Reasons energy storage challenged assumptions

Published on 11/1/2025 by Ron Gadd

Photo by Tesson Thaliath on Unsplash

When the “Easy‑Fix” Narrative Crumbled

A few years ago, the common refrain in energy circles was that storage was the low‑ hanging fruit that would automatically smooth out renewable variability. The story went something like this: “Just add a battery farm and the intermittency problem disappears.” That assumption sounded attractive, but the reality turned out to be far messier. Prices for lithium‑ion packs have indeed plummeted—down roughly 85 % since 2010, according to BloombergNEF—but market prices for electricity have not consistently provided the price spreads needed for simple arbitrage to be profitable. The result? Investors started asking tougher questions, and the whole narrative about “plug‑and‑play” storage began to wobble.

In practice, energy storage is not a silver bullet; it is a set of technologies each with its own strengths, constraints, and cost structures. The assumptions that storage would be cheap, universally applicable, and instantly deployable have been challenged on several fronts: economics, technology maturity, grid integration, and policy. Below we unpack the key reasons behind this shift, using concrete examples from recent projects and research.

The Economics That Refused to Play Nice

The most immediate assumption that fell apart was the idea that storage could earn a decent return simply by buying cheap power at night and selling it at peak price during the day. While that works in markets with pronounced price differentials (e.g., Texas ERCOT during extreme weather events), many regions see relatively flat wholesale price curves. The Energy Storage Opportunities and Challenges report (Energy Innovation, 2014) notes that *“market prices have not supported development of energy storage based on the simple arbitrage.

A few factors contribute to this mismatch:

Flattening price spreads – As renewables flood the market, the merit order effect pushes daytime prices down, reducing the spread between low‑ and high‑price periods.
Regulatory barriers – In many jurisdictions, storage assets are still classified either as generators or loads, limiting their ability to capture multiple revenue streams (capacity, ancillary services, congestion relief).
Capital intensity – Even with falling battery pack prices, the upfront capital cost for a utility‑scale project (including land, interconnection, and balance‑of‑system components) can run into hundreds of millions of dollars.

Because of these economic realities, developers have turned to hybrid revenue models.

Frequency regulation – Fast‑responding batteries earn high payments for keeping the grid stable on a second‑by‑second basis.
Capacity markets – Storage can be compensated for being on standby to supply power during peak demand events.
Renewable firming contracts – Wind or solar farms bundle storage to guarantee a firm output, selling the combined product at a premium.

The lesson is clear: the simple buy‑low, sell‑high arbitrage model is no longer the default. Successful projects now depend on clever stacking of services, often requiring sophisticated market participation strategies and supportive policy frameworks.

Technology Diversity – One Size Does Not Fit All

Another assumption that has been repeatedly busted is the notion that lithium‑ion batteries will dominate every storage niche. While lithium‑ion remains the workhorse for short‑duration, high‑power applications, a growing suite of alternatives is emerging to fill gaps that batteries can’t efficiently cover.

Long‑duration storage (LDS) – For multi‑hour to multi‑day needs, technologies such as flow batteries, compressed air energy storage (CAES), and emerging green hydrogen systems are gaining traction. Green hydrogen, produced via electrolysis powered by excess renewable electricity, can be stored indefinitely and later used in fuel cells or re‑electrified processes. The REGlobal “Energy Storage: Technologies, challenges and future outlook” article highlights that “green hydrogen is rapidly gaining traction as a means of energy storage globally.”
High‑power, short‑burst needs – Supercapacitors and emerging nanocomposite electrodes (e.g., covalent organic frameworks) excel at delivering megawatt‑scale bursts for grid stability, albeit with lower energy density. These materials are still in the research phase but promise lighter, faster‑charging batteries.
Thermal and mechanical storage – Concentrated solar power (CSP) with molten‑salt heat storage, pumped hydro, and even advanced compressed‑air concepts provide cost‑effective storage for specific geographies.

Because each technology sits on a different point of the power‑vs‑energy triangle, planners now conduct detailed techno‑economic analyses to match the right storage to the right need. The old assumption that a single technology could solve all storage problems has been replaced by a nuanced “technology portfolio” mindset.

Grid Integration – Not Just Plug‑And‑Play

Even when the economics line up and the right technology is selected, integrating storage into an existing grid is far from trivial.

Voltage and frequency control – Batteries must be equipped with advanced power electronics to provide reactive power support and ride‑through capabilities during faults.
Site‑specific constraints – Land availability, interconnection queue times, and environmental permitting can add years to a project timeline. For instance, a 100 MW battery slated for California faced a two‑year delay due to transmission upgrade requirements.
Cyber‑security – As storage assets become increasingly software‑driven, they present new attack surfaces. Grid operators now require rigorous cybersecurity standards, adding another layer of cost and compliance.

These integration challenges have forced developers to work closely with utilities from the outset, often co‑designing storage projects alongside transmission upgrades. The shift toward collaborative planning underscores that storage cannot be treated as an afterthought; it must be woven into the grid’s architecture from day one.

Policy and Market Design – The Silent Game Changers

A final, often overlooked reason why assumptions about storage have been upended lies in the policy arena. Early on, many governments offered technology‑agnostic incentives—tax credits or feed‑in tariffs that treated storage like any other generation asset.

Dedicated storage tariffs – Some jurisdictions (e.g., New York’s NYSERDA) now provide specific incentives for long‑duration storage, recognizing its role in firming renewables.
Capacity market eligibility – In regions like the UK, storage can now bid into the Capacity Market, receiving payments for being available during scarcity events.
Performance‑based remuneration – Instead of flat payments, some markets reward storage based on actual grid services delivered (e.g., frequency response performance).

These evolving policies have both opened doors and created new hurdles. While they help capture the full value of storage, they also demand sophisticated compliance and reporting mechanisms. Projects that can navigate this regulatory maze are better positioned to secure financing.

What This Means for the Future – A More Realistic Roadmap

All these factors—economic realities, technology diversity, integration complexities, and shifting policy—paint a picture that is far richer (and messier) than the early “store‑and‑release” fantasy. Yet, the challenges are not roadblocks; they are signposts guiding the industry toward a more sustainable, resilient energy system.

Hybrid storage solutions – Combining short‑duration batteries with longer‑duration options (e.g., a battery + hydrogen plant) can cover both fast response and multi‑day firming needs.
Advanced business models – Energy‑as‑a‑service platforms are emerging, allowing multiple stakeholders to share the cost and benefits of storage assets.
Continued R&D investment – Despite high upfront costs, research into nanocomposite electrodes, solid‑state electrolytes, and scalable flow‑battery chemistries promises performance gains that could tip the economics in favor of broader deployment.

In short, the initial assumptions about storage being a low‑cost, universally applicable add‑on have been replaced by a nuanced understanding that storage is a systemic enabler—one that must be thoughtfully matched, financed, and integrated. By embracing this complexity, we can unlock the full potential of storage to smooth the renewable transition, improve grid resilience, and ultimately help achieve net‑zero goals.