Beijing’s Demand Response Pilot: A Review

Since the launch of city-wide demand-side electricity management trials across China in 2013, the cities of Beijing, Shanghai, Suzhou, and Foshan have established their own demand response resource pools. Jiangsu Province also began demand response pilot spanning the entire province, and in the summer of 2016, implemented the world’s single largest (by load volume) demand response event to date. Through three years of trial periods, China’s demand response programs have largely been co-administered by the government and grid enterprises. Large-scale load aggregators have also played a supporting role integrating both business and residential power users, and several business and residential users have also taken the initiative to participate in demand response programs directly. In this article, we will provide an overview of Beijing’s city-wide demand response pilot as well as provide an outlook for the implementation of future demand response programs in China.

Beijing's demand response program was coordinated through the online DSM platform. 

Beijing Demand Response Pilot Implementation:

Large-scale load aggregators played an important role in systematically organizing Beijing’s demand response participants who opted-in to the program. Users with the capabilities to manage their own energy resources, however, were encouraged to participate independently to encourage the spread of energy informatization. The program was modeled on a six-step system: 1) contract agreement; 2) demand response event dispatch; 3) load allocation; 4) response feedback; 5) load reduction implementation & monitoring; and 6) verification.

The efforts of the 2015 pilot focused on the best ways to ensure stable grid operations and air quality during high-pollution periods. In the 2015 pilots, Beijing’s Municipal Electricity Demand-Side Management Platform served as the base for data collection and implementation of demand response events, though, alternative models comparing government-lead versus grid enterprise-lead implementation were also considered and explored.

 

Beijing DR trial implementation organization.

Platform Organization:

The demand response software accessible via Beijing’s Municipal Electricity Demand-Side Management online platform was used to serve load aggregators, collect the 15-minute interval real-time monitoring of user responses, set day-ahead response plans, notify aggregators of demand response plans, and request feedback to allocate the demand response load volume. In the event that demand response feedback indicated the currently allocation could not meet dispatcher needs, the demand response software automatically adjusted the allocations to meet the requirements and implement the plan. After the end of a demand response event, the software system calculated the baseline load volume and carried out secondary calculations to correct for incomplete data or errors.  

Compensation:

In the 2015 pilot, compensation levels were determined by participation category, providing compensation based on how far in advance users were notified before a demand response event. Notice times were 30-minute advance notice, 4 hours advance notice, and 24 hours advance notice. The 30-minute advance notice group received a payment of CNY 120/kW, the 4-hours advance notice received CNY100/kW, while the 24-hours advance notice group received CNY80/kW.

Program Principles:

The 2015 demand response commitment contract clearly states that the number of demand response events will not exceed 10, with each event’s load reduction to not exceed the total capabilities of the aggregated resource pool. The compensation was allocated according to the actual hourly response during each demand response event. Demand response events occurred only during the summer and winter seasons, with compensation calculated individually per season, with the total payment made after the end of the winter season. The total demand load was calculated according to the principles set forth by the National Development and Reform Commission in conjunction with the Beijing Municipal Power Demand-Side Management Service Platform. A third-party made additional verifications of response implementation, and payments were made in line with the established payment methods.

Implementation Highlights:

In the summer of 2015, the Beijing Municipal Grid experienced record-breaking grid loads.

On August 12 and 13, grid dispatchers organized 17 load aggregators and 74 individual users to participate in a demand response event, shaving 57 MW off of the peak load.

Between August 20 and September 2, 2015 two large events hosted in Beijing, the 70th Anniversary Celebration Commemorating the end of WWII along with the World Track and Field Championships represented a massive strain on the grid load. Beijing officials organized load aggregators and individual users to decrease demand during peak hours 2-3 hours each day over a 10-day period, ultimately shaving an accumulated 430 MW from the grid load.

Additionally, in winter 2015, the city municipal government issued several severe smog alerts. Beginning December 1st, officials organized 19 load aggregators and 136 individual users participated in seven demand response events lasting 14 hours each. According to preliminary estimates, this achieved a largest single-event load reduction of 170 MW.

User Analysis:

Power users participating in the 2015 Beijing demand response pilot were divided among industrial users, public facilities, and residential users. According to the cumulative data for the year, industrial users represented 93% of response volume, mainly in the manufacturing and mining sectors. Public facilities, including office buildings, hotels, business buildings, and sports arenas made up the other 7% of response volume. Residential users made up a relatively small portion of the 2015 resource pool with 0.4% of response volume, but this does not diminish the value of integrated residential response resources as a meaningful and important asset in future demand response programs.

Response Strategy:

During response events, industrial users controlled their electricity use through adjusting the use of manufacturing equipment. A portion of industrial users also adjusted climate controls, lighting, and ventilation. Public facilities generally acted in demand response events by modifying temperature controls and lighting, some even drawing from energy storage reserves to power their operations.  

There were three load aggregators that combined residential users as a demand response resource. Among them, one aggregator used heating and cooling controls to organize residential users in a small apartment block to participate in demand response. The other two residential aggregators used smart controls of electric appliances including air conditioners, hot water heaters, and water coolers to coordinate response steps remotely.

Thoughts on Next Steps:

As China is in the midst of upheavals reforming the electricity system and demand-side management, demand response is very likely to remain in the trial mode for the near future. As they stand, current electricity markets are unable to support full adoption of demand response markets, meaning governments and grid enterprises will still play a key role in the upcoming years.  

The trial stages have afforded provincial and municipal governments the chance to experiment with different implementation methods. One innovative policy in Jiangsu Province collects revenue from electricity sales during critical-peak times* to support the implementation of demand response programs. This reflects an economic equality among electricity price earnings and demand response value. Based on this method, many other cities could set up demand response program funds, and ensure applications of demand response.

The Need for Marketization:

Not all participants in demand response are driven my free-market principles, as in some administrative regions some users are effectively forced to participate to avoid even greater economic losses through imposed fines and penalties. While on the one hand, it’s important to begin the transformation to increase marketization of demand response instead of emphasizing fine-tuning the operational logistics, there remains much work to be done regarding investment costs, earnings calculations, and economic incentives as China undergoes series of power system reforms.

Conclusion:

During the trial period each trial city called upon load aggregators and electricity users to carry out demand response events but cutting down on their respective loads. Promising future directions include, participation via price competition, and the use of smart technology to coordinate alerting users of an event, the duration of the event, and controlling electric appliances. The demand response platform likewise can improve through providing more concrete services for government agencies, load integrators, and electric users in order to achieve an optimal and efficient coordinate demand response effort and ultimately ensure safe grid operations.

2016 and Beyond:

The Beijing municipal government has spent the 2016-year reviewing data from the 2015 trials. There was no demand response program for the 2016 period. We are awaiting announcements for plans for a potential 2017 demand response pilot continuation.

*Electricity price designation for the most expensive portion of “on peak” electricity.

This article has been translated from the original Chinese. 

Energy Storage Innovation Competition - Calling for Entries

International Competition for Innovation in Energy Storage

The China Energy Storage Conference and Expo was founded in 2012 with the support of the National Energy Administration and Zhongguancun Science Park. Now China’s most influential exhibition and conference covering the energy storage industry, China Energy Storage Conference and Expo serves as a platform to showcase the latest developments in storage solutions as well as promote policy changes and commercial applications of storage technology. In 2017, the International Competition for Innovation in Energy Storage was founded to recognize outstanding technologies, projects, and individuals for their contributions to the industry.

Entry Categories:

Prizes will be awarded to outstanding entries in the following categories:

Technology Prize:

To be awarded to the top 10 energy storage technologies/products. Nominations open to the general public for entries in the following categories:

• Physical storage
• Chemical storage
• Other storage technologies (supercapacitors, fuel cells, etc.)
• Battery systems (inverters, management systems, software, systems integrators)
• Energy storage solutions

Applications Prize:

Will be awarded to the top 10 applications in energy storage projects. Nominations will be open to the general public for entries in the following categories:

• Utility-scale, centralized, grid-connected applications (distribution/transmission-sited, ancillary services, etc.)
• Distributed projects (industrial, off-grid island storage, etc.)
• User-sited projects (residential systems, EV charging stations, military, data centers, etc.)

Leadership Prize:

Will be awarded to 5 outstanding individuals in the energy storage industry. Nominations will be open to the general public

Lifetime Contribution Prize:

Will be awarded to 1 individual who over his or her lifetime has made outstanding contributions to the progress and development of the energy storage industry. Nominations will be made by the expert’s committee, voting open to the general public.

Innovation Grand Prize:

Will be awarded to 1 entry from the Technology and Applications categories, as selected by the Evaluation Committee.

Winner Benefits

Innovation Grand Prize: The Innovation Grand Prize winner will receive an award of CNY 10,000

Promotion and Exposure. Winners will be given several opportunities to increase their exposure. At the 2017 International Energy Storage Conference and Expo conference, winners will be featured in the exhibit hall, connecting them to over 4,000 energy storage professionals from around the world. Select winners will also be invited for speech opportunities at the awards ceremony. Outside of the conference, winners will also have promotion opportunities through conference media partners, who will feature winning entries, as well as through official releases on CNESA media channels, including the conference website, WeChat, Twitter, etc.

Financial Support. Winners will have the opportunity to schedule one-on-one consulting services with Northern Light Venture Capital, Kaiwu Investments, Tus Holdings, Tsing Capital, DGJ, IDG Capital, and Sequoia Capital.

Project Recommendation. Winning projects will be directly forwarded to related government agencies to assist in gathering government-backed support. Winning projects will also be nominated for the China Energy Research Society’s “China Energy Innovation Prize.”

CNESA Membership Services. Winners will receive a free year of membership in CNESA, a copy of the complete edition of the 2016 white paper, and CNESA project evaluation services.

How to Nominate:

The nomination form and submission instructions can be accessed on the official competition website. 

Competition Timeline:

January 6, 2017 – March 10, 2017: nomination period opens. Nominations for the Technology, Applications, and Leadership Prizes can be submitted on the official conference website

March 11, 2017 – April 30, 2017: Voting period opens (all categories)

May 22, 2017: Winners chosen

May 23, 2017: Awards presented

The nomination forms and voting portals will be hosted on the official conference website. Winners will be selected by both the recommendations of the Experts Evaluation Committee along with online votes (accounting for 20% of total score).

Competition Organization:

Guiding Organizations: Chinese Association for Science and Technology, National Energy Administration 

Hosting Organization: China Energy Research Society

Undertaking Organization: China Energy Research Society Energy Storage Committee/China Energy Storage Alliance

Supporting Organizations: Global Energy Storage Alliance, California Energy Storage Alliance, Zhongguancun Advisory Board, Beijing Haidian Science Park, Tsinghua University Department of Electricity Systems, China Academy of Sciences Institute for Thermal Physics, Chinese Academy of Sciences Physics Research Institute, China Academy of Sciences Dalian Physical Chemistry Research Institute, China Electric Power Research Institute Department of Electrical Engineering and New Materials, Tsinghua University Energy Internet Innovation Research Institute, ENF Nengrongwang

Advisory Committee: Shi Dinghuan, Yi Baolian, Wu Zongxin, Yang Yusheng, Chen Liquan, Zhou Xiaoxin, Cheng Shijie, Yu Zhenhua (chair)

Experts Evaluation Committee: Chen Haisheng, Lai Xiaokang, Xia Qing, Zhang Huamin, Li Hong, Hu Xuehao, Jiang Liping, Wang Zhiming, Yue Jianhua, Guo Jiabao, Wang Zidong, Wen Zhaoyin, Yi Jin, Janice Lin, Mou Liufeng, Zhao Bo, Li Junfeng, Gao Feng.

China's Top 10 Storage Headlines of 2016

China's domestic storage industry made steady progress in 2016. Electricity system reforms continued to roll out while new regulations in China’s "Three North" Region (三北) allow storage to provide and receive compensation for ancillary grid services. All of these and more contributed to the industry's continued growth as well as carving out market space for future storage technologies. China Energy Storage Alliance (CNESA) has closely followed the market developments this year, and here are the top 10 take-aways. 

1) Storage Listed as "Key Technology" in National Energy Action Plan

On April 7, 2016, The National Development and Reform Commission (NDRC) along with the National Energy Administration (NEA) jointly released the “Action Plan for Innovation in the Energy Technology Revolution (2016-2030)” 《能源技术革命创新行动计划（2016-2030年）》classifying energy storage as one of the 15 “key technologies” to develop over the upcoming 15 years.  CNESA’s Expert Committee along with Alliance industry members worked together providing contributions to the “Innovations in Advanced Storage Technologies” section.

The Action Plan laid out goals for 2020, 2030, and an outlook for 2050 regarding thermal storage, compressed air storage, flywheel storage, high temperature superconducting storage, high capacity supercapacitor storage, as well as battery storage technology.

2) Liaoning Province Announced Plans for the World’s Biggest Chemical Storage Project

Dalian City's reform commission, in order to increase city and province-wide load shifting ability as well as curb curtailed wind energy, submitted plans for a 200 MW/ 800 MWh vanadium flow storage project. Once approved, this marked the first time the NEA has signed-off on a national-level large scale chemical storage project. Total investments for the project are at US$500 million with construction to begin by the end of 2016. The first 100 MW capacity is expected to be installed by the end of 2017 with the the remaining 100 MW coming in by 2018.

3) Energy Storage Conference & Expo 2016 Successfully Completed its 5th Year

On May 11, 2016 CNESA wrapped up the 5th annual Energy Storage Conference & Expo in Beijing. The event brought together policymakers, industry leaders, and technology experts for three days of high-level talks, networking, and collaboration. CNESA also released its 2016 White Paper announcing predictions for China's storage market to reach 24.2 GW by 2020 under ideal conditions, and 14.5 GW with business as usual conditions (all figures excluding pumped hydro storage).

CNESA is pleased to further announce the 6th Annual Energy Storage Conference & Expo is set to take place in Beijing May 22-24, 2017, with plans to release the 2017 White Paper at that time. 

4) China's North Opened to Energy Storage

On June 7, 2016 the NEA released “Announcement on Promoting Electrical Storage Participation in Ancillary Service in the ‘Three Norths’ Region” 《关于促进电储能参与“三北”地区电力辅助服务补偿（市场）机制试点工作的通知》 opening up power markets in China's North to energy storage. The announcement states that that up to five projects will be eligible to participate in peak regulating and ancillary services compensation mechanism trials. Payment, similar to United State's FERC Order No. 755 “mileage” payment mechanism, is based on services provided to increase effectiveness of the scheme. This announcement was a milestone in storage related policy, marking the first time storage received recognition to participate in providing grid services.

5) CERS Established Storage Committee, Naming CNESA Secretariat

The China Energy Research Society, a research body formed under the China Association for Science and Technology, founded an Energy Storage Committee in May of 2016 in order to promote academic exchange in the energy storage field, promote innovation, and provide a platform for collaborations and research discoveries. Soon after, the committee named CNESA as secretariat, together aiming to promote the implementation of industry-related policy, encourage exchange, and develop business models. On September 9th, 2016, the Committee convened for the inaugural meeting with attendees representing industry as well as high-level government agencies.

6) Chinese Premier Calls for Storage Technology Breakthroughs

On November 17, 2016, Chinese Premier, Li Keqiang, emphasized the need for technology breakthroughs in energy storage and microgrid technology. In order to meet China's goals to increase adoption of renewable energy resources, Premier Li stressed the need for energy storage. Additionally Premier Li called for increasing China’s global competitiveness in the energy technology sphere, calling for breakthroughs in microgrid technology and the construction of the “Internet+” Smart Energy, promoting grid system adjustability, increasing renewables consumption, and developing state-of the art high-efficiency energy technology. He also voiced the need for reforms in state-run energy enterprises, and increasing support for privately-run energy companies entering the industry.

7) NEA Project Guidelines Include Energy Storage  

On November 22, 2016, the NEA published the “National Electricity Project Demonstration Management Guidelines” 《国家电力示范项目管理办法》clarifying the application procedures for demonstration project assessment and approval. Among these guidelines, the document also states that energy storage projects fall under this jurisdiction. The release of the document marks a big step for energy storage, showing official, legal recognition by the National Energy Administration, thereby laying the groundwork for future storage projects, policies, and wide-scale implementation.

8) Battery Companies Massively Invested in Storage Projects

As more and more consumers move to purchase electric vehicles, supply has struggled to meet demand. As such, in 2016 companies like BYD, Lishen, China Aviation Lithium Battery Co., Guoxuan, and Optimum Nano released investment expansion plans. Additionally, lead-battery producers like Mengshine, Shuangdeng, and Narada invested heavily in constructing Li-ion battery production centers. On November 22, the Chinese Ministry of Information and Technology published a draft proposal on electric vehicle industry standards 《汽车动力电池行业规范条件（2017年）》 stipulating future Li-ion factories must have annual production capacities of 200 MWh. The figure, however, was later updated to 8000 MWh, a move which will likely further increase investments.

9) New Specialized Storage Companies Emerged

Several specialized storage companies were founded in 2016 deploying large scale storage production capacity totaling over 100 MWh. New companies largely originated in one of two ways: either 1) battery manufacturers and PCS companies combining with system integrators, or 2) PV manufacturers moving into storage applications.  In the first category, examples include Sungrow’s collaboration with Samsung SDI, Clou Electronics with LG Chem, and Eve Battery with Alpha ESS. The second category of PV manufacturers expanding to storage operations includes GCL Technology Integration Co. who recently founded GCL Integrated Storage announcing a 500 MWh annual capacity production center in Suzhou, along with Trina Solar announcing Trina Storage.

10) Electricity System Reforms Continue to Roll Out

Following the 2015 release of Document No. 9 (9号文) additional provincial, city, and regional-level reforms have begun to take shape introducing electricity retail reform pilots. So far, the NDRC has already reviewed plans comprehensive reform trials for 18 provinces and autonomous regions including Yunnan, Guizhou, Shanxi, Guangxi, Hainan, Gansu, Beijing, Hubei, Sichuan, Liaoning, Shaanxi, Anhui, Henan, Xinjiang, Shandong, Ningxia, Shanghai, and Inner Mongolia. The following 8 provinces and regions have also already launched retail reform pilots: Guangdong, Chongqing, Xinjiang Production and Construction Corps, Heilongjiang, Fujian, Hebei, Zhejiang, and Jilin. Additionally over 1,000 new electricity retail companies have been registered across the country.

CNESA Storage Market Analysis Q3 2016

Leading up to Q3 2016, China has accumulated a total of 170.6 MW of operating energy storage, this figure represents a 34% increase compared to the same period last year. 

In Q3 of 2016, 14 new projects were announced including projects in the planning stage, projects under construction, and newly operation projects totaling 587.0 MW in scale, representing a 586% increase compared to Q3 of 2015, and a 50% increase compared to Q2 of this year. These new storage systems are part of projects geared at renewable energy grid integration along with distributed electricity generation and microgrids. 

Q3 also saw 3 projects beginning operations totaling 1.5 MW in scale, a 50% increase compared to the same period last year, and an 87% increase compared to Q2 of 2015. These projects primarily focus on distributed generation and microgrids. 

Bulk of New Projects Concentrated in China's Northwest

Gansu Province:

Guazhou County, Jiuquan City: Shidai Jiahua Co. has announcement plans for a 400 MW*4h super capacitor storage station as part of a wind curtailment microgrid project demonstration. Investments totaling US$860 million with an expected payback of 16-18 years.

Inner Mongolia

Xilin Gol: Plans announced for a 160 MW microgrid and renewable grid integration project demonstration as part of local government plans to explore setting up independent electricity retailers.

Jiangsu Province

Xuzhou Economic Development Zone: A 1.5MW/12MWh project under China Silicon Industries, Narada Power, Sungrow, GCL Power began operations.

Wuxi City Xingzhou Industrial Park: A Narada Power backed 15 MW/120 MWh project, with plans to increase capacity.

Huai’an City: Huai’an Electricity Supply Co., Nanrui Huaisheng Cable Co., Sunwoda jointly collaborated on a 500kW/1000kWh project.

Tibet

Shuanghu County: A new storage project owned by Northwest Engineering Corporation began operations. Storage by Samsung SDI- Sungrow (7 MW/ 13.6 MWh) Clou Electronics (3 MW/10.08 MWh).

Power Reforms Take Shape on a Regional Level

Several rounds of regional-level reforms 

Electricity trading centers established	Guangxi Province Guangdong Province Beijing Hebei Province Kunming Chongqing
Reform plans approved by NEA	Fujian Province Beijing (submitted only) Hainan Province Shandong Province
Comprehensive reform trials approved by NEA	Yunnan Province Guizhou Province Shanxi Province Guangxi Province
Electricity Retail Reforms approved by NEA	Guangdong Province Chongqing Xinjiang
Power Trading/Power Market under construction	Chongqing Tianjin Tang Grid Jing-Jin-Ji Grid (regional grid connecting Beijing, Hebei Province, and Tianjin)

Storage Appears in Q3 Renewables Sector plans

Large scale wind/solar

Xinjiang recently published a policy document “Opinions on Increasing Expansion of Renewables Consumption Sustainable Development” accelerating plans for wind and solar + storage project construction and demonstrations.

Thermal Storage

 National Energy Administration issued “Notification on Construction of Solar Thermal Generation Project Demonstrations” confirming 20 new solar thermal pilot projects, totaling 1349 MW. Projects will be distributed across Qinghai Province, Gansu Province, Hebei Province, Inner Mongolia Autonomous Region, and Xinjiang Autonomous Region. Construction on approved projects is required to be completed by the end of 2018. 

Q3 Industry News

Production Plans

• Chinese PV/inverter manufacturer now storage manufacturer, Sungrow, has formally began joint operations with Samsung SDI. By the end of this year production capacity will reach 100 MWh, with 500 MWh expected by next year

• GCL Integrators: plans to invest USD13 million in a 500 MWh annual capacity battery manufacturing facility.

Investments

• Gree Electronics: purchased of Zhuhai Yinlong Co. (珠海银隆) for US$1.8 billion
• Shanghai Power: over the next five years will execute the “10,000 Storage Stations” project. The company has annoucned plans to invest US$870 million within the next 3 years to construct 100-200 storage projects in Wuxi, Jiangsu Province. Within the next 5 years Shanghai Power plans to invest a total US$4.3 billion planning over 1000 storage projects in Hubei province.

Electric Vehicles

Planning Documents

Beijing: According to the “Beijing City 13th Five Year Period Plan for Strengthening National Science and Technology Innovation,” by 2020, Beijing will become China’s leading alternate energy vehicle R&D center. The entire city aims to produce 500,000 electric vehicles by 2020.

EV Battery/ EV Manufacturing

Shaanxi Optimum Nano: the first of a three stage electric vehicle battery manufacturing project went into operations in Weinan City, Shannxi Province (10 GW production capacity, total investment US$720 million)

Guoxuan High-Tech & Kang Sheng Co. in Luzhou, Sichuan Province will invest US$430 million to build a 1000MAh production capacity production center.

 BYD: in Xining, Qinghai Province invested US$580 million for a 10 GWh Li-ion battery production project. In the next three years, BYD also plans to expand operations to a US-based EV factory operations, increasing production capacity from 300 buses/year to 1000 buses, trucks, and other specialized vehicles. 

A Conversation with CNESA's Tina Zhang

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. 

Nine Updates on China’s 2016 Energy Storage Industry

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.

Qinghai Province

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.

Opinion: Electricity Spot Markets Will Help Commercialization of Energy Storage

Establishing electricity spot markets will necessitate large-scale energy storage applications, ensuring the value of energy storage and guaranteeing profit. Spot markets open up a wealth of opportunities for consumer-side electricity retailers, who, through integrating many different types of users and user loads, can participate in demand-side management, demand response, and peak load shifting. The value of energy storage isn’t just limited to its use in helping curb the differences in peak and off-peak electricity prices. Rather, we can conceive of energy storage as “one system, many uses.” Energy storage systems are a complete system able to realize a multitude of benefits.

The first half of 2016 signaled a high point for the Chinese energy storage industry. According to CNESA data, by the end of 2015, China had 118 energy storage projects in operation (excluding pumped hydro, compressed air, and thermal storage) with an accumulated 105.5 MW in capacity, representing 11% of installed projects worldwide. The compound annual growth rate from 2010-2015 was 110%, six times that of the global growth rate. After entering 2016, energy storage manufacturers released project plan after plan, which we estimate to reach up to hundreds of MW in scale. Nearly all recently announced projects are planned to be fully implemented within two to three years, with a wide variety of applications covering large scale renewables grids, ancillary services, distributed generation, as well as microgrids. Our preliminary estimates expect the installed capacity to approach 1GW (excluding pumped hydro).

The Value of Energy Storage Has Yet to be Fully Realized

Although the industry’s development trends are satisfying, when discussing the nitty-gritty of profits, investment returns, and financial capital in the industry, industry insiders universally acknowledge that if the industry wants to truly realize sustainable commercialization, there remain some prerequisites. At present, increasing product lifetime and safety are the fundamental issues in energy storage application, while policy support, financial subsidies, and lowering costs are the key factors to realizing profits. However, it is not until we have a robust electricity market mechanism that we can realize the true cost benefit of energy storage and unearth energy storage’s true application value.

Looking at technology developments in the past two years, we can clearly see substantial drops in costs in each category of mainstream energy storage technology. Take the previously installed lithium iron phosphate batteries in China as an example. In 2013, the cost was CNY 4500-6000/kWh, but after 2015 the cost was only CNY 2000-3000/kWh. By 2020, it is forecasted costs will even decrease to as low as CNY 1000/kWh. (Calculations based on expected life cycle, cost per kWh at CNY 0.26/kWh, excluding charging costs.) At standard 25°C, 0.5°C, and 95% depth of discharge (DOD), the cycle life of these batteries can exceed 5500 times. Energy storage technology has been progressively advancing, laying the groundwork for future commercialized use.

There are constant advancements in energy storage technology as well as economic feasibility, but when considering current mainstream applications of energy storage, the technology appears to be only useful for limited set of uses. This, however, is due to current economic constraints, and inaccurately reflects the potential of the technology. For example, user-sited installed energy storage systems’ only current benefit is optimizing peak and off-peak price differences. Energy storage systems installed in large wind farms, likewise, can only realize their value through storing small amounts of unused energy (usually 10% of generated wind capacity). To expand from these narrow examples, we thus need a comprehensive way of evaluating and optimizing all potential energy storage applications. China’s current electricity system, in turn, must provide energy storage systems with a reasonable marketization mechanism as well as encourage flexible deployment and fast response capabilities. The structure of the electric power service and supply-side needs to adjust and user-side energy efficiency must increase. Energy storage is already an indispensible part of future energy systems, realizing a larger array of energy storage technology applications and wide-spread marketization is imminent.

Realizing Energy Storage Marketization

Sustainable development of the energy storage industry and commercializing energy storage technology requires a compatible electricity system. With the first round of electricity system reforms in November of 2015, the China National Development and Reform Commission (NDRC) and National Energy Administration (NEA) published six sets of reforms, among them “Opinions on Advancing the Construction of the Electricity Market” and “Opinions on Establishing Electricity Transaction Institutions and Governing Regulations.” These reforms detailed the government’s plans for electricity markets, indicating their directions and goals.  Qing Xia, Professor of Electrical Engineering at Tsinghua University, expressed, “The next step in electric marketization reforms is to establish an electricity commodities exchange market. As the saying goes, ‘Without commodities there is no market.’ After a commodities market is established, energy storage will have value.”

Compared with similar market reforms in 2002, the latest round of reforms is different in that it simultaneously calls for long-term commodities exchange and electric power and capacity balancing mechanism resembling constructing electricity capacity, ancillary services and multifaceted electric market systems. Frequency modulation, peak load shifting, and operating reserves all ensure capacity and can undergo reasonable market mechanisms to obtain economic gains. Under the new marketization scheme, different services can gradually enter the market, in a flexible, reasonable deployment. As one leader in the NEA expressed, “From the perspective of progress in developing the modern electricity market, the commodities market is a necessary part. It is the precise way to realize the actual price of electricity—all achieving optimal grid balancing, the sign of a mature and highly developed electricity market.”

A robust spot market represents a potential large-scale application of energy storage technology. Tsinghua University Professor Chen Qixin points out, “Through flexible deployment of energy storage systems, including power and energy models, energy storage can realize its worth in a spot market with its fast response time. At the same time, energy storage systems can provide the real time balancing and support services a spot market scheme would require.”

In the traditional market, electricity generating companies are the main providers of power and ancillary services. In the proposed spot market, however, providing ancillary services can be open up for bidding by other companies; this includes frequency modulation, pressure regulation, operating reserves, as well as black start services. Of these, it’s important to note that frequency modulation and spinning reserves have a strong coupling effect. High power energy storage systems with fast response speeds thus would be ideal to combine frequency modulation and spinning reserves ancillary services. In this sense, spot markets don’t require specific energy storage related subsidies in order to realize a profit; rather, energy storage systems could realize profits themselves. Professor Chen of Tsinghua University agrees, “In America, this scheme is already being used in electricity markets managed by companies like PJM (Eastern US) and ERCOT (Texas). Energy storage can provide quality ancillary services to gain profits. Its unit capacity profit from frequency modulation alone can even reach up to 3-5 times that of thermal power generators. This enormously increases the economic viability of energy storage systems.”

After establishing spot markets, user-side electricity retails can begin business, integrating many types and scales of user loads, participating in demand-side management, demand response, as well as peak load shifting work. Energy storage, we can see, is not only a useful way to bridge the gap between peak and off-peak electricity prices. Rather, the value of energy storage as “one system, many uses” can be realized.

Director of the energy storage projects at Beijing Ray Power believes that in a wholesale energy spot market, energy storage is an excellent resource as an “activator” of peak load shifting. One important use of spot markets is to sell electricity at its true price as it changes with time. Energy storage then allows you during peak price times to sell out stored electricity, using the price differences to acquire economic gains. When stored energy capacity relative to the system scale reaches a set degree, using energy storage to sell electricity during peak load times will increase competition on the generation-side. Compared to a scenario with no energy storage, this would bring prices down. On the other hand, during off-peak times, low prices will drive an increase in demand by those looking to buy energy to store, thus energy storage is the technical means to facilitate the economics behind peak load shifting.

In this way, energy storage helps reduce fluctuations in prices, enabling the electric load to avoid the risk of sharp peaks in prices. Likewise, from the perspective of physical operations, energy storage “cuts” from the peaks, to “fill in” the valleys to even out the electric load. Lowering the price differences between peak and off-peak hours reduces the need for large-scale unit load shifting as well as unit starting frequency, lowering both the unit and system’s composite generation costs. Energy storage participating in spot markets will allow for maximum benefits for power suppliers and consumers alike.

Recently, a series of national policies have come out including “Outline of the Thirteenth Five Year Plan,” “Action Plan and Strategy for Energy Development (2014-2020),” “Made in China 2025 – Plan for Implementing Energy Equipment,” “Guiding Opinions on Advancing the ‘Internet+’ Smart Energy Development,” “Action Plan for Energy Technology Reforms and Innovation (2016-2030)” and the “Pilot Program Notification for the National Energy Administration Promoting Energy Storage in China’sNorthern Regions Ancillary Services Subsidy (Market) System.” All of these policies give energy storage an important place in China’s development goals. Following the implementation of electricity system reforms and the establishment and improvement of spot markets, energy storage will make leaps, being a crucial element in supporting China’s energy transition.

CNESA 2016 White Paper

CNESA has recently released its 2016 White Paper, a comprehensive review of the energy storage industry in China and abroad. This year's report explores industry and technology trends from 2015 and provides our analysis of how the Chinese and global energy storage industries will expand in the near future.

Key topics include:

• Chinese Demand Response Pilot Projects 
• Chinese Energy Storage Policies
• Economic Assessment of Current Energy Storage Technologies
• Li-Ion Batteries in the Second Life Industry 
• Thermal Energy Storage
• Graphene Technology 
• Outlooks for the Chinese Energy Storage Market

We're happy to release this English summary version white paper for free. For more detailed and in-depth analysis, please refer to our Chinese-language version, available for purchase on our Chinese site. 

To learn more about the Chinese energy storage market, please contact us.

Energy Storage China 2016 Recap

Distributed PV+Storage Session

Microgrids have grown at 24% CAGR over 2 years, and China's energy storage distributed generation and microgrid markets have grown at 64% CAGR over that same period. 

WANG Sicheng of China NDRC (National Development and Reform Commission) Research Institute said that ES supporting policy is coming; and that the industry can expect subsidies.

Hubei Zhuiri Electric Co. VP LI Hengjie discussed the opening of new energy bus demo programs in Lasa (Tibet) and Nanjing Jinlong. There, a full 8 hours of PV can provide about 20% of the busses’ energy.

LI Daixin of CNESA: By 2020: 5M EVs, with 5-8 years of battery live; by 2025, these cars will reach 215GWh, with recoverable materials reaching 2.9M tons – which is huge and a huge market capacity for second life batteries and recycling/recovery.

Pre-Conference News - China's Retail Electricity Market Reforms

In March 2015, Policy No. 9 (Opinions on deepening electric system reforms) was released, beginning a new round of electric system reforms. One important direction is “the orderly opening of a competitive electricity pricing environment (excluding T&D pricing); and the orderly shift towards non-government capital (social/private capital) in developing distribution and retail services”, is a major topic. One year after Policy No. 9’s release, as of February 2016, 274 retail electric companies had been established nationwide (North Star Electric Grid Statistics Database). Of these, Guangzhou Huikai Electric Services Co., and Chongqing Liangjiang Changxing Electric Company, in February 2016 for the first time began retail services.

Retail reforms are continuing to be advanced, but at present effective retail side reforms, policy directions, etc., are problems of general concern. How to increase flexibility in the market environment, opening it to new power products, service models, and business models? Can the ES industry find opportunities in the retail side, and in what potential markets? Energy Storage China 2016 speakers Professor WANG Peng, Director CHEN Zheng, and Mr. JIANG Diandong addressed these issues.

Professor WANG, North China Electric Power University, recognized that under present conditions, the electric reforms are facing complexities, such as: weak electric demand with slow medium growth; relying on investment stimulation, with excess electric supply; curtailed wind, curtailed hydro, curtailed solar inflexibility, and insufficient renewables integration/market participation; coal prices low providing larger profit space, but local economies lag in reducing commercial and industrial prices; grid profit models are changing, causing conflicts in losses between upstream and downstream operation, etc.  China’s reforms are a ‘war of attrition’ (prolonged effort), requiring 5-10 years, with building on experiences, struggling, stalemate stages, and only then will completion be reached.  

Prof. Wang identified 7 types of actions/entries into retail markets: 1) independent retail electric companies using internet of energy + light installations; 2) asset-linked user-anchors; 3) integration of public utility resources; 4) energy efficiency service company (ESCO) contracted energy management; 5) increased supply and expanded consumption by grid companies; 6) generation company activities; 7) aggressive marketing by large-cap actors.

For ES, profitable business models for frequency regulation have already been realized, with one example being Huabei Electric Grid Ray Power Co.’s energy storage frequency regulation project’s favorable results and effectiveness. Dongbei Electric Grid hopes to begin operation of an Ancillary Service Market next year (2017), which could provide more development opportunities for ES.

Director CHEN Zheng of Southern Power Grid Clean Energy Institute spoke on The Transmission and Distribution Reform, which began in Shenzhen in November 2014. Inner Mongolia, Anhui, Hubei, Ningxia, Yunnan, Guizhou, Beijing, Tianjin, and 19 provinces and cities have begun similar efforts, and it is likely that all of China will be under this system by 2017. The T&D reforms will greatly lower electricity prices. In Shenzhen’s case, in the first management period (2015-17), average T&D prices have reduced over 1c CNY from 0.1558CNY/kWh in 2014 to 0.1435, 0.1433, 0.1428 CNY/kWh.

In the retail electric reforms, as of February 2016, Shenzhen had already established 18 retail electric companies, including Shenzhen Qianhai Shekou Free Trade Area Power Company, which has become China’s first distribution incremental joint venture power supplier. Guangdong has established 37 retail electric companies, which aim to provide the province’s 2016 direct trading capacity target of 42.0B kWh. Industry actors recognize that retailer licences are not being issued, and retail electricity has not actually begun [butong]; retail electric companies that have already filed with Guangdong Province Economy and Informatization Commission can already participate in direct trading. In March 2016, the first retail company executed a direct trade; 8 retailers have already completed direct trades, totaling 680M kWh, accounting for 64.9% of Guangdong’s direct purchases (these 8 retailers account for 64.9% of direct purchases, which they then sell directly to users; the other 35.1% of procurements are made by other users (not retailers)).

For ES in distributed generation or microgrid applications, there is the possibility of participating in retail side reforms. <Replies in support of the Chongqing Municipality and Guangdong Province retail side reform pilot> recommends that Guangdong should include the following in the <Pilot Plan>: Users with distributed energy or microgrids can commission/entrust retailers as representative agents for purchasing and selling electric services.

Regarding ES opportunities in the electricity markets, Mr. JIANG Diandong of OneCloud said that the retail electricity market will become a market space of trillions. Over 2014, China’s average retail electricity price was 0.492 CNY/kWh, totaling 5.52 trillion kWh, with the nationwide retail market totaling 2.72 trillion CNY. Excluding first tier industries and urban+rural home usage, the market capacity was about 2.3 trillion CNY. This ENORMOUS market brings great opportunities to retail electricity and great development space to retail electric companies and the supporting industrial chains.

However, at the same time, retail electric companies also face fierce challenges and competition, with specialized and diverse complicating issues that they must resolve. Retailers must gradually address the positioning the company, profit model, service model development, and customer retention in seeking development space.

Emerging Technology Session

Ambri: liquid metal batteries -  long life, high capacity, high power, low cost battery. With the exception of the already commercialized Mb-Sb system, Li-Sb-Pb systems also have good functionality. The company is currently working on industrial processes and developments for sealing and corrosion due to the battery’s high operating temperatures.

Researcher CHEN Haisheng - CAES technology - At present, SustainX, Highview, General Compression, and China Academy of Sciences Institute of Engineering Thermophysics (CAS IET) have installed MW-level projects, and are working towards 10-MW level and 100 MW level.

Tsinghua University Professor DAI Xingjian introduced the 1MW 60MJ flywheel ESS projectin the Zhongyuan Oilfield drill-rig peak-shaving system, where it provides energy recycling. Currently 1MW modules are used, and can already be expanded to the 10 MW and 100 MW levels. However, a critical problem is finding suitable sub-second high power and small capacity. 

Heindl Energy’s Dr. Eduard Heindl introduced their gravitational ES technology, in which a 100m diameter stone cylinder with hydraulics would store GWh capacities with 8-14 hour storage durations.

Scholar WANG Zhonglin spoke on the self-powering concept, where micro/nanometer piezoelectric effects and friction generate electricity aggregated to create large amounts of energy via collecting the power of huge amounts of nanometer friction generators. This could be used in clothing, vehicle tailpipes, wind generation, heart monitors, and other fields, in a principle he called ‘Blue Energy’.

Global Energy Storage Market Session

Australia market – Craig Chambers: Australia’s ES market relies on policy, subsidies and financing. In the last 5 years, Australia has 4GW of rooftop solar generation; by 2035 Australia will reach 400,000 customer sited ESS units. With the economics of ES rapidly improving given the pricing conditions of Australia, the ES market will grow extremely rapidly – primarily at end user consumption. Modes of distributed PV+ES will expand greatly.

Germany – Ms. YE Lijuan: Germany has installed over 30,000 ES units, with 16,000 sold in 2015 – more and more users and businesses are using customer-sited ES and tapping Germany’s ES subsidy. Large-scale smart grid ES will exceed 140MW in 2017. With ES adding functionality to PV, Germany’s total market capacity will exceed 400 GW.

Japan – Mr. LIANG Xiao:  By 2020, the Japanese government wants renewables to have a 20% market share, at present it is only about 3.2%. Thus, ES will have a lot of development in Japan in the next few years, and will create a HUGE market for ES. Government and enterprise are working vigorously to reform the electric structure and improve ES technology capabilities. Japan’s retail electricity market, as of April 1, 2016, has implemented liberalization.

India – Dr. Yashodhan Gokhale: India has huge solar and wind industries, and the grid has lots of shortages and interruptions, leading to opportunities for the ES market. In India’s grid, ES is used in generation, transmission, distribution, customer-sited, EVs, and other sectors. India’s DR market also has huge potential. The government set a target to realize a smart grid in 2027.

China's Energy Innovation Action Plan

On April 18th, the NDRC and NEA released an “Energy Innovation Action Plan (2016-2030)", which aims to sharpen the country’s focus on energy technology innovation out to 2030.

China’s energy systems currently face a number of serious challenges due to resource insecurity, energy restructuring, pollution, energy inefficiency, and grid inflexibility. The Action Plan seeks to address these issues by highlighting fifteen areas for technological innovation:

1. Coal mining risk reduction
2. Unconventional, deep, and deep-sea oil and gas extraction
3. Clean and efficient coal technologies
4. Carbon capture and storage
5. Advanced nuclear power
6. Spent fuel reprocessing and radioactive waste disposal
7. High-efficiency solar power technologies
8. Large-scale wind power
9. Hydrogen and fuel cell technologies
10. Biomass, ocean and geothermal power
11. High efficiency gas turbine technology
12. Advanced energy storage
13. Key grid modernization technologies
14. “Energy Internet” technologies
15. Energy saving and energy efficiency technologies

Here’s a closer look at what the documents say about energy storage, particularly in hydrogen and fuel cell technologies, and advanced energy storage.

Hydrogen and Fuel Cell Technologies

• Research focusing on renewable energy and nuclear power-to-gas technologies, hydrogen production from next-generation coal gasification and methane reformation/partial oxidation, distributed hydrogen production, hydrogen purification, and development of key materials and technologies in hydrogen transport and storage. Research on methods to achieve low-cost and large-scale integrated hydrogen production, storage, transport and utilization. Research on hydrogen fueling stations, hydrogen production standards and business models.
• ŸResearch on PEMFC technologies, methanol/air hybrid polymer electrolyte membrane fuel cells (MFC), new energy mobility power sources, and research on extended life PEMFC and MFC electric vehicle pilots and program expansion.
• ŸResearch on distributed fuel cell battery technologies, in context of demonstration projects and scalable deployment.

Advanced Energy Storage Technology Innovations

• Research on high-efficiency concentrated solar power (CSP) technologies and high-capacity distributed thermal storage systems. Research on methods to increase grid peaking capabilities and the use of physical energy storage to address local supply issues. Research into renewable energy grid integration, distributed microgrids, the use of electric vehicles as grid storage, mastery of core technologies in each stage of energy storage development. Verification of completed pilot programs, ensuring that all technologies meet international standards and that Chinese energy storage technologies and industry development are internationally competitive.
• ŸActively research high energy density and low cost thermal energy storage technologies, new concept energy storage technologies (including liquid batteries, magnesium-based batteries, etc.), superconductor and electrochemical multifunctional hybrid energy storage technologies, and strive for key breakthroughs.

China’s North Now Open to Energy Storage

This month, Chinese policymakers passed the most substantial energy storage policy since power sector reforms began last year. The policy, “Announcement on Promoting Electrical Storage Participation in Ancillary Service in the ‘Three Norths’ Region” (the Announcement) opens up tangible regulatory pathways for energy storage deployments in China’s northeastern, north-central, and northwestern provinces, where high penetrations of wind power and must-run coal-fired power plants have created a need for better grid balancing.

During periods of grid oversupply, generators in China’s northern grids earn money when grid operators call on them to steeply reduce output or shut down, an ancillary service called “peak regulation (调峰)”. The Announcement now allows energy storage to earn money by absorbing this oversupply – allowing coal-fired generators to improve efficiency and reducing curtailment for wind and solar.

This is particularly valuable in China’s north because of the large deployments of combined heat-and-power coal-fired plants that provide district heating during the frigid winter months. Because these power plants must operate regardless of demand – homes have to stay heated – renewables end up getting curtailed during periods of low demand. The Announcement opens a new value stream for energy storage to address oversupply conditions and store the wind and solar energy that would otherwise be curtailed.

Interestingly, the policy allows both in-front and behind-the-meter energy storage to participate. Generator-side energy storage is required to be able to deliver 10 MW for four hours at a time. These installations will be compensated using existing payment schemes for coal-fired generators. The size requirements and compensation mechanisms for aggregated behind-the-meter installations have not yet been announced.

A little back-of-a-napkin number crunching suggests that this policy will significantly reduce the payback period for energy storage projects co-located with wind farms – to as little as five years under certain circumstances.

The (Rough) Math

Suppose that a 10 MW, four-hour energy storage system located at a wind farm fully charges twice during off-peak hours each day, and fully discharges twice each day during peak hours in the morning and evening.

This system can earn two value streams simultaneously: 1) “peak regulation” during charging, compensated at 300 CNY per MWh, and 2) electricity retail during discharge.

1. Charging: Although the compensation for downward regulation varies by region, we’re looking at the northeast grid, where compensation is highest at 300 CNY per MWh of downward regulation. The energy storage system can absorb 40 MWh, twice per day, so:

Daily regulation payment = 40 MWh x 300 CNY/MWh x 2 = 24,000 CNY

2. Discharge: Because the energy storage unit is co-located with a wind farm, it sells electricity at the on-shore wind feed-in tariff of 0.5 CNY/kWh. For simplicity’s sake, let’s assume 100% round-trip efficiency and full discharge:

Daily retail payment = 40 MWh x 1000 x 0.5 CNY/kWh x 2 = 40,000 CNY

Assuming these (admittedly over-optimistic) circumstances persist throughout the year, an energy storage installation would earn about 23m CNY per year:

Annual earnings = (24,000 CNY + 40,000 CNY) x 365 = 23.36 million CNY/a

Assuming this system costs 3000 CNY/kWh (~$460/kWh), a 40 MWh system would cost 120m CNY (not including construction costs, O&M, etc.), and have a payback period of about five years.

Given that the storage system only cycles twice per day, the number of cycles required to reach the payback date is only 3,744 cycles – a figure that lithium-ion, sodium-sulfur, and flow batteries can all achieve.

A new value stream

In the days when energy storage couldn’t earn money from downward regulation, the payback period might be 8.3 years or longer. This new value stream opens up opportunities for energy storage providers, and helps China achieve its policy goals of reducing renewable energy curtailment.

Admittedly, these simple calculations are missing a lot, from round-trip efficiency losses, to discounting, to assuming full discharge twice every day year-round, so real-world payback periods are likely to be longer. But it is clear that with a new value stream available, energy storage is moving closer towards wide-scale commercial feasibility in China.

China Announces Renewables Quota, But Is It Enough?

On March 3rd, the National Energy Administration released “Guiding Opinions on Establishing Renewable Energy Portfolio Standards,” which set renewable energy consumption targets for China. The country aims to rely on renewable energy for 15% of total primary energy consumption by 2020, and 20% by 2030. Non-hydro renewables should produce 9% of consumed electricity by 2020. The Opinions break down the non-hydro renewable electricity consumption requirements for each province and region, shown below.

Region		Region
Beijing	10%	Hubei	7%
Tianjin	10%	Hunan	7%
Hebei	10%	Guangdong	7%
Shanxi	10%	Guangxi	5%
Inner Mongolia	13%	Hainan	10%
Liaoning	13%	Chongqing	5%
Jinan	13%	Sichuan	5%
Heilongjiang	13%	Guizhou	5%
Shanghai	5%	Yunnan	10%
Jiangsu	7%	Tibet	13%
Zhejiang	7%	Shaanxi	10%
Anhui	7%	Gansu	13%
Fujian	7%	Qinghai	10%
Jiangxi	5%	Ningxia	13%
Shandong	10%	Xinjiang	13%
Henan	7%	Total	9%

Based on the government 2020 forecasts for power consumption and renewable energy capacity, we made a few simple calculations.

	2020 Installed Capacity	2020 Annual Use-Hours	2020 Generation
Wind	250 GW	1728 hours	432 TWh
Solar PV	160 GW	1133 hours	181.3 TWh

Sources: Renewable Energy Development 13th Five Year Plan (Draft Version); 2015 wind and solar generation statistics, NEA

Graph assumes 2020 generation patterns are similar to 2015. 2020 annual generation=Installed capacity*utilization hours. Annual use-hours (利用小时) is derived by dividing total generated electricity over the course of one year (GWh) by the total capacity of the generation fleet (GW). 

Assuming that the overall capacity factors for wind and solar in China don’t change from 2015 levels (I’ll get to that in a moment), wind and solar together are expected to produce 613 TWh annually in 2020. The National Development and Reform Commission anticipates that the entire country will consume 7390 TWh in 2020, meaning that solar and wind generation would comprise about 8% of the total. Once you factor in biomass and other non-hydro renewables, you can just about expect to meet the Opinions’ target of 9% renewable electricity production nationwide by 2020.

Is it Ambitious Enough?

While the target earns marks for realism, it struggles to make the grade in terms of ambition. We based our above calculation on wind and solar consumption for 2015. Thing is, wind and solar consumption was disastrous last year. Average solar and wind curtailment reached 10%, with some regions experiencing curtailment rates exceeding 30%.

Additionally, experts are mixed in their assessment of the strength of the new policy. Back in 2012, aware that existing mechanisms wouldn’t be enough to drive renewable energy consumption, the NEA drafted policies establishing renewable energy consumption targets, called the “Renewable Energy Quota Management Method.” The policies included robust assessment and enforcement mechanisms, but due to conflicts of interest, the policies never went into effect.

The newly-announced energy consumption policy published this month cover many of the same topics, but is believed to be pretty weak in comparison with the 2012 draft proposal. Industry players have even dubbed the new rules “Renewable Energy Quota Lite.”

The new energy consumption policy does suggest the creation of a “green certificate” trading mechanism, which would allow utilities unable to meet their renewable energy consumption targets to trade with utilities who consume above their own target. It’s an interesting idea, but it lacks an existing management mechanism, and it doesn’t get to the heart of the problem – that China’s dispatch rules, transmission infrastructure, and regulatory support for distributed energy are still inadequate.

Regulatory gridlock notwithstanding, the government has attempted to address this problem through a variety of channels:

1)       Promoting local consumption

Given that renewable energy resources are concentrated in China’s north, the National Energy Administration has been eager to encourage communities in that region to consume locally-generated renewable energy. To do so, the government has expanded direct electricity trading provisions for large consumers.

The results from this effort have been mixed, due to the fact that these areas have very few load centers to begin with. Even local consumers that do directly consume renewable energy often do so in a package deal that includes coal-fired generation to manage wind variability. In reality, these consumers are still buying very little power from renewable sources.

2)       Power-to-gas

One option that has been under examination since 2012 has been power-to-gas, in which electricity is used to power hydrogen reformers. This hydrogen can then be transported to load centers via traditional pipelines. A number of influential organizations have begun research or demonstration projects in power-to-gas, including State Grid, Shenhua Group, and China Energy Conservation and Environmental Protection Group.

This method faces challenges as well. A stable hydrogen market is a prerequisite for commercializing power-to-gas, and such a market does not yet exist in China. Additionally, pipelines are firmly under the control of China’s oil companies, who so far have not been proactive in exploring this business model.

3)       Energy storage

Combining energy storage with wind and solar production has already drawn significant attention in China. But regulatory barriers still stand in the way of making it a commercially-viable solution.

Let’s take a hypothetical lithium-ion battery energy storage system priced at 3000 RMB (US$460) per kWh, including all supporting equipment. If the battery operates to spec for 3000 cycles at 80% DOD, can the numbers pencil out?

The short answer is no. Such a system would have a lifetime cost of 1.04-1.25 RMB (US$0.16-0.19) per kWh discharged. China’s current feed-in tariff compensates wind generators at a rate between 0.47 and 0.54 RMB (US$0.07-0.08) per kWh. At these rates, generators using energy storage to store wind-produced electricity during times of grid congestion face the hard math that storing electricity costs more than it earns when fed into the grid.

Now, this math changes when those batteries can be dispatched to provide other services, particularly ancillary services to the grid. China’s ancillary services markets are still focused on generator responsibility, and are not yet open to the value that energy storage technologies can provide.

China’s grid is an institution with enormous inertia, so changes are bound to be slow. Nonetheless, we expect that China’s support for energy storage as an emerging technology and its concurrent power sector reforms are a positive signal that changes are on the way.

Divining China's Energy Future

Reading the “Internet+” Smart Energy Development Guidelines 

On February 29th, 2016, the NDRC, NEA, and Ministry of Industry and Information Technology released Guiding Opinions on “Internet+” Smart Energy Development.

This policy document focuses on the Energy Internet, a concept which has engulfed Chinese energy and grid circles for more than a year.

With the release of this document, we have an official take on the future of China’s grid.

The Opinions established a definition for this Energy Internet concept: “a new industry development model based on a deeply integrated network of energy production, transmission, storage, consumption and markets. It is characterized by device intelligence, energy diversity, information symmetry, distributed generation and demand, a flat structure, and open exchange.”

Until now, energy storage in China has been perceived as a set of technologies or devices used in certain links in the grid. But the Opinions take a different approach, describing energy storage as a standalone link in the energy chain, alongside production, transmission, and consumption. This is the first time that national government bodies have recognized energy storage as a separate and critical part of the future energy system.

The Energy Internet covers power, heat, oil and gas, and transportation. By highlighting energy storage as an independent link in the energy chain, policymakers are laying a foundation for the beneficial use of energy storage across the board.

The Opinions take a broad look at energy storage, calling for the development of “high-capacity, low-cost, high-efficiency and long-lived energy storage products and systems in electricity, thermal, and clean fuel storage.” This inclusive approach places energy storage at the center of the interconnections between power, heat, transportation and gas networks.

Bulk Energy Storage and Renewables Integration

The Opinions argue “suitably-sized energy storage facilities should be located in energy production centers to optimize grid and energy system operation."

At present, energy storage facilities used for renewables integration are generation-side resources, co-located with particular power stations. The Opinions call on years of operational experience and institutional input to suggest that energy storage functions better as a shared resource located in areas with high energy production. This maximizes the value of expensive storage installations by serving multiple stations at once.

Better sited energy storage would also gain value by giving grid operators the ability to tap into other operational benefits of the technology.

Some experts estimate that energy storage installations equaling 5-10% of the generation capacity in a renewable energy producing region would be sufficient to address intermittency issues. With China’s 12th Five-Year Plan calling for 200 gigawatts of wind by 2020, the grid would benefit from an additional 10-20 gigawatts of energy storage – an enormous opportunity.

Distributed Energy Storage – the Future of the Industry

The Opinions also promote the deployment of “distributed energy resources in communities, rooftops, and homes through the use of grid-friendly, effective and distributed energy storage.”

Distributed energy storage has attracted a lot of attention for its flexibility, low capital requirements, and value to the consumer by supporting on-site solar generation, demand response, and bill management.

The Opinions also bring up networked management of energy storage devices, calling for energy storage device databases, remote operation and control of distributed storage devices, and energy storage cloud platforms. It encourages modular system design, standardization, networked control over second-life batteries, and support for unhindered and flexible energy exchange. The document also promotes energy storage as a provider of backup power, peak shaving, frequency regulation, and other services.

But because China’s residential electricity rates are so low, residential energy storage is not yet profitable. However, in some industrial parks and among some high-energy consuming businesses, users are beginning to consider solar-plus-storage as a way to reduce electricity bills.

While the present opportunities for energy storage are limited, China remains committed to revolutionizing its energy system. This means that demand response, time-of-use rates and demand charges are likely to grow. As these policies spread and mature, distributed energy storage may well become an attractive market.

The Opinions also mention electric vehicles: “Promote the use of used EV batteries in stationary energy storage. Build an operational EV cloud platform based on elements of the grid, energy storage and distributed energy consumption. Explore the use of electric vehicles in networked platforms to participate in direct energy trading, demand response, and other models.”

According to official targets, China aims to bring five million electric vehicles to the road by 2020. Electric vehicle charging can have a serious impact on the grid, and so having effective control over distributed EV batteries to provide peak shaving, frequency regulation, or engage in demand response could help maximize the value of electric vehicles.

According to the Opinions, the rollout of the Energy Internet model is set to take place in two phases. From 2016 to 2018, the government will support pilot demonstration projects of different types and scales. From 2019-2025, the emphasis will be on diversification and scaled-up development, and establishing the Energy Internet as a driver of GDP growth. 

While its clear that China is a long way from achieving these goals, its telling that national decision-making bodies are endorsing such powerful language to describe their vision of the grid to come. What's most uncertain is how China's vested grid interests will adapt to -- or resist -- these changes. 

University of New South Wales Partners with Chinese Torch Program

Australia and China are embarking on a decade-long collaboration effort to spark international energy and environmental innovation.

In a meeting on March 1, 2016, a leadership delegation from University of New South Wales met with representatives of the Chinese Ministry of Science and Technology’s Torch Program in Beijing. The two organizations aim to establish long-term research and development partnerships between UNSW and Chinese businesses through the development of an Innovation Precinct at the university. The meeting also included representatives from Chinese businesses in the fields of energy and environment, new materials, and biotechnology.

The Torch Program, established in 1988, strives to promote technology transfer and the commercialization of innovative technologies by developing international partnerships and high-tech industrial parks in China and around the world.

The Chinese program dovetails with UNSW’s recently announced 2025 Strategic Plan, which includes among its initiatives the development of a A$50 million Innovation Precinct. According to UNSW’s innovation statement released last year, the precinct “will bring together industry, small to medium sized enterprises (SMEs), entrepreneurs, investors and policy makers from around the world.”

As part of the proposed collaboration, the university is offering special services to international companies in exchange for industry investment in the university, according to Laurie Pearcey, director of international strategy for Greater China and India at UNSW.

The university is offering rent-free office space for international companies on the university's campus, as well as access to a team of business development advisers to help support the companies in their bids to enter the Australian and New Zealand markets.

At the heart of the program is the opportunity for collaborative research between UNSW experts and industry researchers. This collaboration is undergirded by the university’s commitment to provide full-ride scholarships for PhD students selected by industry partners, opportunities for permanent residency visas, and an innovative IP sharing scheme.

The IP sharing mechanism, called Easy Access IP, is designed to hasten commercialization of university-developed technologies via partnerships with industry. UNSW offers free IP licensing to select companies that invest in the university’s research efforts. As long as the companies allow continued university research, acknowledge UNSW as the inventor, and put the technology into use within three years, the university grants these companies permanent licensing to university IP.

Pearcey emphasized that UNSW is internationally recognized as a research leader in renewable energy, having set numerous world records in solar cell efficiency. The university also has top-tier facilities used to simulate solar cell manufacturing, and boasts its status as a national leader in providing research grant funding for collaborative research projects.

The formal partnership between the Torch Program and UNSW is expected to be signed in April, and the first round of industry partners will be announced in the third quarter of 2016.

Power Retail Pilots Open in Guangzhou, Chongqing

Citic Tower, Guangzhou, Credit: wyliepoon / Flickr

This February, two major Chinese cities announced the launch of new electricity distribution pilot projects. In these projects, private electricity retailers will provide electricity services directly to consumers, representing a major step forward in China’s eagerly awaited power sector reforms.

The Guangzhou Development District

The first of these reforms takes place in Guangzhou. According to a policy released by the Guangdong Economy and Information Technology Commission, the Notice on Launching Retail Reforms in the Guangzhou Development District, entities within the Guangzhou Development District that consume at least 10 gigawatt-hours of electricity per year may participate in a direct electricity purchasing program. These entities may either purchase electricity in a bilateral agreement with generators or choose an electricity retailer.

As a result of these reforms, power plant owner Hengyun and Guangzhou Economic Technology Development Zone State-Owned Asset Investment Company, formed an electricity retailer, Guangzhou Suikai Electric Services. It’s important to note that the distribution grid is owned by the development district. As Hengyun owns generators that can serve the District and because the district itself – rather than China’s giant state-owned grid company -- owns the distribution grid, the entire value chain from generation to distribution is controlled by this newly-formed utility.

Although on paper it looks as if only consumers meeting a minimum consumption of 10 GWh will be able to participate in the retail market, it’s likely that smaller users will be able to participate by aggregating their loads.

Reforms in Chongqing

Retail reforms are also taking effect at an industrial park in Chongqing. On February 3rd, the Chongqing Liangjiang Changxing Electric Co. signed agreements with twelve businesses located at the Liangjiang New Area. Electricity sales to the first of these companies will begin this March.

This electric retailer was formed by four companies: Chongqing Liangjiang Group, Yangtze Power, Fuling Julong Electric, and Zhongfu Thermoelectric. Chongqing Liangjiang Group is a state-owned distribution grid developer responsible for the Liangjiang New Area. Yangtze Power, the country’s largest listed hydropower company, owns a number of large power stations including the Gezhouba and Three Gorges Dams. Fuling Julong is a state-owned enterprise primarily involved in power generation and retail, electrical equipment and transmission maintenance. Zhongfu Thermoelectric is a thermal generation owner.

The retailer formed by these companies covers each link in the power chain, from generation to retail. Although the distribution grid at the Liangjiang New Area is partly owned by the grid, any new additions will be built and owned by the retail utility.

The Role of Industrial Parks in Retail Reform

One reason that retail pilot projects are taking off in these two industrial parks first is the fact that the retailers in these cases are vertically integrated from generation to distribution. It’s important that in each case, the industrial park owner is a part owner of the utility, allowing the utility to gain control over the park’s assets – such as the distribution grid. Moreover, the utility is guaranteed to have customers in the companies that operate in the park. This vertical integration is expected to result in savings of 26 million yuan (US$4 million) in 2016.

It’s unusual for business and industrial parks to own their own distribution grids, which makes the Guangzhou Development District a special case. Though now that electricity retail is now opening up, yet-to-be-built industrial parks are likely to become a focus point in retail reform.

Where does energy storage sit in all of this?

For industrial parks with access to their own generation, retail reforms are likely to vastly reduce electricity prices. These reforms also open up possibilities for distributed generation and microgrid development, both of which do well when combined with energy storage technologies.

Additionally, now that retail companies are directly serving industrial parks, there is likelihood that consumers will have access to a wider range of services, including energy efficiency, energy management, and demand response. Freed from the shackles of the traditional grid system, energy storage has new opportunities ahead.

China’s Top 10 Energy Storage Headlines of 2015

China’s energy storage market made big strides in 2015. Major policy shifts last year – from power sector reform, to microgrids, to demand response – brought new opportunities to the table for energy storage.

Looking back, our experts weighed on the state of the market to bring you the top ten energy storage stories from 2015.

1. China Announces New Power Sector Reforms

Without a doubt, China’s power sector reform tops the list of important energy storage stories last year.

Beginning last March, China’s dormant power sector reform regime fired back up, with major policy releases marking adjustments to China’s generation, retail, and consumption regulations.

The heart of the reform rests in a landmark policy piece published by the State Council and CPC Central Committee, called Further Deepening the Reform of the Electric Power System, widely known as Document No. 9 (9号文).  This document established that this round of reforms would:

• Maintain a monopolized transmission system, but open up generation and distribution to market competition
• Open up competitive electricity retail pricing
• Establish the groundwork for diversified energy trading
• Promote demand-side management and energy efficiency programs
• Increase the ratio of renewable energy in the country’s generation mix

China’s reform strategy thus far has strived for institutional separation between government bureaus and market entities, between generators and grid operators, and between main grid services and unrelated business operations in other sectors.

Document No. 9 states that the current round of reforms will open up market competition in generation and retail electricity markets and promote private investment in distribution infrastructure. Most importantly, the document calls for strengthened government oversight and control over grid planning.

In 2016, we expect these reforms to open up new opportunities for energy storage, particularly in demand response, ancillary services, and distributed generation.

2. National Energy Administration Releases Microgrid Guidelines

In July, the NEA shook up the microgrid space, announcing that each of China’s provincial governments should begin planning microgrid pilot projects. In the Guiding Opinions on New Energy Microgrid Pilot Projects, the NEA specified that these pilot projects should strive to integrate high penetrations of variable renewable energy sources.

This document emphasized the importance of energy storage, suggesting that policymakers are increasingly aware of the benefits energy storage can bring to microgrids.

The policy made no mention of specific subsidies for these projects, only stating that “new energy microgrid projects [should] be economically reasonable, given a certain degree of policy support.” Microgrid developers in China currently face challenges due to the lack of regulatory structures that colleagues in the United States and Japan rely on to drive value – such as widespread time-of-use rates, tiered electricity tariffs, and compensation for peak shifting and frequency regulation services. However, the opening up of retail electricity markets is expected to be an opportunity to develop these common-sense changes.

3. New Lithium-ion Battery Industry Regulations

Last year, the Ministry of Industry and Information Technology published new policies to better regulate China’s sprawling lithium-ion battery industry. The regulations specify that battery manufacturers should meet a number of production criteria to earn necessary government certifications.

Beyond manufacturing baselines, the regulations also set requirements for product quality, establishing minimum standards for cycling and energy density.

In comparison to previously published regulations, these are relatively relaxed. Nonetheless, this round of industry regulations should have some effect in cleaning up a disorganized industry and establishing further battery manufacturing standards down the road.

4. A Broad Push for Demand Response

As China’s economy shifts from manufacturing to service, load profiles are expected to change as well. Recognizing the challenges of a peakier load profile due to more grid-connected air conditioners and other high-consumption devices, the National Development and Reform Commission (NDRC) and the Ministry of Finance has taken an active role in promoting demand response pilot programs in select cities across China’s urban east coast.

The China Energy Storage Alliance was selected as the first certified load aggregator for the city of Beijing, putting us at the forefront of the effort to roll out demand response in China. On August 12th, for example, CNESA helped reduce load by 70 MW as Beijing’s peak load hit new highs. Although demand response providers still face myriad challenges in China, we expect to see increased institutional support for demand response as a result of last year’s successes.

5. Molten Salt Thermal Solar Storage Heats Up

In September, the National Energy Administration announced an RFP for thermal solar procurements totaling one gigawatt.

Notable for energy storage providers is the fact that the government required each project to include at least one hour of energy storage at rated capacity. Looking at the projects submitted so far, industry watchers could expect see a 4 GWh bump in energy storage capacity in China by 2018 from these procurements alone.

6.  It’s All About the Energy Internet

If there’s been one catchphrase on everyone’s lips, it’s been the “Energy Internet.”

The Energy Internet (or the Smart Grid, as it’s described in other circles) is a term to describe energy systems characterized by a high degree of renewable distributed generation, wide deployments of a variety of energy storage technologies, and energy exchange between prosumers.

The idea has caught on quickly among China’s energy policymakers. Last April, the NEA held its first conference on the Energy Internet, resulting in the country’s first action plan to focus on distributed generation, microgrids, demand-side management, contract energy management, data-based services, and other business models and products.

With government support, companies like IESLab, NARI Technology, Shenzhen Clou Electronics are combining devices and big data analysis to shift from traditional sales to infrastructure-as-a-service. Meanwhile, leading inverter manufacturers Sungrow Power Supply and Xiamen Kehua are expanding into energy storage. In the EV space, Qingdao TGOOD Electric and Zhejiang Wanma Co. are building EV charging stations across the country.

CNESA has been at the leading edge of these developments as well. Last December, CNESA and ENN Energy held the 2015 Energy Storage and Energy Internet Research Summit, with support from the National Energy Administration. Tsinghua University’s Energy Internet Innovation Institute and North China Electric Power University’s Energy Internet Research Institute co-organized the event, which brought over 150 academic and industry experts together to discuss how to support further research on building out the Energy Internet. This closed-door event focused on the common needs of the energy storage industry and the Energy Internet in order to help clarify new opportunities and business models for energy storage.

7. Financial Sector Interest in Energy Storage

As anywhere, a significant barrier to entry for energy storage technologies in China is a lack of financing sources to support commercialization and deployment.

To help resolve this problem, CNESA signed a three-year agreement with the Bank of Beijing last June, opening up one billion Chinese yuan in potential financing for CNESA member companies.

The agreement also aims to facilitate the creation of a crowdsourced equity fund to support smart grid development, supported by Chinese capital funds Mingwu Capital, Kaiwu Capital, Qingyu Fund, and a number of CNESA member companies.

8. Retail Reforms and New T&D Reform Pilots

One key element in China’s most recent round of power sector reforms will involve changing tariff structures for transmission and distribution services.

On April 15th, the NDRC published a document announcing the first steps on that road, including an expansion of T&D reform pilot programs and signaling the intention to hasten tariff reform.

For context, outside of Shenzhen and Inner Mongolia – where T&D tariff reforms were first piloted – grid operators are not held to any tariff structure. Rather, they make margins off the difference between the wholesale price and regulated retail price of electricity.

Now, additional provinces and regions are now taking up tariff reforms, including Anhui, Hubei, Ningxia, and Yunnan. The NRDC has specified that grid operators will be compensated based on “authorized costs plus a reasonable profit” – essentially a regulated grid transmission fee. The document also called on all remaining provinces to examine existing T&D assets, costs, and profit structures to begin laying the foundation for nationwide reforms.

Retail reforms are also driving changes in the power sector. Until recently, electricity retail was firmly in the hands of the large electricity monopolies controlling China’s T&D assets. In the few months since power sector reforms were announced, though, over ten companies have registered as electricity retailers.

With the opening of China’s retail market come opportunities for innovative retailers to provide new services to end-use consumers and to tap into new value streams through distributed generation, EVs, smart homes, and energy storage.

9. Growing Policy Support for EVs and Charging Infrastructure

In 2015, government policies on electric vehicles moved beyond subsidies and support mechanisms to begin engaging in greater industry regulation and technical standardization.

The government has continued to release policies supporting EV charging infrastructure deployment. In a set of guiding opinions published in September, the State Council emphasized the need for increased EV charging deployments to keep up with China’s surging consumer demand. The Opinions call for greater deployments, improved services, and better technical standardization .

In October, four national-level ministries jointly published the 2015-2020 EV Charging Infrastructure Development Guidelines, calling for “12,000 new centralized charging stations and 4.8 million distributed charging stations to meet demand from the national goal of 5 million electric vehicles,” by 2020.

Battery recycling has also gained national recognition. In September, the NDRC and MIIT published a draft paper guiding industrial policy for EV battery manufacturing and recycling. It also aims to establish a recycling and reuse system for these batteries.

10. Energy Storage China 2015 Held in Beijing

Last June, CNESA held its fourth annual Energy Storage China conference and expo in Beijing’s Crowne Plaza Hotel. The event was co-organized by event organizer Messe Dusseldorf and supported by the National Energy Administration

Kicking off with a training session on June 2nd, the four-day event featured sessions on global market developments, electric vehicles, stationary energy storage technologies, and distributed solar plus energy storage. The event also included an in-depth exploration of energy storage opportunities in light of China’s new power sector reforms. CNESA marked the event by releasing its annual energy storage industry white paper, which covers major trends in energy storage in China and around the world.

Energy Storage China 2015 was supported by an international coalition of energy storage trade associations, including BVES (Germany), CESA (California), IESA (India), and the Global Energy Storage Alliance. Last year’s event drew 700 attendees from over 10 countries, who enjoyed access to Chinese policymakers and leading utilities, generators, and energy storage solution providers. Attendees learned about global industry and regulation trends from 80 experienced speakers, and had the chance to promote their products, understand new business models, meet potential clients, and establish themselves in China’s growing market.

Energy Storage China 2016 will be held May 10-12th at the Beijing International Convention Center.

What's ahead for 2016?

2016 is going to be a big year for China. This March, China's national legislature is expected to approve the 13th Five-Year Plan, a far-reaching document that will guide investment and growth targets through 2020. 

In this context, China watchers should expect a changing landscape for energy storage in 2016. Here's our take.

A Look Ahead at 2016: A Message from CNESA Secretary-General Tina Zhang

2015 was a landmark year for energy storage in China.

Season's greetings from the China Energy Storage Alliance.

In March, the government announced long-awaited power sector reforms that promise new opportunities for energy storage in an increasingly market-based power system.

Policymakers prepared the country’s next Five-Year Plan, the policy lodestone which will guide China’s development through 2020. This carefully crafted document is the key to meeting China’s ambitious energy and environmental targets.

And in the Paris COP21 talks, China emerged as a world leader by arguing that clean energy can be a tool to simultaneously address climate change and meet development goals.

Looking ahead, all indicators point to continued strong growth in clean energy and a greater role for markets and innovation in China’s transition to a more sustainable economy.

Of course, this transition is already well underway. As of September, China has installed 38 gigawatts of grid-connected solar, and the country reached 100 gigawatts of wind capacity earlier this year.

Now it’s our turn.

Energy storage is going to be a big part of China’s energy revolution, and policymakers know it. Last month, China’s national governing body called for increased deployments of energy storage and smart grids, higher penetrations of distributed generation, a greater share of renewables in China’s energy mix, more efficient and low-carbon dispatch, and greater numbers of electric vehicles on the road.

For now, China’s energy storage market remains dominated by pumped hydro: only 106 megawatts of China’s 21.9 gigawatts of energy storage capacity come from battery storage, according to CNESA’s Energy Storage Project Database. Nevertheless, this number still puts China among the top five countries in terms of grid-connected battery capacity, and installations are rising fast. On average, China’s battery storage capacity has more than doubled each year since 2010.

But it’s not just batteries making the news. In October, China’s top energy ministry collected bids for concentrating solar power generation demonstration projects -- most of which included molten salt energy storage. Several more gigawatts of CSP projects are in the pipeline, suggesting that thermal energy storage in China is finally starting to turn the corner. 

Where do we see the industry going in 2016 and beyond?

Microgrids and Distributed Generation

About half of China’s non-hydro energy storage capacity is paired with microgrids or distributed generation, and we foresee that these will remain strong growth areas in the coming year. Successful demonstration projects have proven that China’s islands and remote western regions are prime targets for energy storage deployments, while industrial parks, hospitals, data centers, and other urban buildings are now coming into the spotlight. And last July, the government announced a plan to promote renewable energy-based microgrids nationwide, a great sign for the development of solar-plus-storage in China.

Demand-side Management

There is enormous potential for energy storage in demand side management, thanks to policy commitments from the highest levels of government. Last year, Chairman Xi Jinping announced a campaign to promote efficient energy use in order to meet the country’s carbon emissions and air pollution targets. This drive – as well as our industry connections and technical knowledge – is why CNESA was selected by the Beijing municipal government to lead a demand response pilot program in Beijing. This past August, we helped reduce peak load by 70 megawatts just as demand was set to reach a new nationwide record.

Electric Vehicles

We’re also excited by the future of electric vehicle grid integration. It’s no secret that China’s EV market is booming; automakers sold over 130,000 plug-in electric vehicles in the first three quarters of 2015, double the number sold in the same period last year. This is a great step forward in the electrification of China’s transportation sector, but it also represents a huge challenge for Chinese grid operators – a challenge that energy storage and smart grid technology companies are well-positioned to solve.

While China's energy storage market is primed for growth, challenges still remain. 

China is still an emerging market, with all the risks that can bring. Regulatory changes are forthcoming, but there is still a great deal of uncertainty and a lack of well-defined value streams. That’s why our team works hard to keep you informed via our monthly newsletter, annual white paper, and customized market and policy insights.

Strong partnerships are also a must, which is one reason we organize China’s premier energy storage conference each year. In June, we held our fourth annual Energy Storage China Conference and Expo, our largest to date with over 700 attendees and 60 presentations from top policymakers, industry leaders, and energy researchers. The event is a great opportunity to learn more about China’s energy storage ecosystem and to make lasting partnerships in the world’s largest emerging market. I invite you to join us for next year’s event, to be held May 10-12th in Beijing.

Since 2010, CNESA has brought you the latest developments and opportunities for partnerships in energy storage. In 2016, I hope you’ll join us as we lead the way towards building a cleaner, smarter and stronger world. 

China's Grid and the Electric Car

Courtesy: BYD

Thanks to generous subsidies and incentive programs, electric vehicle sales in China are booming. Chinese EV drivers enjoy a number of perks, including tax incentives when purchasing a vehicle and exemptions from restrictions designed to reduce traffic congestion.

In part due to these measures, sales of plug-in electric vehicles have soared. In the first nine months of 2015, automakers sold 136,733 units – twice the amount sold in the same period last year, according to Wards Auto.

These policies are part of a drive to put 5 million new energy vehicles (NEVs) on Chinese roads by 2020. Although it’s unclear whether or not this target will be met, it is certain that the grid will be faced with new challenges and opportunities as more plug-in electric vehicles hit the road.

In particular, Chinese regulators will need to begin examining how electric vehicle demand response can help address grid instability and support China’s transition to a low-carbon power system.

Electric vehicles and demand response

As the transportation sector electrifies, electricity consumption patterns will change. In order to meet demand, utilities need capacity and incentive mechanisms to address potential spikes in consumption. A study commissioned by the Regulatory Assistance Project and the International Council for Clean Transportation compared the expected impact on peak load in various countries as the number of plug-in electric vehicles rises. The report found that China’s grid was particularly susceptible to disruption in cases of high EV penetration.

To avoid power shortages, Chinese regulators will need to adopt measures to minimize the impact of electric vehicle charging on the grid. Policymakers have several options on the demand side to do this.

Programmable charging

Programmed charging allows grid operators to control EV load. In this model, EVs receive signals from the grid to optimize efficiency and reduce grid impact, while also factoring in battery constraints and the user's charging requirements.              

EV programmable charging can be regarded as a flexible demand response resource, providing a certain amount of peak shaving functionality. Via smart grid signals and time-of-use pricing incentives, EV owners can be encouraged to charge their vehicles when wholesale electricity prices are low. Entities like charging facility operators and vehicle companies can act as load aggregators, earning subsidies and lowering EV lifetime ownership costs via participation in such demand response programs.

Large scale implementation of programmable charging faces several problems: chargers and charging stations do not all support remotely programmed control, there are issues with ITC standards and data compatibility issues, and there is a lack of attractive pricing mechanisms and business models.

Vehicle-grid integration (V2G)

Vehicle-to-grid integration (V2G) takes the role of EVs a step further by using the vehicle battery to provide grid services, including peak shaving, frequency regulation, renewables smoothing, and non-power supporting functions. An NRDC study, Electric Vehicles, Demand Response and Renewable Energy – Jointly Advancing Low Carbon Development, estimated that vehicle-to-grid integration could yield billions of yuan in cost savings each year by using electric vehicles for flexible capacity.

But V2G, while technologically feasible, still requires a great deal of standardization and business model development. Most EVs and charging infrastructure do not support output to the grid, ancillary service markets are not open to such participants, and the extra wear and tear on vehicle batteries will be a disincentive unless proper compensation is provided to vehicle owners. These challenges are compounded in China due to a regulatory framework that makes market-driven demand response particularly challenging.

Demand Response with Chinese Characteristics

China’s current load management mechanisms are, to a large degree, vestiges of the planned economy era. Chinese grid operators typically rely on administrative rationing during electricity shortages, rather than market-based demand response.

Nonetheless, China is implementing a small number of demand response pilot programs, including one in Beijing, which are helping set the stage for policy reforms expected to be released soon. In March 2015, the government introduced power sector reforms addressing issues that will affect demand response: pricing reforms, ancillary services markets, and the opening up of wholesale electricity markets. Those reforms will be followed by more specific policy measures later this year.

In the meantime, more demonstration projects integrating electric vehicles and grid operations are needed. Internationally, there are a number of demonstration projects which may serve as good models. 

At the time of writing, we are unaware of any electric vehicle demand response programs in mainland China. But with record-breaking electric vehicle sales unlikely to slow down, we fully expect to see these programs coming soon.

Original article by Daixin Li, translation by Matt Stein, editing by Charlie Vest.