In the first half of this year we observed some positive signs: China’s increasing electricity system reforms, the rise of the “energy internet,” and growing activity in frequency regulation and peak-load shifting in China’s North. We also saw some less positive developments such as increases in wind and solar curtailments. Good and bad alike, all of these developments underline the importance of energy storage in a wide array of fields, from renewable energy, distributed generation and microgrids, as well as in setting electricity prices. From the beginning of 2016 to present, China’s energy storage industry took steps forward in project planning, policy support, and increasing product capacity.
Here are nine highlights:
1) Large-Scale Storage Projects Increased
According to CNESA’s project database, storage project installations continued to increase. In the first half of 2016, newly operating projects totaled 28.5 MW, principally focused on renewable energy grid integration in Northwestern China. The nine newly operating projects include Golmud (Tibet) City Solar Storage Station and Kelu Electronics Solar Storage in Yumen, Gansu province.
In addition to the projects in operation, in the first half of 2016, China also announced storage project construction plans adding up to over 400 MW in scale (CNESA project database). System integrator companies Samsung SDI-Sungrow, Dalian Rongke, Narada Battery, were the main enterprises involved. Technologies involved include Li-ion, flow, and lead storage batteries. Principal applications include ancillary services, large scale renewable energy grid integration, and distributed energy and microgrids. CNESA forecasts that these projects will gain momentum in the upcoming years.
2) New Energy Policies Emphasized Energy Storage
As China enters its 13th Five Year Planning Period in the midst of the energy revolution, the State Council, National Development and Resource Council (NDRC), and National Energy Administration (NEA) have all geared policy efforts towards adjusting China’s energy systems, innovation of new technology, manufacturing equipment, constructing smart grids, and developing renewable energy. CNESA predicts future policies will be focus on the energy internet, ancillary services, and microgrids, all increasing applications for energy storage technology.
Energy storage was mentioned in numerous policy documents including, “Innovation in the Energy Storage Technology Revolution: New Action Plan (2016-2030),” “Outline for the Strategy of Driving National Innovation,” and “Made in China 2025—Plan for Installation of Power Equipment.” Such policy documents clearly outlined roadmaps for development and innovation in the energy storage, project demonstrations, and how to tackle key problems in the industry.
The importance and application value of energy storage technology also appeared in the policy document “Guiding Opinions on Implementing the ‘Internet+’ Smart Energy Development.” Energy storage is related to internet, electricity storage, heat storage, hydrogen cells, and gas storage. Through different forms of storage, electric power, heat, traffic, and oil and gas applications all interconnect.
3) Power System Reforms Granted More Marketing Opportunities for Energy Storage
New rounds of electricity system reforms aim at transmission & distribution price reforms, the creation of an electricity market, sell-side reforms, and launching demand response. Increasing the degree of electricity marketization will allow the latent market potential of energy storage to open up, expanding storage business models, and bring about a turning point in the industry. As electricity retailers throughout China are established, the reforms will go into effect, introducing a flexible and diverse pricing system, thus creating spaces for the use of user-sited energy storage.
Distributed storage set-ups for industrial users were also a hot topic. At present, companies like BYD, Zhonhen, and GSL System Integration Technology Co. have already began targeting industrial parks for planning large scale distributed energy storage systems. Optimizing differences in peak and off-peak electricity prices is the primary goal, along with balancing PV use levels, participating in demand response, delaying upgrades to electricity system infrastructure, and providing in ancillary services. Given current peak and off-peak price conditions, increasing off-peak consumption and decreasing peak consumption in industrial areas can result in investment returns of five years.
4) Energy Storage Can Play a Chief Role in Providing Ancillary Services in Northern China
In June of 2016, the NEA formally issued a policy in favor of electricity systems peak-load shifting and frequency regulation titled, “Notification on Promoting Energy Storage in China’s Northern Regions Ancillary Services Compensating (Market) Mechanisms Trial Project.” This is the final release of the document after the NEA solicited opinions in May earlier this year.
The first part of this document discusses how to formulate substantive policies supporting the energy storage industry, how to employ energy storage in ancillary services cost sharing mechanisms, and how to demonstrate electricity storage technology’s superiority in peak-load shifting and frequency modulation. First of all, the document states that policy must first clearly give stand-alone energy storage an important position in electricity markets. Energy storage also needs a recognized identity similar to that of ancillary services, generator storage, retailers, and electricity users. Next, policy must encourage energy storage diversification by encouraging investment diversification. Policy should also support both concentrated energy storage in renewable energy generation and distributed energy storage facilities in smaller districts, buildings, industries, as well as user-sited distributed storage facilities. Storage’s use in peak balancing, and fast response, will encourage the recognition of its value. Additionally, the document states policy must promote not only power plants, but also user-sited storage facilities to participate in peak-load shifting ancillary services together with grid companies.
5) Rapid Investments in Battery Companies are Driving Energy Storage
The rising popularity of electric cars is driving domestic demand for batteries to the point where supply doesn't meet demand. In the first half of 2016, companies like BYD, Lishen, and China Aviation Lithium Battery Co., Hefei Guoxuan High-Tech Power Energy Co., and Optimum Nano, drove the domestic battery industry forward introducing several rounds of investment plans. Lead battery manufacturers such as Menshine, Shuangdeng, and Narada Power represent enterprises also vigorously investing in Li-ion battery systems.
According to CNESA’s statistics, in the first half of 2016, domestic enterprises already announced an increase of 120 GWh in newly added production capacity for power Li-ion batteries. If operations begin smoothly, by 2018, the domestic market can potentially be faced with the pressures of a supply exceeds demand scenario. In addition to current applications in electric cars, electric bikes, and the electric tools markets, battery storage will become a key industry for battery manufacturers and focus point in future markets.
6) New, Specialized Energy Storage Companies Entered the Market
From 2015 to the first half of 2016, many new companies specializing in energy storage entered the market, with a combined planned storage capacity exceeding 100 MWh. These new businesses largely aim at developing user storage products, providing energy storage systems solutions services. The newly founded companies comprise two main types:
A) Battery manufacturer and PCS companies launching partnerships with system integrators. Examples include:
a. Sungrow Power and Samsung SDI: The joint venture has already accrued more than $170 million USD in investments In July of 2016 the two officially launched energy storage equipment production. They expect an annual production capability of 2000 MWh in storage equipment.
b. Shenzhen Clou Electronics and LG Chem: The two have set up a new joint venture enterprise, Shenzhen Kele New Energy Technologies Ltd., at a registered cost $3.5 million USD. The planned yearly production capacity is set for over 400 MWh, with assembly lines set to begin operations starting in early 2017
c. EVE Lithium Batteries and Neovoltaic: EVE recently purchased a 12.5% share in Neovoltaic. Neovoltaic mostly focuses on PV storage, energy management services, and internet in the Australian and German markets. This move will help EVE expand its storage user base.
B) Traditional PV enterprises along with PV system integrators opening up storage-focused companies. Examples include:
a. Suzhou GCL Integrated Storage Technology Co.: This company, set up by GCL System Integration Technology, was founded with expected annual production of 500 MWh in battery capacity. At present, they have already developed and are taking orders for their first storage product, the E-KwBe NC-S Series. In the future the company will move toward distributed PV, industrial storage, and grid storage.
b. Trina Energy Storage: Trina Solar established Trina Storage Co. as a system integrator company to provide storage solutions for industrial users as well as public utility grid storage, residential storage, off-grid storage, communications systems, and vehicles.
7) Chinese Companies Target Foreign Residential Storage Markets
In recent years, the distributed residential storage market has developed in countries like Germany, Australia, the U.S., and Japan. Local governments overseas have drawn up storage installation subsidies, tax credits, and other demand response incentive mechanisms in order to expand the storage user base and bring about viable business models.
While companies like Tesla, Sonnenbatterie, and LG Chem, release residential storage products all over the word, Chinese storage technology companies are targeting the Australian and German residential storage markets. Since 2016, Shenzhen Clou Electronics, Neovoltaics, China Aviation Lithium Battery Co., GCL Integrated Storage, Pylontech, and Trina Storage, have all released products for residential PV + storage users with capacities ranging from 2.5 kWh to 7 kWh, mainly employing Li-ion battery technology complete with smart energy management systems solutions. Chinese storage enterprises, with technology and production capacity in Li-ion and lead-acid batteries, are looking to establish business partnerships with PV installers and storage system integrators in the Australian, German, and American residential storage markets.
8) Chinese Regional Governments Have Taken Measures to Support the Growing Domestic Storage Industry
As the storage market grows, local and regional governments have grasped the importance of the emerging energy storage industry. In 2016 the governments of Dalian City, Qinghai Province, and Bijie City have all initiated planning efforts for the storage industry, preparing for industrialization and constructing demonstration centers.
Dalian City (Liaoning Province)
In March of 2016, the Dalian City local government issued a policy document “Dalian City People’s Government Opinions on Advancing the Energy Storage Industry,” declaring the city a research and manufacturing center of vanadium-flow and Li-ion batteries. The policy outlines a supply chain involving local materials preparation and system integration, estimating that both the storage and related industries worth at nearly 50 billion CNY. In April of 2016, the NEA approved Dalian’s National Chemical Storage Peak Load-Shifting Station demonstration project, with a scale of 200 MW/800MWh. This signifies the first time that the NEA has approved a national scale chemical storage demonstration project and ensures enormous benefits for Dalian’s flow battery industry.
In the 13th Five-Year Plan, Qinghai Province will classify lithium batteries as a “key industry.” The province has confirmed that its lithium reserves constitute over 80% of the entire national supply. At present, Qinghai Province plans to construct a vertical supply chain including lithium extraction from salt pools, synthesis of lithium carbonate, and manufacturing of positive and negative electrode material, membranes, power and storage batteries, power control systems, and electric vehicles. The government also plans to expand the electric vehicle user base in the cities of Xining and Haidong. They list primary storage applications as combining the PV and wind operations in Haixi, Hainan, and Haibei.
Bijie City (Guizhou Province)
Beginning in 2014, China began its first compressed air storage/multiple energy source demonstration project in Bijie City, Guizhou Province with 1.5 MW capacity. Next, in 2016, Bijie also became the site of China’s first large scale physical storage national research and development center, the first of its kind to be established in Bijie. After construction is completed, it will be the largest in Asia, gearing to produce world-class research.
8) Electric Vehicle Battery Recycling Presents Both Opportunities and Risks
As electric vehicles become more and more widespread, a large scale influx of retired batteries can also be expected in upcoming years. In 2016, China’s Ministry of Industry and Information Technology issued “Policy on Uses for Recycled Electric Vehicle Batteres (2015 edition)” pointing out that producers should be responsible for implementing systems to recycle and reuse electric vehicle batteries. Electric vehicle manufacturers should take on primary responsibility for the recycling of used batteries, while battery manufactures should take responsibility for after-sales service systems. Vehicle and Li-ion battery manufacturers alike have both started paying close attention to the battery waste chain.
According to the CNESA research team, domestic power battery enterprises have already began technology research and demonstrations with the battery second-use mind. Confronted with the enormous market capacity of second-life batteries, the domestic battery industry has many questions that need to be answered yet, such as how to set reasonable market prices, how to choose suitable applications, how to establish quality standards.
All in all, considering proven application value, strengthening in supporting policies, as well as increasing industry investment, the present developments in the domestic storage industry are stable and favorable. We look forward even more progress in the remainder of the year.