Potentials for Energy Storage in China's Ancillary Services
An interview with Tina Zhang, China Energy Research Society Energy Storage Committee Secretary General, China Energy Storage Alliance Secretary General
Interviewed by Qiuling Xu, China Electric Times
Introduction: Solar and wind powered energy are developing at high speed, yet at the same time are faced with a series of challenges regarding energy waste. Through ten years of development, energy storage has already been acknowledged as the crucial technological solution to this problem. The following is an interview with CNESA Secretary General, Tina Zhang, regarding energy storage’s promise in providing ancillary services.
Cost is Key for Energy Storage’s Participation in Load Shifting/Frequency Modulation Services
Xu: In regards to the changing energy landscapes in China where wind and solar resources are quickly being integrated into the grid, what challenges does this pose for China’s ancillary services?
Zhang: Essentially, the problem is like this: the difference in demand between peak- and off-peak electricity is growing and the system’s load shifting capacity can’t keep up. Powering up and powering down large-scale thermal power equipment results is highly inefficient, causes equipment wear and tear, wastes coal, and is neither safe nor economic. Pumped hydro storage capacity is also insufficient. Demand-side management that staggers electricity users to mitigate peak load stress is also not accomplishing enough. In the future, highly efficient, smart grids need large sources of distributed capacity and renewable energy to enter the grid. Additionally, the grid’s ability to accept renewable sources in large part depends on the structure and composition of the electrical power systems, especially the ability to shift peak loads.
Xu: So the industry is following more and more closely the potential value of using energy storage in providing ancillary services?
Zhang: Yes. We will see, adding so much increased capacity in renewables brings about short and long-term problems for the electricity industry. At present, we’re seeing high rates of curtailed wind and solar. In the future, high rates of grid integrated renewables poses challenges for grid regulation. With regard to China’s current main power sources, thermal power is not only the country’s principal electricity generation source, but also undertakes most of current ancillary service operations. Pumped hydro storage and natural gas, by contrast, are used much less. In addition, during winter months, thermal power must also provide heating; you could say that thermal power’s multifaceted role makes it difficult to exhibit its function in providing ancillary services. In light of these two circumstances, this gives storage a certain opportunity. Using energy storage to provide ancillary services will increase grid flexibility, as well as encourage renewables consumption.
Xu: Since resources to provide ancillary services in China are limited, the idea that storage can participate in this market is becoming a hot topic. Starting with the 2011 Zhangbei solar+storage transmission integration project, the performance and effectiveness storage stations providing ancillary services for large scale renewables projects are being validated. However, the fact remains that costs are still an issue. Do you see this as a challenge?
Zhang: It is. Cost is certainly an important factor when considering whether or not storage can be used to provide ancillary services. With regard to mainstream storage technology costs, we’ve discovered that through 2015 to the beginning of 2016 storage investment costs have come down significantly when compared to 2014. Take the lithium iron phosphate battery as an example: system costs have already dropped to USD$300/kWh, which we predict will drop 50% by 2020, reaching as low as USD$150/kWh. By 2020, we also expect other storage technology costs to drop significantly, among them lead batteries to drop 48%, vanadium-flow batteries by 23%, and supercritical compressed air storage to drop by 44%.
You could say, the decreasing costs also will help storage participate in “peak shaving valley filling” applications, further assisting an increase in renewables consumption. Energy storage systems can realize a multitude of applications and bring about economic gains and increase efficiency. Thus whether or not the investment costs of storage are economically feasible depends on if storage stations obtain the rights to participate in ancillary services. This will be the driving force behind realizing the benefits and value of storage and promoting future adoption of energy storage technology.
The Urgent Need for a Feasible Profit Model
Xu: How would you say China has made headway in promoting the use of energy storage to provide ancillary services?
Zhang: In June of this year, China’s National Energy Administration formally released “Notification for the Trial Demonstration Promoting Storage in China’s North Compensation (Market) Mechanism” which for many was a burst of fresh air, blowing open the door to allow storage to participate in ancillary services markets. Everyone in the industry was full of confidence. According to our forecasts, under “business-as-usual” conditions, Chinese storage capacity will reach up to 14.5 GW (these data include thermal storage, but not pumped hydro). In an ideal scenario, we could see capacity reaching up to 24.2 GW. Favorable policy and market requirements are the two forces that would set the foundation to encourage storage applications. At present, projects like Dalian’s national level chemical storage demonstration and the Erlianhaote microgrid network project are either in planning or are actively being deployed. Some new models for storage stations providing ancillary services are also under investigation.
Xu: So these new models you just mentioned, investigations into such models have produced what kind of results?
Zhang: Most recently at the “Seminar on the Role of Large-Scale Storage in New Energy Generation,” industry leaders unanimously agreed, the biggest challenge facing the storage at the moment is lack of a viable profit model. In theory, storage can improve the quality of power generated by wind, alleviate stress on the grid, participate in power electricity markets, and provide ancillary services, all of these applications. But owing to the fact that storage lacks a clear mechanism to participate in these markets, and lacks a method to calculate costs and generate profits, it’s really hard to properly consider storage’s value. In addition, at the present stage, storage is mainly deployed at wind and solar stations, effectively binding storage with wind/solar operations. The grid has no way to optimize the dispatch of storage resources, making storage’s function less than anticipated. We need to separate storage from wind/solar stations to properly calculate its profitability. As a result, all this brings about a lot of difficulty in setting up a payment mechanism.
Xu: And there’s no policy addressing this?
Zhang: The industry is actively working on this. For example, the domestic company, Quanwei, has been suggesting the concept of constructing stand-alone battery storage stations at centralized wind/solar sites. They hope that such a setup would allow the stations to coordinate wind/solar storage in addition to separated, stand-alone storage operations. This kind of stand-alone storage could be directly dispatched by the grid to provide many types of services including ancillary services, backup capacity, and power output smoothing, much similar to small-scale pumped hydro stations. In Quanwei’s stand-alone storage concept, the storage station’s adjustable capacity is relatively easy to calculate, this definitely simplifies many of the problems faced by energy storage station. Separating storage from generation equipment makes things clearer from an investments point of view as well, making it simpler to make economic assessments. At the same time, it makes it easier to illuminate the intrinsic value of storage technology, itself, making storage technology a stronger target for policy and subsidies.
This interview has been translated from the original Chinese, available here.