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Energy storage has been identified as a priority technology for innovation. However, the rapidly developing family of storage technologies will find it difficult, under the current regulatory regimes, to compete with conventional generators for the provision of electricity system services, and this is likely to impede innovation. This paper analyses and categorizes 16 investment barriers hindering the near-term deployment of energy storage technologies in electricity markets, which are related to four regulatory and public attitudes barriers. The most important regulatory barrier is the current classification of storage as a generation asset, despite it being unable to provide a positive net flow of electricity, which is used to justify double network usage charges. The merit order design of balancing and ancillary markets hampers the ability of storage technologies to recoup their relatively high capital cost, while capacity markets penalize their limited discharge duration. Network companies are in the best position to realize the system value of storage, but their ownership may only be acceptable if system operation is made independent of network operation. Current initiatives to address these issues include flexible connection agreements and the development of enhanced frequency response and aggregate fast reserve services. However, to remove the identified barriers, a market structure that valued the flexibility offered by storage, viewing it as complementing rather than competing with network and generation assets, would be required. [ABSTRACT FROM AUTHOR]

The global effort to decarbonise electricity systems has led to widespread deployments of variable renewable energy generation technologies, which in turn has boosted research and development interest in bulk Electrical Energy Storage (EES). However despite large increases in research funding, many electricity markets with increasingly large proportions of variable renewable generation have seen little actual bulk EES deployment. While this can be partly attributed to the need for technological developments, it is also due to the challenge of fairly rewarding storage operators for the range of services that storage provides to the wider network, especially in markets that have undergone significant restructuring and liberalisation. Pumped Hydroelectric Energy Storage (PHES) is the overwhelmingly established bulk EES technology (with a global installed capacity around 130 GW) and has been an integral part of many markets since the 1960s. This review provides an historical overview of the development of PHES in several significant electrical markets and compares a number of mechanisms that can reward PHES in different international market frameworks. As well as providing up-to-date information about PHES, a primary motivation for this work is to provide an overview about the types of rewards available to bulk EES for the wider storage community including investors, technology developers and policy-makers. Observing that bulk EES projects seem to be unattractive investments for the private sector, the paper also includes a brief discussion in terms of public sector investment. [ABSTRACT FROM AUTHOR]