”, while the National Energy Administration released the “Energy Sector Energy Conservation and Carbon Reduction Action Plan (2026–2028)”. Both policy documents explicitly emphasized the development of long-duration energy storage, indicating that LDES is gradually becoming an essential component of the new power system.

Currently, LDES technologies are developing toward greater diversification. Technologies such as compressed air energy storage (CAES), flow batteries, and hydrogen energy storage each demonstrate different advantages and limitations in terms of technology maturity, application scenarios, and construction costs.

This article provides a systematic analysis of LDES from three perspectives: technology development, revenue structures, and prospects for large-scale deployment, offering industry insights and references.

Six Technology Pathways Leading LDES Development for Diverse Applications

Long-duration energy storage technologies are diverse and mainly include:

• Physical energy storage technologies, represented by pumped hydro storage, compressed air energy storage, and gravity energy storage;

• Electrochemical energy storage technologies, represented by flow batteries and metal-air batteries;

• Thermal energy storage (including cooling storage) and chemical energy storage technologies, represented by hydrogen energy storage.

Among them, pumped hydro storage is currently the most mature and widely deployed long-duration energy storage technology.

As of the first quarter of 2026, China’s operational pumped hydro storage capacity had reached 67.09 GW.

At present, pumped hydro storage is primarily based on large-scale fixed-speed pumped hydro power stations. However, as suitable sites for large-scale pumped hydro projects become increasingly limited, the development of small- and medium-scale pumped hydro storage projects is gradually increasing.

Gravity Energy Storage

The operating principle of gravity energy storage is similar to pumped hydro storage. It mainly uses the physical lifting and lowering of solid masses to drive power generation equipment, thereby achieving energy storage and discharge.

Currently, China’s 100 MWh-scale gravity energy storage tower demonstration project has been completed in Rudong, Jiangsu Province, and has entered the grid connection commissioning stage.

The project, invested and developed by China Tianying, has an energy storage capacity of 100 MWh and a power output of 25–26 MW. It is expected to be connected to the grid and begin operation by the end of 2026.

Compressed Air Energy Storage

Compressed air energy storage is another long-duration energy storage technology with significant potential for large-scale application.

The technology converts electricity from off-peak periods or curtailed renewable energy into compressed air pressure energy and thermal energy, storing them separately in air storage units and thermal storage units.

During periods of high electricity demand, the stored high-pressure air is released and expanded through turbines to generate electricity.

Currently, large-scale engineering applications mainly focus on adiabatic compressed air energy storage systems with thermal storage.

According to statistics from the China Energy Storage Alliance (CNESA), as of the first quarter of 2026, China had 14 operational compressed air energy storage projects connected to the grid, with a cumulative installed capacity exceeding 1.5 GW.

The total installed capacity of projects under construction and in the planning stage has exceeded 54 GW.

Flow Batteries

Flow batteries are electrochemical batteries in which the active materials of both the positive and negative electrodes are liquid.

Depending on the types of active electrode materials, flow batteries can be categorized into:

• Vanadium redox flow batteries (VRFBs);

• Zinc-bromine flow batteries;

• Iron-chromium flow batteries;

• and other technology pathways.

Overall, flow batteries offer advantages including:

• high safety;

• no risk of explosion or fire;

• long service life;

• deep charge and discharge capability;

• and environmental friendliness.

By the end of 2025, China’s 10 kW-scale vanadium redox flow battery demonstration projects had already entered operation.

Thermal Energy Storage

Thermal energy storage refers to storing energy from sources such as:

• solar thermal energy;

• geothermal energy;

• industrial waste heat;

• low-grade waste heat;

and releasing it when needed, thereby addressing mismatches between thermal energy supply and demand caused by differences in time, location, or energy intensity.

Based on storage principles, thermal energy storage technologies can be categorized into three types:

• sensible heat storage;

• latent heat storage;

• thermochemical energy storage.

Currently, relatively mature thermal storage materials include:

• hot water;

• molten salt;

• refractory bricks;

• and other thermal storage media.

Hydrogen Energy Storage

Hydrogen energy storage is a form of chemical energy storage that enables:

• large-scale energy storage;

• long-duration storage;

• and cross-regional energy storage.

It mainly consists of three key stages:

1. hydrogen production;

2. hydrogen storage and transportation;

3. hydrogen utilization.

Water electrolysis for hydrogen production is expected to become the dominant future technology pathway.

Hydrogen storage and transportation technologies include:

• gaseous hydrogen storage;

• liquid hydrogen storage;

• solid-state hydrogen storage;

• ammonia (alcohol)-based hydrogen storage;

• underground hydrogen storage;

• and other approaches.

In the power sector, hydrogen energy can generate electricity mainly through:

• hydrogen gas turbines;

• hydrogen internal combustion engines;

• hydrogen fuel cells.

Different LDES Technologies Demonstrate Distinct Competitive Advantages

Different long-duration energy storage technology pathways demonstrate diverse technical characteristics and competitive advantages.

In terms of efficiency, pumped hydro storage and gravity energy storage achieve relatively high efficiency, while molten salt thermal storage and hydrogen energy storage have comparatively lower efficiency.

Regarding service life, physical energy storage technologies such as pumped hydro storage, compressed air energy storage, and gravity energy storage generally offer longer lifetimes.

In terms of safety, most LDES technologies demonstrate high safety levels, except hydrogen energy storage, which requires additional safety considerations.

Regarding environmental adaptability, pumped hydro storage and compressed air energy storage have relatively limited adaptability to certain environmental conditions.

In terms of response speed, flow batteries demonstrate significant advantages.

Lifecycle Cost of Energy Storage Determines Economic Competitiveness

The levelized cost of electricity (LCOE) over the full lifecycle is a key indicator for evaluating the economic performance of energy storage technologies.

According to estimates from the China Energy Storage Alliance (CNESA), when the storage duration reaches 8 hours, salt cavern compressed air energy storage and pumped hydro storage currently demonstrate relatively lower lifecycle electricity costs.

With continuous technological advancement and large-scale deployment, the lifecycle costs of emerging long-duration energy storage technologies are expected to continue declining.

According to projections, by 2035, mainstream LDES technologies including:

• compressed air energy storage;

• pumped hydro storage;

• flow batteries;

• molten salt thermal storage;

could achieve lifecycle electricity costs of approximately:

RMB 0.3–0.5/kWh

under conditions of 250 annual utilization cycles.

If calculated based on each technology’s inherent lifecycle cycle life, the lifecycle cost of energy storage could decline even further.

Revenue Channels Established, Value of Long-Duration Storage Yet to Be Fully Released

Currently, the development of market mechanisms for long-duration energy storage is accelerating its transition from policy-driven growth toward market-driven development.

The three-part revenue structure of:

“Energy Market + Capacity Market + Ancillary Services Market”

is gradually moving from the stage of framework establishment toward detailed implementation.

Energy Market: The Most Fundamental Revenue Source

The energy market is currently the most fundamental and primary revenue source for long-duration energy storage.

The core business logic is:

“Charge during low-price periods and discharge during high-price periods.”

Compared with 2-hour energy storage systems, the key advantage of LDES lies in its ability to provide:

• cross-period energy shifting;

• large-scale electricity time-shifting capability;

• and flexible short-term operation.

Some technology pathways can also achieve multiple daily cycles, allowing them to capture more price arbitrage opportunities.

In provinces where electricity spot markets are relatively mature, peak-valley price differences have become a major revenue source for energy storage projects.

Taking compressed air energy storage as an example, the first phase of the Jintan Salt Cavern Compressed Air Energy Storage National Demonstration Project in Jiangsu, which began operation in 2024, has an installed capacity of:

60 MW / 300 MWh

The project can achieve:

• one charge and two discharge cycles per day;

• or multiple charge-discharge operations within a day.

  Capacity Market: Providing Long-Term Reliability Value

Unlike the “price arbitrage” mechanism of the energy market, the core logic of the capacity market is the “value of availability” — meaning that energy storage systems commit to remaining available whenever the power grid requires support.
This mechanism is particularly important for long-duration energy storage because:

• it requires higher upfront investment costs;

  it has a longer payback period;

  and it requires stable baseline revenues to improve project bankability.
  Currently, the development of capacity markets in China demonstrates a dual-track approach, which is gradually removing market access barriers for long-duration energy storage.
  On one hand, the coal-fired power capacity pricing mechanism began nationwide implementation in 2024, providing a stable revenue foundation for the transformation of thermal power generation.
  On the other hand, the Notice on Improving the Capacity Electricity Pricing Mechanism for the Generation Side, released in January this year, established for the first time at the national policy level a capacity electricity pricing mechanism for independent new-type energy storage systems on the grid side.
  Based on the principle of “equal pay for equal performance,” independent energy storage has officially been incorporated into the generation-side capacity pricing mechanism.
  The capacity payment mechanism for independent energy storage has therefore evolved from regional exploration toward a nationwide unified framework.

Ancillary Services Market: Unlocking Additional Value

If the energy market addresses the question of “whether energy storage can generate revenue,” the ancillary services market determines “whether energy storage can generate additional value.”
Currently, power ancillary service markets mainly include three categories:

• frequency regulation;

• peak shaving;

• backup reserve.
  In regions where electricity spot markets operate on a regular basis, peak-shaving ancillary services have gradually been replaced by spot energy markets, with their original functions being absorbed by electricity trading mechanisms.
  Meanwhile, some provinces have begun pilot programs for new ancillary services, including:

• ramping support;

• inertia support;

• and other grid flexibility services.
  Long-duration energy storage can provide:

• long-cycle energy shifting;

• backup reserve capability;
  and some technology pathways can also provide physical inertia, effectively supporting grid stability requirements.
  However, although the three-part revenue structure appears relatively complete, the current market mechanism still mainly focuses on the question of “whether energy storage exists”, without further distinguishing “how long energy storage can provide service.”
  The differentiated advantages of LDES — including:

• cross-time energy shifting;

• large capacity;

• high reliability;
  have not yet been fully translated into market revenues.
  This remains the most significant challenge in current market mechanism development and represents a key area requiring further breakthroughs.
  Technology and Market Mechanisms Advancing Together to Support Demonstration Deployment
  At the recently held Energy Storage International Conference and Expo (ESIE2026), Ma Yuan, Assistant Researcher at the Department of Earth System Science of Tsinghua University, stated that by 2030, energy storage capacity should account for 15%–20% of total renewable energy installed capacity, reaching a key milestone of approximately 400 GW.
  Among this capacity, long-duration energy storage with durations exceeding 8 hours should account for at least 20% in order to effectively reduce renewable energy curtailment and ensure power system security.
  According to forecasts from the China Energy Storage Alliance (CNESA), during the 15th Five-Year Plan period, demand for long-duration energy storage will gradually become more prominent.
  New LDES demand during this period will mainly focus on storage durations of:
  4–10 hours
  Under a conservative scenario, the market scale is expected to reach:
  180 GW
  while under an optimistic scenario, it could reach:
  250 GW
  Pumped hydro storage will remain the dominant technology, complemented by emerging LDES technologies such as:

• compressed air energy storage;

• electrochemical energy storage.
  However, this scale still falls short of the requirements of power grid companies.
  In some northwestern provinces with high renewable energy penetration, demand for 24-hour-plus long-duration energy storage is expected to emerge first.
  By 2035, the scale of long-duration energy storage is expected to reach:

• 300 GW under a conservative scenario;

• 400 GW under an optimistic scenario.
  Storage durations will mainly range from:
  4–24 hours
  while the deployment scale of emerging LDES technologies will continue to increase.
  Accelerating the Transition from Technology Demonstration to Large-Scale Deployment
  To continuously promote the transition of long-duration energy storage from technology demonstration to large-scale commercial application, more projects need to be implemented to transform technological maturity into commercial viability.
  1. Coordinated Demonstration of Different Technology Pathways
  Currently, emerging LDES projects face challenges including:

• technologies that are not yet fully mature;

• incomplete industrial supply chains;

• relatively high investment costs.
  As a result, commercial applications remain dominated by short-duration lithium-ion battery energy storage.
  Going forward, demonstration and deployment of LDES technologies should be promoted in an orderly manner based on different stages of technological development.
  This approach will accelerate the implementation of emerging technologies while driving industrial technology upgrades and improving market competitiveness.
  2. Promote Scenario-Specific Demonstration Projects Based on Local Conditions
  Under the new power system framework, different application scenarios have different requirements for long-duration energy storage.
  For example:

• developed cities in eastern China have relatively higher requirements for energy density;

• northwestern “desert, Gobi, and barren land” regions;

• eastern coastal areas;

• and cold regions in northeastern China;
  all have different requirements regarding:

• operating temperature;

• humidity resistance;

• sand and dust protection;

• and environmental adaptability.
  Therefore, demonstration projects should be combined with different application environments to deepen research into key technologies including:

• energy storage equipment;

• system integration;

• safety protection;

• and operational reliability.
  3. Strengthen Long-Term Monitoring and Evaluation of Demonstration Projects
  Currently, management and evaluation mechanisms for demonstration projects are not yet sufficiently comprehensive.
  In the future, long-term tracking, monitoring, and periodic evaluation should be carried out for demonstration projects.
  This will provide scientific data support for:

• the practical application of new technologies;

• new products;

• and innovative solutions.
  It will also provide evidence-based support for national industrial policies and technical standards.
  4. Encourage Demonstration Projects to Explore Innovative Policies and Business Models
  While demonstrating LDES technologies, pilot projects should also serve as platforms for exploring innovative commercial models.
  At the same time, improving policy mechanisms and market support systems will be a critical foundation for large-scale LDES development.
  Establishing Cost Recovery Mechanisms for Long-Duration Energy Storage
  Compared with short-duration energy storage, LDES demonstrates greater value through:

• capacity contribution;

• long-term backup capability;

• and system reliability support.
  Therefore, it is necessary to gradually establish market-based capacity cost recovery mechanisms.
  Through market competition and pricing mechanisms, investment entities can be encouraged to make reasonable investments, ensuring long-term adequacy of power system capacity.
  Improving Cost Allocation Mechanisms for Long-Duration Energy Storage
  Long-duration energy storage can directly or indirectly accelerate the replacement of traditional fossil fuel power generation with renewable energy, significantly reducing overall societal carbon emissions.
  In the future, policy and market frameworks for:

• green electricity;

• green electricity certificates;

• carbon trading;
  should be further developed.
  These mechanisms can better reflect the value of LDES in:

• energy transition;

• carbon reduction;

• and renewable energy integration.
  By expanding revenue sources and improving cost allocation mechanisms, the economic foundation for long-duration energy storage can be further strengthened.

  
  Conclusion

  
  Long-duration energy storage is becoming an increasingly important pillar of future power systems as renewable energy deployment accelerates.
  With continuous technological innovation, improved market mechanisms, and increasing project deployment, LDES is expected to move from early-stage demonstration toward large-scale commercialization.
  The future development of long-duration energy storage will depend not only on breakthroughs in individual technologies, but also on the coordinated evolution of:

• technology pathways;

• market structures;

• business models;

• and policy frameworks.
  Together, these factors will unlock the full value of LDES in supporting renewable energy integration, enhancing grid flexibility, and enabling the global energy transition.

Dispatches from San Diego, pt. 3

This is part three in a series on our trip to San Diego for the Energy Storage North America conference and expo. If you haven't yet, check out parts one and two.

Today was the last day of the Energy Storage North America conference. Today's themes were grid services, finance, and technologies. We heard from grid regulators, policymakers, and technical experts, including Dr. Imre Gyuk, Energy Storage Program Manager at the Department of Energy.

Distributed Storage at the Market Edge

A morning panel featuring California policymakers focused on how distributed storage can interface in electricity markets.

The panel noted that utilities were tasked with examining the value of energy storage on their grids. At the time, utilities came back saying that the technologies were mature, economical, or proven enough for widespread use. Five years later, we’re seeing thousands of megawatts of interconnection requests for distributed storage, reflecting the effectiveness of California’s subsidies and the growing value propositions of these technologies.

During the Q&A session, a representative from Trina Solar, asked how policies can help China manage the problem of having long distances and constrained transmission between renewable generation and load centers. The simple answer given was to build more power lines. But the panelists also stressed the importance of building a diversified renewable asset base.

In a later panel, two grid experts continued the conversation about the role distributed energy storage can play on the grid edge.

James Gallagher, executive director of the New York State Smart Grid Consortium, described how New York’s Reforming the Energy Vision (REV) program is trying to better align utility practices with the goal of integrating more grid edge resources. Because New York has the oldest electrical grid in the country, REV also aims to help deal with the challenges of using older grid assets.

To do this, he said, REV is helping utilities procure distributed assets to meet their operational needs. The plan intends to introduce further market mechanisms to incentivize deployment. For example, the cost of electricity distribution is averaged across a utility’s consumer base, but in reality, the actual cost of delivery may vary by a factor of a hundred. Clarifying the actual costs of running a distribution grid gives third parties an opportunity to make a profit by introducing distributed resources like storage to locations where it is needed most.

He also touched on the issue of financing. Because increasing ratepayer fees to finance upgrades can be hard for utilities, there is an opportunity for microgrid players, who can raise money from third party sources to build and operate assets which traditionally were owned and operated by utilities. He also noted that insurance companies are becoming aware that record storms and heat waves driven by climate change are going to put community resilience to the test. Insurance companies have access to big pools of money that can finance power system upgrades, including energy storage, that build resilience in the face of global warming.

Technologies and Standards

Dr. Imre Gyuk, Energy Storage Program Manager at the US Department of Energy, gave a presentation on new technological breakthroughs in energy storage and efforts to establish better codes, standards, and regulations affecting energy storage system safety.

He highlighted work being done in energy storage at several national laboratories. Pacific Northwest National Laboratory (PNNL) has made breakthroughs in mixed acid vanadium redox flow batteries by developing electrolyte with 80% improved temperature stability and 70% better energy density. This technology has been licensed out to several big flow battery producers, including UniEnergy, Imergy, and WattJoule.

He foresees the system cost for vanadium redox flow batteries (RFB) to fall from $325/kWh in 2015 to $275 by 2017. He also shared projections that aqueous soluble organic flow batteries will become commercially viable in the medium term, with projected system costs falling to $150/kWh by 2021.

The Department of Energy is also working to resolve energy storage safety issues. The Department has published an inventory of codes and standards to help industry players better design, install, and operate their technology. The document also provides a list of best practices to respond to incidents involving energy storage technology.

The conference finished off with free beer at a reception at the San Diego Convention Center. It struck us how large this event is – a signal that the industry is really picking up speed, especially in the United States. This year, there were over 1800 attendees, 110 exhibitors, and over 150 speakers. We’re happy to have come – we’ll certainly be back next year.

Our fourth and final part in this series takes us to Borrego Springs, where SDG&E is pioneering microgrids and solar power to bring energy resilience to an isolated community in the desert.