Paths to NetZeroPillarsEmitting sectorsBest practices
All actions

Incentivize a diverse clean energy technology mix

  • Power and Grids
  • Companies
  • 1. Accelerate deployment of mature climate solutions

While wind and solar are key to power-system decarbonization, virtually every major electricity market is facing the challenge of adapting to increased shares of variable renewable supply. Therefore, it is fundamental that policymakers incentivize a diverse clean energy technology mix to ensure power system reliability. This means encouraging a resilient combination of low-carbon supply sources, as well as flexible energy storage capacity. A diverse portfolio of renewable energy sources is better for decarbonizing the global power mix than relying on just solar, for example, which has relatively low capacity factors and highly seasonal output. Wind power can be complementary to solar and has higher capacity factors.

Scaling up mature energy storage technologies will be key to allow deeper penetration of variable clean power and ensure diverse supply in all markets. Under BNEF’s Net Zero Scenario, installed global battery storage capacity must hit 4 terawatts (TW) by 2050. To help integrate additional renewables on the grid, battery annual installations grow more than threefold to provide energy shifting services. This is over 50 times the amount of battery storage available in 2023. However, many countries still lack policies to support battery storage development. By the end of 2023, there was around 71 gigawatts (GW) of behind-the meter and utility-scale storage systems installed, excluding pumped hydro, up from just 13GW in 2020. Still, over half of this is concentrated in the US and China. In other markets, especially developing economies, deployment of energy storage has been limited due to high technology costs and lack of adequate policy frameworks.

Market reform can help to overcome these barriers, for example by enabling energy storage for frequency regulation and ensuring there are clear rules for energy storage to enroll, bid and dispatch into markets given characteristics such as charging, discharging and limited energy availability. In markets that are more vertically integrated, utilities or network operators typically need a regulatory framework to direct them to consider energy storage when doing resource planning, such as energy storage targets, adjustment to models that feed into long-term planning to account for technical characteristics of energy storage, and adopting new types of contract structures that are more appropriate for capacity rather than just energy output. In some cases, it may make sense to allow the utility to rate base investments in energy storage assets (or part of the asset) in the same way it would pass through the costs for traditional network reinforcement.


Read next

NetZero PillarsEmitting sectorsKey stakeholdersBest practicesNetZero Actions

Follow BNEF


Privacy PolicyTerms

© 2024 Bloomberg L.P. All Rights Reserved.

© 2024 Bloomberg L.P. All Rights Reserved.