The Development of China's Solar-plus-storage Market: Solar-plus-storage Policies

In early 2019, the China Photovoltaic Industry Association met with the China Energy Storage Alliance to discuss CNESA’s “China Solar-plus-Storage Development Status” report, which was published in the CPIA’s 2018-2019 China Photovoltaic Industry Annual Report.  The report focused primarily on solar-plus-storage market development, solar-plus-storage policy updates, and current problems in solar-plus-storage applications, among other topics.  Below, we take a look at some of the polices discussed in the report that affect solar-plus-storage applications.

2018 Solar-plus-storage Policy Updates

Aside from the national-level “531 policy,” policies released between 2018 and early 2019 that have had significant effect on solar-plus-storage applications also include local-level policies in Xinjiang, Hefei, and the northwest China region.  The “531” policy helped to encourage the solar PV industry to focus more attention on combined solar and energy storage applications.  Regional policies have also focused on matching solar and storage, as well as solar-plus-storage subsidies and updates to the “two regulations” for grid operations and management.  These policies have helped implement a deeper, varied, and more focused approached to the use of solar PV with energy storage.

1.       The “531” Policy Brings New Attention to Solar-plus-storage

On May 31, 2018, the National Development and Reform Commission released “Notice on Matters Related to Solar PV Generation in 2018.”  The notice not only cut back solar PV subsidy standards and targets, it also clarified two main foundations for future solar PV development: grid parity and subsidy-free solar PV.  The notice also helps promote a shift in focus for the solar PV industry from the development of large-scale projects to the development of high-quality projects.  Despite the benefit that the policy has brought, the changes have been significant enough to create ripples through the industry.

Following the release of this policy, solar PV companies began turning their eyes toward storage, viewing solar-plus-storage as one of the future development paths for marketization of solar PV.  Many market players have already begun actively deploying solar-plus-storage projects, including GCL New Energy Holdings, Huaneng Group, Luneng Group, and Huanghe Hydropower Development Co.  However, from an economic standpoint, the costs of converting stored energy to electric power is still comparable to the grid purchase price of solar PV.  Without subsidies, it is quite difficult to rely solely on the sale of solar-generated stored energy to supplement the generation of a solar station and achieve profitability.  Therefore, the commercialization of solar-plus-storage applications can only occur under the condition that the power system continues to marketize, solving profitability issues through technological innovations, lowering production costs, and innovative business models.

2.       Xinjiang Develops Generation-side Energy Storage Demonstration Projects to Increase Energy Storage Integration with Renewables

As of late December 2018, the Xinjiang power grid maintained 85.535 GW of connected generation capacity.  Of this, solar PV made up 9.516 GW of capacity, of which on average 1337 hours are used annually, with a curtailment rate of 15.5%.  In southern Xinjiang’s Kizilsu prefecture, 2018’s curtailment rate reached 30.3%.

In order to increase peak shaving backup capacity and encourage the greater use of renewables in the Xinjiang power grid, the Xinjiang Development and Reform Commission released the “Notice on the Development of Generation-side Solar-plus-storage Projects” in February 2019. The policy is the first guiding policy in China that directly addresses generation-side energy storage.  The policy states that each energy storage station should be deployed at a capacity approximately 20% of that of the total capacity of the solar PV station it accompanies.

After deploying energy storage, solar PV stations can add 100 hours of additional planned power generation.  In theory, a 100MW solar PV station could gain millions of RMB in additional annual revenue.  Aside from increasing salable power, energy storage stations can also help solar PV stations avoid performance penalties.  With new regulations recently put in place for the performance assessment and compensation of power generators throughout northwest China, energy storage has become a valuable resource for lowering penalty fees and increasing profit.

3.       Hefei City Releases the First Distributed Solar PV Energy Storage Subsidy Policy with Support for Solar-plus-storage Applications

In September 2018, the Hefei city government released “Suggestions for Promoting the Healthy Development of the Solar PV Industry,” emphasizing the need for high-end, intelligent, environmentally friendly, and service-oriented manufacturing.  The “Suggestions” also give special support to solar-plus storage systems, including power charging subsidies for energy storage.

The “Suggestions” states that solar-plus-storage installations connected and operational after the release of the policy which use components, batteries, and/or inverters supplied by companies recommended by the Ministry of Industry & Information Technology or by the Hefei government’s official list of approved companies will receive, beginning in the second month after grid connection, a subsidy of 1 RMB per kWh of battery charging.  The total subsidy amount that can be received is capped at 1 million RMB per year per project.  The release of the “Suggestions” makes Hefei the first city in China to release a subsidy plan for distributed solar-plus-storage, providing a positive boost to distributed solar-plus-storage in the region.

4.       Renewable Energy Stations Face Growing Imbalance Between Penalty Fines and Compensation

At the end of 2018, the Northwest China Energy Regulatory Bureau released a new edition of the “Regulations for Operations and Management of Grid-Connected Power Stations in Northwest Regions” and “Regulations for Ancillary Services Management of Grid-Connected Power Stations” (hereafter referred to as the “Two Regulations”)

The new editions of the Two Regulations affect energy storage in three categories: peak shaving, AGC frequency regulation, and renewable integration.  In regard to peak shaving, although the compensation standards for each province vary, in the northwest region, energy storage that independently provides peak shaving services has a relatively long payback period. For AGC frequency regulation, conditions in the northwest China power grid have led to the current model in which AGC penalties and compensation are calculated based on integral power rather than using a model similar to the north China power grid’s kp value to calculate frequency regulation contributions.  Therefore, it is difficult for energy storage in the northwest region to achieve an acceptable investment payback period for peak shaving and/or frequency regulation.  In regard to renewable integration, dispatch and operations strategies must be improved in order to guarantee system safety and encourage increased consumption of renewables.  Appropriate compensation should also be given to renewable energy stations which contribute to the energy system.  In comparison to the 2015 draft of the Two Regulations, the recent update strengthens the assessment accuracy and strength of penalization for renewable energy stations, as well as increases the categories and standards for compensation.

To address the new assessment standards, renewable energy companies can not only increase the level of operations of their equipment, but also add storage to optimize the quality of operations of their stations, thereby not only reducing the frequency of penalization, but also increasing profitability.

Author: CNESA Research
Translation: George Dudley

CNESA Global Energy Storage Market Analysis – 2019.Q2 (Summary)

1.       The Global Market

 As of the end of June 2019, global operational electrochemical energy storage project capacity totaled 7427.5MW, or 4.1% of total energy storage capacity.

Graph 1: total global operational electrochemical energy storage capacity

In the first half of 2019, global newly operational electrochemical energy storage capacity totaled 802.1MW, a decrease of 38.9% in comparison to the first half of 2018.  Geographically, the United States saw the greatest increase in new operational capacity, at 24.6%, an increase of 106.6% in comparison to the first half of 2018.  In applications, generation-side energy storage saw the greatest increase in new operational capacity, at 26.0%.  In technologies, lithium-ion batteries saw the greatest increase in newly installed capacity, at 85.7%, a decrease of 46.8% in comparison to the first half of 2018.

 2.       The Chinese Market

 As of the end of June 2019, China’s operational electrochemical energy storage project capacity totaled 1189.6MW, or 3.8% of the country’s energy storage market.

Graph 2: China’s total operational electrochemical energy storage capacity

In the first half of 2019, China’s newly added electrochemical energy storage capacity totaled 116.9MW, a decrease of 4.2% in comparison to the first half of 2018. Geographically, Hunan province saw the greatest increase in new electrochemical energy storage capacity at 51.3%.  In applications, grid-side energy storage saw the greatest increase in new capacity at 56.0%, an increase of 189.9% in comparison to the first half of 2018.  In technologies, lithium-ion batteries saw the greatest increase in newly installed capacity at 95.8%, an increase of 9.6% in comparison to the first half of 2018.

 According to CNESA predictions, by the end of 2019, China’s operational electrochemical energy storage capacity will reach 1891.50MW.  By the end of 2020, capacity is predicted to reach 2833.70MW.

Graph 3: forecast for China’s electrochemical energy storage market capacity growth

3.       About this Report

 CNESA Research customers can access the full version of the CNESA Global Energy Storage Market Analysis – 2019.Q2 by visiting the ESResearch website.

The ES Research website launched in January 2018 to provide an online platform for CNESA research products and services.  Products and services include the “Global Energy Storage Database,” “Energy Storage Industry Tracking,” “Energy Storage Industry Research Reports,” and “Research Consultation Services.” To learn more, please visit www.esresearch.com.cn. For questions or comments, please contact the CNESA research department at the email or phone number below.

Phone: 010-65667068-805

Email: esresearch@cnesa.org

A Look at Global Large-scale Solar-plus-storage Project Plans in 2019

After the 2017 launch of Tesla’s 100MW/129MWh battery energy storage project in Australia, the global energy storage market saw a new large-scale battery storage project appear nearly each month throughout 2018.  According to CNESA statistics, globally, there were 57 individual projects exceeding 50MW either newly operational, under construction, or planned in 2018.  These 57 projects equaled a total capacity of 7.6GW, or 58% of the global total of newly added energy storage capacity in 2018.  Geographically, these projects were largely concentrated in South Korea, the United States, Australia, and China.

In 2019, the “race” to deploy large-scale battery energy storage projects has continued.  Many of these projects have consisted of solar-plus-storage applications.  According to CNESA Global Energy Storage Database statistics, in the first half of 2019, there were 10 newly added solar-plus-storage projects (including operational, under construction, and planned) of size 50MW or greater globally. The capacity of these 10 projects totaled 2.3GW, equaling 83% of the newly added global solar-plus-storage capacity in the first half of 2019.

As of this writing, the Puerto Rico Electric Power Authority’s plan for 920MW of energy storage is the world’s largest solar-plus-storage plan in terms of power (MW), while the United States Bureau of Land Management’s 531MW/2125MWh solar-plus-storage project plan is the largest in terms of energy (MWh).  The majority of large-scale solar-plus-storage projects currently planned are set to be operational by 2021-2023.  Should all these projects be completed on schedule, the global energy storage market will be set for massive capacity growth over the next 2-5 years.

From January to June 2019, notable large new solar-plus-storage projects included the following:

Data source: CNESA Global Energy Storage Project Tracking Database, 2019.H1

In recent years, with the costs for solar-plus-storage project development dropping, many utility companies have begun to incorporate energy storage systems into their generation capacity.  Since 2012, battery energy storage costs have dropped 76%, increasing the feasibility of renewables-plus-storage, particularly solar-plus-storage.  The combination of battery storage with solar power or wind power can greatly increase the reliability and flexibility of the power source, even to the point in which they can begin to compete with traditional coal and natural gas generators.  One such example is the above FPL Manatee Energy Storage Center, which is intended to replace two aging gas-fired stations as part of a larger renewable energy development goal.

Solar-plus-storage projects have also caught the attention of countries and regions where natural disasters and/or weak power grids are a significant concern.  The above Puerto Rico Electric Power Authority solar-plus-storage plan is intended to be used not only to replace aging natural gas stations and diesel generators, but will also help lower mitigate the risk of power blackouts caused by tropical storms, improving the resilience and reliability of the power supply.

Author: CNESA Research
Translation: George Dudley

Assessing Development and Discussing Industry Design – Results from the 2019 Energy Storage Industry Leaders Forum

Industry leaders attend the ESIE 2019 China Energy Storage Leaders Closed-Door Seminar

On May 18, 2019, the China Energy Storage Alliance hosted the China Energy Storage Leaders Closed-Door Seminar at the 8th annual Energy Storage International Conference & Expo.  This year’s seminar featured representatives from the National Development and Reform Commission, the Ministry of Industry and Information Technology, the National Energy Administration, as well as leaders from the South, Northwest, and North China Energy Regulatory Bureaus.  Power grid representatives included those from, China State Grid, China Southern Grid, Inner Mongolia Power Group, and additional subordinate management departs and grid subsidiaries. Generation groups and energy storage system providers were also present.  These representatives of the government and private industry discussed the path for development of energy storage technologies and applications in China.  Below we explore the results of the seminar discussions.

1.      China’s Energy Storage Development is “Flourishing”

At present, China’s energy storage technology applications have achieved the beginnings of large-scale development.  According to data from the China Energy Storage Alliance, China’s operational energy storage capacity has reached a total of 31.3GW. Of this capacity, electrochemical energy storage has reached 1.07GW, marking 2019 as the beginning of the “gigawatt era” for energy storage.  In the past year, newly added electrochemical energy storage projects totaled 700MW, placing China among the top three countries in both new energy storage capacity and total energy storage capacity.  Following the release of the Guiding Opinions on Promoting Energy Storage Technology and Industry Development in 2017, the speed of development of energy storage in China has seen a massive increase.  Energy storage technology already possesses the foundation for widespread commercial applications, and is now awaiting policy support and a market mechanism that can take it further.  Despite the way in which energy storage is “flourishing,” these much-needed policies and market mechanism are not growing at the same rate as the industry itself.  Further planning and design is required before such measures will be able to support China’s healthy and structured energy storage growth.

2.      Conflicts Among Various Applications Have Become Apparent

In 2017, behind-the-meter storage saw rapid deployment in Jiangsu, Guangdong, and Beijing. By 2018 interest in behind-the-meter storage had not decreased, and large-scale deployments had not ceased.  However, falling electricity prices produced a chilling effect on behind-the-meter systems, raising concerns among technology operators and limiting investment opportunities.  Accidents at energy storage stations both domestic and international also brought forward safety concerns that could not be ignored, especially for large indoor I&C energy storage systems.  These challenges put a damper on the development of one of the industry’s most lively sectors.

Beginning in 2018, the power grid began actively promoting energy storage applications.  Both China State Grid and China Southern Grid released “Guiding Opinions” policies for the development of storage. The participation of the power grid provided a great boost to energy storage industry development while also opening a new door for grid-side energy storage applications.  Jiangsu, Henan, Beijing, and Zhejiang all initiated deployments of large-scale grid-side energy storage projects, raising the portion of grid-side energy storage in China’s total energy storage capacity from 3% to 21.4%.  In other countries where power markets are open, the handling of energy storage systems operations in the grid varies according to each regulatory agency.  In the United Kingdom, energy storage is classified as a generation resource, and policies have considered prohibiting grid operators from owning and operating energy storage systems.  In the United States, both the power grid and private industry are permitted to invest in energy storage projects, though grids are limited to project sizes which cannot exceed 50% of a total procurement goal.  At present, China lacks an evaluation system and incentive system for grid-side energy storage, yet large-scale grid-side projects are already actively participating in grid services. Grid company support of energy storage has also already begun to influence government bodies to implement policies that will support grid-side storage.  However, in a situation in which regulatory and market mechanisms are not satisfactory, we should not define energy storage as part of T&D costs, as has been done in the recently released T&D Power Price Supervision Methods policy.  At the current stage, grid-side energy storage’s value and revenue channels still cannot yet be determined, which creates uncertainty in how grid-side storage will develop.

Aside from behind-the-meter and grid-side applications, ancillary services and renewable energy integration applications also still face many market problems.  Current market rules do not reflect the full flexibility and functionality of such resources.  A long-term market mechanism awaits establishment, as current evaluation and stimulus mechanisms cannot drive the combined use of energy storage with renewables.

3.      Policies and a Market Mechanism are Slow to Form

Despite an undeveloped policy and market environment, China’s energy storage capacity still lies among the world’s top three countries.  With project scales ever increasing and policies and market conditions unable to keep up with industry development, there are three major issues that must be addressed:

1)      Safety management and environmental concerns must be planned and designed early

Safety is one of the leading concerns for energy storage systems, yet a unified and clear safety assessment model and grid-connection process still do not exist.  Among energy storage projects that are already operational, a unified fire safety management system is also lacking.  For large-scale energy storage systems, environmental assessment and system retirement requirements have not yet been defined.  Such safety and environmental issues cast doubts on the successful future development of energy storage.

2)      Energy storage systems lack a proper definition

The Guiding Opinions simplifies the process for energy storage to receive approval, yet many regional and local bureaus, such as those dealing with development and reform, fire safety, land use, the environment, transportation, and other areas do not have a clear definition of energy storage.  Energy storage is in desperate need of a clear identity.  Excluding a small number of provinces, many currently operational energy storage projects are in violation of local regulations, with some even considered as “illegal constructions.”  In addition, the process of connecting energy storage systems to the grid is fraught with obstacles, and current low-voltage connection designs are insufficient for the continued dispatch and use of energy storage resources into the future.

3)      Challenges in multiple energy storage applications await breakthroughs

Behind-the-meter energy storage in China is currently limited to one source of revenue--energy arbitrage--and investment risks are high.  Demand side management and other value-adding applications are unable to add a high level of additional value to energy storage.  The rationality of grid investment in energy storage requires correct assessment.  Grid-side energy storage development should not disrupt the principles of an open and fair market.  Proper regulatory strategies and incentive mechanisms should be put in place to recognize the investments that the grid has put into existing projects and planned projects.  The power market is China is still largely closed, but a transition from current ancillary services methods to a true ancillary services market will be key to establishing true business models.  As regulations are continually tweaked and modified, the ability of energy storage to support the use of renewable energy is challenged by uncertain investment conditions, and business models are unable to mature.

4.       Policy Suggestions

Energy storage is an important part of the energy system, with significance to the future development of China’s power structure, the creation of a low-carbon energy system, increasing the safety and efficiency of energy, and other benefits.  For a time, the issue of whether to provide energy storage with subsidies in the way of solar PV and electric vehicles was one of frequent debate, with many feeling that subsidies are not conducive to market development.  Yet in a power market that is not open, energy storage industry development and technology applications must have policy support.  Positive funding management strategies and subsidy distribution regulations can reduce many key issues.  However, industry development and technology applications require structured guidance, and projects that would receive subsidies need comprehensive regulation.  The current inability to regulate is one of the key elements holding back industry development.  Therefore, the industry should not rule out subsidies, yet at the same time should neither demand too much nor rely to greatly on the benefits they bring.  Industry growth cannot simply rely on technological maturity and dropping prices if the market is still not open, especially when price dropping is conditional on industry development, policies, and the market.  A complete reform of the power market is unlikely to occur in the short term.  Therefore, the industry must rely on a suitable policy and market environment, while a reasonable compensation mechanism can help to propel new advancements in technology.

In addition, with energy storage system accidents becoming an ever-pressing concern, the central government must put greater effort into finding ways to take preventative measures rather than wait for accidents to happen.  Safety responsibility should be a concern of all energy storage stakeholders.  As projects increase in scale, we must all take the necessary design and development measures to prevent accidents and limit environmental pollution.  The improvement of policies and development of a market mechanism for energy storage are both of major significance to China’s energy revolution.  Long-term policy and market planning will have an effect on more economic sectors than just the power sector, while the current development lags will in hindsight be seen as a natural phase of industry development.

In the short term, there are a few problems that we must solve:

First, to address the safety issues of energy storage, project management responsibilities must be clear and unified.  An evaluation system for energy storage systems must also be developed that can evaluate system safety at every stage of development and offer suitable responses to the results.  In addition, standards and regulations for storage systems should also be improved, thereby creating stronger market entry requirements for energy storage systems.

Second, regarding the issue of irregular or noncompliant energy storage systems, the national government must provide clear direction to the regulatory bodies and bureaus that oversee storage, including those that handle fire safety testing, environmental safety assessments, land use approval, project registration, and other aspects of the project development process.  Grid companies must also clarify the steps for grid connection for various energy storage applications and scenarios.  Most importantly, policies must create a clear identity for energy storage to ensure its compliance with the energy system.

Third, for those large-scale energy storage systems already in the power system, the recycling and second-life usages of electric vehicle batteries can be used as a reference for management of retired batteries.  The early establishment of a recycling and/or second-life usage mechanism will help to limit environmental pollution and provide a clear ending to the industry chain.

Fourth, more investment must be brought into grid-side energy storage systems by encouraging market-oriented development without interfering with market competition.  Grids should also not limit the services they use to those provided by their own invested projects, but also allow behind-the-meter, generation-side, and other application projects to participate in grid dispatch, making full use of the value of all resources. 

 Finally, when viewing the many issues that energy storage faces in commercialization, China must continue to push for market reforms, using market strategies to solve issues and creating rational market rules that are adapted to storage technologies and applications.  A full ancillary services and demand-side management market both wait to be established.  While a developed market will help increase the value of energy storage across multiple scenarios, early stage market development will also need a certain level of financial support.

At present, government bodies have been actively working to produce a greater number of energy storage policies, opening themselves to suggestions from technology providers, power companies, and power customers on what policies should be developed. CNESA will continue to strive for the development of policies that will support storage, providing platforms for discussion and research that will reflect the needs and opinions of stakeholders both upstream and downstream, and working towards a healthy energy storage industry with developed markets, standards, and policies.

Author: CNESA Research
Translation: George Dudley

Xinjiang Province Releases “Notice on the Development of Generation-side Solar-plus-storage Projects”

CNESA attends the solar-plus-storage seminar hosted by the Xinjiang Development and Reform Commission

Recently, the Xinjiang Development and Reform Commission and the Xinjiang Regulatory Office of the National Energy Administration released the “Notice on the Development of Generation-side Solar-plus-storage Projects.”  In early June 2019, CNESA was invited to a Xinjiang solar-plus-storage policy seminar hosted by the Xinjiang Development and Reform Commission, where suggestions were collected on energy storage applications, business models, and the safe construction and operation of energy storage systems.

The “Notice on the Development of Generation-side Solar-plus-storage Projects” highlights the use of energy storage in creating a modern energy system and transforming the way that energy is produced and used.  Key points of the “Notice” include:

1)      Solar-plus-storage demonstration projects will be developed in four regions of southern Xinjiang.  Kashi Prefecture will install no more than 15,000 kW of capacity, Hotan Prefecture will install no more than 10,000 kW of capacity, Kizilsu Prefecture will install no more than 5,000 kW of capacity, and Akesu Prefecture will install no more than 5,000 kW of capacity.

2)      This round of demonstration projects will focus only on generation-side solar and energy storage installations. Such demonstrations will have storage and solar PV operate concurrently (solar-plus-storage), receive optimized grid dispatch signals, performing output smoothing, and increasing energy consumption.  Energy storage system capacity must be no lower than 15% of the total capacity of the solar PV system, and the system must have a duration of no less than 2 hours.

3)      The demonstration projects are set to complete construction by October 31, 2019.  Beginning in 2020, the solar PV stations will add 100 hours of power generation each year for five years.

4)      Power prices for solar PV stations with paired energy storage are based on the current power price policies for solar PV stations.  Solar and energy storage stations operating in conjunction as one unit will also receive the same subsidies.

5)      Operational energy storage systems must include a battery protection system, automated fire alarm system, fire suppression system, and other preventative safety measures as they apply to each site.

6)      Private industry stakeholders are encouraged to invest in the project demonstrations using energy storage technologies and equipment that have potential commercial viability.  Energy storage technology R&D demonstrations are highly encouraged. The pilot projects are inclined to utilize equipment from companies that invest and manufacture in Xinjiang.

Author: CNESA Research
Translation: George Dudley

China Releases “2019-2020 Action Plan for the ‘Guiding Opinions on Promoting Energy Storage Technology and Industry Development’”

In 2017, China’s national government released the Guiding Opinions on Promoting Energy Storage Technology and Industry Development, the first national-level policy in support of energy storage.  Following the release of the Guiding Opinions, China’s energy storage industry made critical headways in technologies and applications.  In the past year, China ranked among the top three countries in the world in both new electrochemical energy storage capacity and accumulated energy storage capacity. As China’s energy storage industry enters the “post-Guiding Opinions” stage, suitable polices and a market mechanism become ever more necessary to contain moving forward.

To confront some of the key issues in the energy storage industry and better implement the strategies laid out in the Guiding Opinions, the National Development and Reform Commission, Ministry of Science & Technology, Ministry of Industry and Information Technology, and the National Energy Administration jointly released the “2019-2020 Action Plan for the ‘Guiding Opinions on Promoting Energy Storage Technology and Industry Development’” (NDRC [2019] NO. 725), which emphasizes a number of actions, including technological R&D and intelligent manufacturing, the creation of policies supporting technological and industrial development, further development of pumped hydro storage, support for new application demonstrations, the development of energy storage applications for electric vehicle batteries, standardization of energy storage project construction, and others. The action plan hopes to ease some of the local-level construction approval processes for energy storage technologies, allowing projects to become compliant with local regulations.  An additional action includes the provision of guidance and regulation for the development of grid-side storage, redesigning the current model which ties energy storage prices to T&D electricity costs.  The plan’s support of increased demonstration projects encourages large-scale development that prioritizes safe and stable operations in the power system while also exploring new and innovative technologies. Finally, the plan encourages the improvement of the energy storage standards system, supporting standardization that can develop in pace with innovations in technology. 

With the release of the action plan, specific work goals have been set for the Guiding Opinions. While the plan strives to realize all the goals for energy storage laid out in the 13th Five-year plan, an emphasis on safe and environmentally friendly systems remain two of the most prominent focuses for China’s energy storage industry development and technology applications.

The full version of the policy (in Chinese) can be viewed at: http://www.ndrc.gov.cn/zcfb/zcfbtz/201907/t20190701_940747.html

Author: CNESA Research
Translation: George Dudley

Xia Qing: What Kind of Policies Does Energy Storage Need?

At this year’s Energy Storage International Conference & Expo 2019, the hot topic was grid-side energy storage.  Much of the talk stemmed from the April 22 release of the “Transmission & Distribution Power Price Supervision Methods (Draft for Comment)” and its omission of energy storage as a T&D cost.

The cost of energy storage is currently one of the major factors slowing the pace of industry growth.  The inclusion of energy storage as a T&D cost would encourage grid companies to make rational investments in energy storage, providing guiding support for the industry.  Yet the draft version of this policy has clearly placed energy storage outside of the category of T&D costs.  During his speech at the ESIE 2019, Tsinghua University Department of Electrical Engineering professor Xia Qing shared his views on this policy.

Tsinghua University Department of Electrical Engineering professor Xia Qing Speaks at ESIE 2019

As Xia Qing states, the reason that energy storage facilities have not yet been included as a T&D cost can be summarized in three reasons:

1. Energy storage facilities are still considered “luxury items” with high costs.

2. Grid-side energy storage project construction is undertaken by grid company subsidiaries, creating unbalanced prices.

3. When energy storage is used as T&D infrastructure, investment returns are difficult to measure.

Energy storage’s most notable trait is that it can help increase the usage of grid resources.  If energy storage is used in place of traditional T&D resources to meet peak load demands, then the power grid will see a significantly greater return on investments.

Xia Qing stressed that energy storage possesses great value.  If we admit that energy storage is a segment of the power grid, then we must consider energy storage as a fixed cost to be included in T&D electricity prices. However, this would not be without certain conditions.  The power grid could take an integrated planning approach to energy storage construction, yet it should also make efforts to bring other resource providers into the mix.  While T&D prices should receive part of the benefit, energy storage should generate profit primarily from the competitive power market, particularly the power spot market, wherein energy storage would have a much better opportunity to exert its full value.

Energy storage is a new and rising industry with major significance to the energy revolution.  New forms of industry require systematic innovation, and only industry policies can help push grid-side energy storage technologies to greater quality, higher efficiency, and sustainable development.  Regarding the types of policies that are needed, Xia Qing raised five suggestions:

1.       An Open Investment Market

The creation of a “diversified investment, unified operations” business model will help attract an increasing number of resource providers to the energy storage industry under a unified grid dispatch system.  Grid-side energy storage possesses global benefits that should be shared with all society, and an open market helps ensure fair energy storage pricing.

2.        Create an Open and Stimulative T&D Power Price Mechanism

Energy storage must connect with the T&D power price mechanism to provide better T&D deferral services (while meeting relevant economic margins). System lease prices should be determined by market competition, with their costs included in T&D capital costs.

3.       Create a Marketized Payback Mechanism

Xia Qing stressed that energy storage cannot entrust all hope for development in T&D power pricing.  Energy storage must be an active participant in the power spot market.  Through a free and open power market, energy storage can compete with traditional energy resources.  The success of energy storage in such a market would be proof of its value.  Such a model is one that the industry can rely on for continued development.  Marketization must come before planning, and we must use the market to lead industry development.

4.       Promote and Improve the Construction of a Power Spot Market

Create market mechanisms and pricing mechanisms for energy storage and other flexible resources.

5.       Create Sufficient Management Mechanisms and Effective Monitoring Mechanisms

To bring investment to grid-side energy storage, we must improve methods of management.  The simpler the management techniques, the easier they will be to implement.  Proper management should focus on the investment of energy storage capital before a project is developed, as well as evaluating the project once it has begun operations.  Such management processes will be able to certify whether the industry is operating reasonably.

From Professor Xia Qing’s suggestions it is not hard to see that the inclusion of energy storage in T&D costs would establish a clear and prominent position for energy storage. However, the majority of the value and benefits of energy storage should be drawn from the power market.  Without the support of one or both of these conditions, it will be difficult for energy storage to develop in a healthy direction.

Through systematic innovations, the support of improved industry policies, the opening of an inclusive market environment, and the development of an ideal management system, energy storage will be allowed to serve as an application supporting the creation of efficient, smart grids.  Grid-side energy storage has the potential to carry the development of the energy storage industry, providing a new and exciting element to the grid energy revolution.

Author: Carrie, Beijixing Energy Storage News
Translation: George Dudley

ESIE 2019: A Look Back at this Year’s Opening Ceremony

On May 18th, the 8th Energy Storage International Conference & Expo (ESIE) opened at the China National Convention Center in Beijing.  The event was led by the China Energy Research Society and organized by the China Energy Storage Alliance and Chinese Academy of Sciences Institute of Engineering Thermophysics.  Government leaders, senior executives, academic researchers, and media representatives all gathered for one of the biggest energy storage events of the year, discussing the industry’s latest development trends and challenges while lending insight into the future of energy storage.

CNESA General Secretary Liu Wei Hosted the Opening Ceremony

The ESIE opening ceremony featured some of the leading representatives of China’s energy storage industry, including guests and leaders from the National Energy Administration, China Energy Research Society, Zhongguancun Management Committee, Chinese Academy of Sciences, and others.  China Energy Storage Alliance General Secretary Liu Wei served as host.

During his opening remarks, China Energy Research Society Vice Chairman and Former National Energy Administration Assistant Director Shi Yubo stressed the need for the energy storage industry to increase efforts in planning, technology innovations, and institutional reforms to overcome challenges in industry development. Shi Yubo highlighted three synchronous developments that the industry should strive for: first, a simultaneous focus on technological advancements with safe, reliable applications. Second, the construction of policy and market mechanisms with commercial development.  Third, the establishment of a recycling system in step with large-scale project development.  He expressed hope that industry stakeholders can do more to expand their modes of thinking, engage in deep discussion, and share valuable experiences, all of which will contribute to solving the major issues of the industry.

China Energy Research Society Vice Chairman and Former National Energy Administration Assistant Director Shi Yubo Delivers a Speech

Chinese Academy of Sciences International Cooperation Department Assistant Director Wang Zhenyu expressed congratulations on the successful opening of ESIE 2019.  He highlighted the use of energy storage in solving issues with large-scale renewable integration, expanding distributed energy storage resources, and creating smart grids, stressing energy storage as a core technology for the energy revolution. The Chinese Academy of Sciences has devoted significant resources to research in energy storage technologies, including the support of international collaborative projects and talent plans related to energy storage.  The Chinese Academy of Sciences will continue to strengthen its research in energy storage technologies as well as international collaboration through the International Energy Storage Alliance, founded by the Chinese Academy of Sciences Institute of Engineering Thermophysics last year.

Chinese Academy of Sciences International Cooperation Department Assistant Director Wang Zhenyu Delivers a Speech

Representing the conference organizer, China Energy Storage Alliance Chairman Chen Haisheng expressed that in 2019, “spring had now arrived” for energy storage in China.  In the past year, over 13 provinces and regions have released policies in relation to energy storage, providing a big boost to the market.  Yet a multitude of challenges still lie ahead: a compensation mechanism for energy storage has not yet appeared, storage technologies must improve, and costs and safety issues must be addressed.

China Energy Storage Alliance Chairman Chen Haisheng Delivers a Speech

In 2018, the value of grid-side energy storage began to become more apparent.  Tsinghua University Department of Electrical Engineering Professor Xia Qing shared how energy storage has brought new flexibility, smart solutions, and economic benefit to the grid.  Continued development in grid-side energy storage requires institutional innovations and policy support, much of which must come from changes in the practices of investment bodies, T&D pricing, remuneration, and management.

China Southern Grid is one of the world’s leading constructors of MW-level energy storage projects, developing the Baoqing energy storage station in Shenzhen in 2011 and continually expanding their range of applications.  They have also been active participants in the drafting of many domestic industry standards. According to China Southern Grid Science & Technology Department Assistant Director Zhen Yaodong, energy storage in China currently lacks a suitable commercial model.  Energy storage has now become an indispensable tool for grid frequency regulation, but determining who must foot the bill for storage must be settled before the technology’s range of use can be expanded.

China State Grid is the leader in domestic grid-side storage. As China State Grid Dispatch Center Assistant Chief Engineer Pei Zheyi expressed, electrochemical energy storage has already been implemented at all segments of the electrical system.  It is predicted that by 2035, as renewables energy capacity continues to expand, renewables will surpass coal power to become the primary energy source for the entire country.  Energy storage can help improve the effectiveness of renewables in the grid, providing frequency regulation services for thermal power plants, black start capabilities, and other important services.

The United States is one of the world’s largest energy storage markets, expected to surpass 1 billion USD in 2019.  As Energy Storage Association CEO Kelly Speakes-Backman stated, in 2018, the United States energy storage market saw a newly installed capacity of 777 MWh, an increase of 80% from the previous year.  Following the release of FERC Order 841, ten U.S. states passed stimulus bills for energy storage, giving the industry an additional boost.  By 2025, the total accumulated U.S. energy storage capacity is expected to reach 35 GW.

Energy Storage Association CEO Kelly Speakes-Backman Delivers a Speech

Speaking for one of the world’s leading energy storage systems integrators, Sungrow Power Vice President Cheng Cheng shared his company’s thoughts on energy storage applications.  Reflecting on 2018’s growth, Cheng Cheng stated that China’s massive breakthroughs in energy storage capacity are inseparable from recent technology innovations.  However, if we wish to see further developments in the future, we must devote our skills to improvements in safety, policy, costs, peripheral technologies, and other issues.  From an applications standpoint, we now see energy storage coupling with a variety of other industries and systems, necessitating efforts to develop new applications scenarios and models.  Further breakthroughs in “Energy Storage+” applications would be a great boon for the industry.

China Energy Storage Alliance Research Department Director Yue Fen presented on energy storage industry growth in the previous year, stating, “in 2018, the global energy storage industry experienced a giant leap in growth.  Global new operational electrochemical energy storage project capacity totaled 3698.8 MW, an increase of 304.6% in comparison to 2017.  Of this new capacity, China’s new operational electrochemical energy storage capacity totaled 682.9 MW, an increase of 464.4% in comparison to 2017.  China’s increase was second only to that of South Korea.”  With costs continuing to drop and application scenarios expanding, CNESA predicts that in five years’ time, China’s electrochemical energy storage market will see even larger growth.

China Energy Storage Alliance Research Department Director Yue Fen Presents on the CNESA Energy Storage White Paper 2019

As the opening ceremony wrapped, ESIE organizers invited representatives from the National Development and Reform Commission, Ministry of Industry & Information Technology, National Energy Administration, regional energy management bureaus, China State Grid and its subsidiaries, China Southern Grid and its subsidiaries, generation companies, private energy storage enterprises, and other industry experts together for a closed-door energy storage leaders meeting. Representatives discussed such themes as support methods for energy storage commercialization policies and market mechanisms, increasing energy storage application and technology requirements, ways of guaranteeing safe and reliable energy storage systems, and other pressing industry topics.

Johnson Yu: Energy Storage Technology Costs Have Reached a Turning Point

In 2018, the Chinese energy storage industry welcomed tremendous new growth.  According to China Energy Storage Alliance Global Energy Storage Database statistics, as of the end of 2018, China’s accumulated operational energy storage projects totaled 31.3GW.  Of this total, electrochemical energy storage projects accounted for 1072.7MW, 2.8 times that of the total accumulated operational capacity of 2017.  Newly added capacity totaled 682.9MW, an increase of 464.4% from the previous year.

The primary reason for such fast-paced industry growth has been the recent launch of grid-side energy storage projects which have come about in part due an increasingly supportive policy environment.  With the help of the Guiding Opinions on Promoting Energy Storage Technology and Industry Development, many new projects have been put into operation.  Industry reforms have brought about the first trial spot markets, and more than 13 provinces and regions have released policies addressing the construction of ancillary services markets, attracting the attention of many energy storage companies and bringing new excitement to the market.

At the same time, the industry has yet to fully move out of the demonstration stage and standards are only beginning to take shape. Industry competition has increased, and project profits have shrunk dramatically as safety concerns become more prominent.  The industry is now having difficulty keeping up with the pace of its own development and is in desperate need of improved systems solutions and standardization.

In 2018, China’s economy began to slow.  The combination of industry structural adjustment, financial deleveraging, and the U.S.-China trade war have all affected the industry, weakening confidence in long-term investment in technologies and the future market. Many energy storage companies felt pressure in the second half of 2018 due to a variety of factors, including financing difficulties, project delays, changes in ownership, and corporate restructuring.

Such difficulties also brought new opportunities.  After the massive changes to the solar industry brought about by the “531” policy, some advanced solar technology companies actually saw their business increase, and many solar PV projects have already begun delivering electricity without feed-in-tariffs.  Much like solar PV, the price of energy storage batteries is dropping 20-30% each year.  In theory, as of 2018, energy storage technology costs have already reached their turning point.

As an emerging industry, once such a turning point has been reached, development is likely to reach unpredictable speeds, bringing as many opportunities as it does risks and challenges.  The best method for meeting such opportunities and challenges lies among companies themselves to strengthen their operations abilities and the quality of their technologies.  Pioneering companies must emphasize technological improvements, innovations, and integration techniques, or risk becoming left in the dust as competitors pass them by.

With technology costs now closing in on an ideal target, three pathways are forming:

The EV battery path, which views the lowest possible technology price as the ultimate benchmark.  We have already surpassed the frequently mentioned 1.5RMB/Wh turning point, and even lower prices are now being discussed, with 0.5-0.7RMB/Wh cell manufacturing costs already appearing, and prices as low as 0.3RMB/Wh possibly emerging this year.

The non-lithium-ion path, focused on power and/or hybrid applications, which includes a variety of physical and electrochemical energy storage technologies that have already become frontrunners for new applications in many power markets.

The hydrogen energy storage path, which has already shown significant progress along a similar path of development as EV batteries.

The pace in which policies and a market mechanism are being developed lags significantly behind the industry’s speed of growth.  The lack of policies helping to lower costs and manage system safety has been a longtime concern, and has been particularly apparent in its effect on the behind-the-meter storage applications which have led the industry’s development.  It is our hope that relevant agencies and parties can address fire safety regulations with more urgency, and that local governments can give deeper consideration to the design of policies related to the energy storage industry in the future.

In contrast to other energy industry sectors in which energy storage frequently collaborates, energy storage is a small-scale industry with an equally small voice.  We hope that the industry can come together to create a true market and push for the release of meaningful policies.  Though current market conditions may be frustrating, we must not get discouraged.

Internationally, many emerging markets have shown impressive growth, though in Europe and Asia, there are still many regions that have remained untouched.  We hope that companies that are up to the challenge can cross international borders and participate in the international competitive market.

2019 is likely to be an inspiring year.  In technologies, we have seen many new breakthroughs, including solid-state electrolyte technologies which have upgraded traditional lithium-ion batteries, developments in a wide variety of sodium battery technologies, new breakthroughs in flow battery and Li-ion hybridization, the launch of a variety of physical energy storage projects, and the ever-increasing speed of hydrogen technology development.

Energy storage technologies have demonstrated versatility to support the electricity system, solar PV, and electric vehicles.  Energy storage will become a key technology for the future integration of transportation and energy, and ending reliance on traditional fuel sources such as coal and oil. Energy storage will become increasingly valuable in new application scenarios, and is destined to become a key component of China’s energy system.

In policies and regulations, we hope to see relevant government bodies coming to a greater understanding of the difficulties the industry has faced as it has developed, and will release supporting policies and regulations that will better reflect the current industry conditions.

We hope to have more opportunities in the future to work together with colleagues at all levels of the energy industry to discover more areas of collaboration, overcome challenges, and create a bright future for both energy storage and the entire energy industry.

Author: Johnson Yu, Vice Chairman, China Energy Storage Alliance.
Translation: George Dudley

This article is comprised of excerpts from the CNESA 2019 White Paper introduction.

ESIE Wraps Up Another Year—A Look Back at Three Days of Energy Storage Events

The 8th Energy Storage International Conference closed this past May 20th, 2019.  Throughout three days of ESIE events, representatives from government, industry associations, power generation groups, and energy storage enterprises from around the world gathered in Beijing to discuss the latest in technology trends, discover opportunities for collaboration, and create a blueprint for energy storage industry development.

CNESA would like to thank all attendees and exhibitors who took part in ESIE 2019.  We hope that the event was rewarding and enjoyable for all.

In comparison to other established energy sectors, energy storage is still in an early, yet fast-developing stage.  With an exhibition area of over 6000 sq. meters, nearly 100 expo participants from 10 countries, and conference attendees from over 1600 organizations and companies across the industry chain, ESIE 2019 showed just how quickly energy storage is growing. In total, ESIE 2019 achieved a scale 30% larger than the previous year.

Expo Spotlight

Attendees register on opening day

Attendees tour the expo hall

An exhibitor stands beside his product

Attendees get an up-close look at an exhibitor display

The CNESA Energy Storage Standardization Committee announces the release of CNESA energy storage system standards

The Energy Storage Open Course provides free industry information to expo attendees

Contestants participate in the expo hall prize drawing

Multiple companies sign strategic partnerships

“A Night with Shoto” banquet dinner welcomes guests far and wide

In addition to the expo, other ESIE highlights included the conference opening ceremony, 10 forum tracks, an energy storage industry leaders closed-door forum, and many other activities.  ESIE organizers invited government leaders, grid companies, domestic and international energy companies, and energy storage company representatives to present on hot topics and challenges in the industry.  Attendees heard 170 presentations from experts hailing from 30 different countries, sharing their personal industry experiences and achievements.

Conference Highlights

Attendees view the ESIE opening ceremony

The results of the Energy Storage International Innovations Competition are released, honoring 25 companies and 8 industry leaders

Flywheel Energy Storage Technology Seminar

Forum: Energy Storage System Design and Implementation

Forum: Global Energy Storage System Safety & Standardization

First Annual World Energy Storage Technology Conference

Forum: The Value of Energy Storage in Ancillary Services (Spot) Markets

Forum: Large-scale Grid-side Energy Storage Applications

Forum: Second-life Batteries

Forum: Behind-the-meter Energy Storage Applications and Energy Services

Forum: Energy Storage Applications for Electric Vehicle Charging

1st Annual International Energy Storage Operators Forum

This year’s ESIE exceeded expectations.  As the energy storage continues to grow, we hope that ESIE can continue to be one of the industry’s yearly highlights.

As CNESA Vice Chairman Johnson Yu said, energy storage companies are still a very small part of the energy industry, with few opportunities to voice their opinions. As development opportunities increase, so do risks and challenges become more prominent. We hope that the industry can unite together to create a true market for energy storage and promote policies that will support industry growth.

ESIE has been a part of the energy storage industry since its inception in 2012.  The China Energy Storage Alliance, organizer of ESIE, has served and continues to serve as a bridge linking government, industry consumers, and energy storage enterprises together.  Since 2010, CNESA has been supporting the energy storage industry, providing advice to relevant government bodies, promoting policies for the support of the industry, and formulating the creation of energy storage industry standards.

We hope to see you again for ESIE 2020 at the China National Convention Center in Beijing.  We look forward to an even bigger and better event next year!

CNESA Global Energy Storage Market Analysis—2019.Q1 (Summary)

1.       The Global Market

According to statistics from the China Energy Storage Alliance Global Project Tracking Database, as of the end of March 2019, global operational energy storage project capacity totaled 181.2GW, an increase of 3.2% compared to Q1 the previous year.  Of this capacity, electrochemical energy storage made up 6829.0MW, or 3.8% of the global total, an increase of 104.0% in comparison to Q1 of the previous year, and an increase of 3.1% since the 2018 year’s end.

Global Distribution of Total Electrochemical Energy Storage Projects in Operation (2000-March 2019)

Data Source: CNESA Project Tracking Database

In the first quarter of 2019 (Jan-Mar), global newly added electrochemical energy storage projects totaled 203.6MW, a decrease of 51.7% in comparison to the first quarter 2018, and a decrease of 88.8% in comparison to the fourth quarter of 2018.

2.       The Chinese Market

At of the end of March 2019, China’s operational energy storage project capacity totaled 31.3GW, or 17.3% of the total global market, an increase of 8.3% in comparison to Q1 the previous year.  Of this capacity, electrochemical energy storage comprised 1123.2MW, or 3.6% of the total Chinese market, an increase of 150.5% in comparison to Q1 the previous year, and a 4.7% increase since the end of 2018.

Distribution of Total Electrochemical Energy Storage Projects Operational in China

Data Source: CNESA Project Tracking Database

In the first quarter of 2019 (Jan-Mar), China’s newly added electrochemical energy storage projects totaled 50.5MW, a decrease of 13.7% in comparison to the first quarter 2018, and a decrease of 84.2% in comparison to the fourth quarter of 2018.

About the CNESA Global Energy Storage Project Database

The CNESA Global Energy Storage Project Database was established in early 2012 by the China Energy Storage Alliance to provide data for the annual CNESA Energy Storage Industry White Paper and other CNESA research products.

As of the end of 2018, the database has collected over 2500 energy storage projects used in the global energy system, covering a wide variety of storage technologies and applications.  Project data is available for over 70 countries and regions around the world.  Over the course of its development, the database has achieved wide recognition from the industry.

About the Global Energy Storage Market Tracking Report

The Global Energy Storage Market Tracking Report is published each quarter by the China Energy Storage Alliance.  The report provides the latest market data and trends in the energy storage industry.  Readers can log on to the official CNESA ES Research web page at www.esresearch.com.cn to download the summary version and/or order the complete version.

About the ES Research Platform

 The ES Research online website launched in January 2018 to provide a platform for CNESA research products and services.  Products and services include the “Global Energy Storage Database,” “Energy Storage Industry Tracking,” “Energy Storage Industry Research Reports,” and “Research Consultation Services.” To learn more, please visit www.esresearch.com.cn. For questions or comments, please contact the CNESA research department by phone at 010-65667068-805.

Regional Energy Storage Subsidies Bring Good News for Behind-the-meter Storage

On March 24, the Suzhou Industrial Park Administrative Committee released Measures for the Management of Special Guiding Funds for Green Development of Suzhou Industrial Park (苏州工业园区绿色发展专项引导资金管理办法). The measures outline subsidies to be used for energy saving modifications, cyclical economic measures, and Internet of Energy projects.  Subsidies are also provided for distributed natural gas generators and energy storage projects. As stated in the policy:

“Owners of natural gas generators and energy storage projects within the industrial park that have undergone pre-connection review, have connected to the grid, and are operational will receive a 3-year subsidy of 0.3 RMB for each kWh of electricity produced.”

Such a subsidy has big implications.  Until now, China’s energy storage industry has lacked a financing mechanism for energy storage, making future profitability unclear.  Industry stakeholders have for many years called for a financial subsidy that can help push the industry forward.  Suzhou has now been the first this year to release clear subsidy standards that are certain to have a positive effect on energy storage, particularly behind-the-meter storage systems.

However, Suzhou is not the first Chinese city to introduce a subsidy policy for energy storage.  In September 2018, Hefei released the Suggestions for Encouraging the Continued Healthy Development of the Solar PV Industry (关于进一步促进光伏产业持续健康发展的意见), which stated that solar-plus-storage projects put into operation after the release of the policy would, beginning in their second month of operation, receive a subsidy of 1 RMB for every kWh charged, with a limit of 1,000,000 RMB per project per year.

Cities like Hefei and Suzhou have begun to release such subsidy plans in response to policies that have caused I&C electricity fees to drop.  Such policies shrink the gap between peak and off-peak power prices, causing the demand for behind-the-meter energy storage projects to decrease.  Yet shrinking peak and off-peak price differences are not the only pressures that energy storage faces.

One example is Jiangsu.  In August 2018, State Grid Jiangsu revised the “Customer-side Energy Storage System Grid Connection Regulations” (客户侧储能系统并网管理规定), preventing behind-the-meter energy storage stations from feeding energy back into the grid. Engineering and construction of behind-the-meter systems must comply with multiple national standards for grid connection and system design, while information relating to energy storage systems must be submitted to State Grid Jiangsu’s monitoring and interaction platform.  For many companies, the entire process, including grid connection, safety inspection, permits, etc. can add an additional 200,000-300,000 RMB in costs to a project. Such policies are a hindrance to the development of the energy storage industry and the ability for projects to be profitable.

Suzhou’s energy storage subsidy is different from the Hefei subsidy in that instead of compensating based on amount of electricity charged, it instead compensates based on the amount of electricity released.  Compensating in this way supports battery products with higher charge/discharge efficiencies, giving them an advantage in the market that contributes to a healthy, competitive growth in the energy storage industry.

From its small beginning 8-9 years ago, to its recent growth spurt over the past two years, the growth of the Chinese energy storage industry has been carried by the behind-the-meter market.  According to CNESA statistics, in 2018, global newly added electrochemical energy storage project capacity was dominated by behind-the-meter storage at 1530.9MW, or 43% of the total.  Concentrated renewable integration and ancillary services held second and third places, respectively, at 26% and 17%.

Despite the large increase in capacity last year due to new, large-scale grid-side energy storage projects, behind-the-meter energy storage will undoubtedly continue to play a key role in capacity growth.  As one industry insider put it:

“China’s energy industry has developed thus far through the efforts of behind-the-meter storage developers.  If the Chinese energy storage industry is to truly stand on its own, behind-the-meter energy storage will be the driver.  National support, whether for electric vehicles or energy storage, is not guaranteed forever.  If the EV industry is to develop, it must do so with the support of the consumer.  If the energy storage industry is to develop, it is the behind-the-meter industry that must foot the bill.”

But this is also where the conundrum lies.  Behind-the-meter storage cannot expect to forever rely on subsidies, yet the current state of the industry necessitates them.  An appropriate subsidy can provide quick stimulation to market capacity while also providing a reasonable standard for projects to follow, awarding funds only to projects that are of good quality.

Of course, the major perquisite to a successful subsidy system is for the issuing region to possess solid financial strength. Besides Suzhou and Hefei, Beijing has been widely rumored to have a similar policy in the works.

From a national perspective, because energy storage is applicable to a wide variety of scenarios and many friendly industries are already receiving subsidies, it is unlikely that we will see a national-level subsidy in the future. At the 2018 Energy Storage 100 Lingnan forum in Shenzhen last December, a representative from China State Grid commented, “at this time, the national government is not going to release a comprehensive subsidy policy for energy storage, though they do support the creation of regional policies. However, such policies would inevitably lead to regional protectionism.”

Such regional protectionism could involve taxation, project developer registration, procurement of local equipment, etc. However, when considering the monumental challenges of how to guide and promote energy storage development, the possibility of regional projects coming with “strings attached” may not be an issue of great concern.

Author: Energy Storage 100
Translation: George Dudley

The International Market--Challenges and Opportunities for Chinese Energy Storage Companies

The 2018 global electrochemical energy storage market saw continued growth from many different players. Projects continued to accumulate, application areas continued to expand, and market capacities increased all at dazzling speeds.

The Global Storage Domain

It is no surprise that countries in the Asia-Pacific, North America, and Western Europe who possess strong industrial power foundations and widespread renewable energy markets are the leaders in energy storage growth.  According to statistics from the China Energy Storage Alliance global energy storage project tracking database, South Korea, the United States, China, the United Kingdom, Japan, Germany, and Australia contributed to 94% of the world’s newly added storage capacity in 2018.  These countries also accounted for 94% of storage capacity between 2000-2018.

The presence of South Korea amongst these countries is somewhat unexpected.  In 2017, South Korea’s energy storage capacity was nearly equal to that of China, yet in just a year, South Korea’s energy storage market experienced a tremendous growth spurt, adding 1580.3MW of new capacity, equivalent to 45% of the globe’s new total for 2018, vastly exceeding that of China, the United States, or any country in Europe.

Graph 1: 2018 Global Distribution of Newly Added Electrochemical Energy Storage Projects

According to statistics from the CNESA Global Energy Storage Project Database, in 2018, global newly operational electrochemical energy storage project capacity totaled 3545.7MW, an increase of 288% from the previous year. Total accumulated capacity reached a total of 6472.3MW.

Graph 2: Global Accumulated Operational Electrochemical Energy Storage Capacity (2010-2018)

An observation of each country’s growth reveals the following: first, the Chinese market’s largest source of growth is grid-side and behind-the-meter applications.  Second, South Korea’s market growth is driven by renewable integration and behind-the-meter applications.  Third, UK market growth is based primarily on ancillary services, while the United States and Australia see a substantial portion of capacity come from residential behind-the-meter markets.

Aside from the seven countries above, other countries—including Canada, France, and Portugal, as well as emerging markets such as India and Brazil—are also growing their energy storage capacities, releasing ambitious plans for storage development.  The addition of new countries to the global stage has brought diversity to global energy storage market needs.

With grid remodeling and renewable energy development acting as drivers for energy storage around the world, the need for energy storage has become widespread. 

The Appeal of the International Market

In comparison to the other countries above, China occupies a somewhat awkward position.  Despite China’s status as the world leader in battery production, the country lags behind in many energy storage applications. Grid-side applications still lack an effective price mechanism.  In behind-the-meter applications, uncertain I&C electricity policies and ever-shrinking peak and off-peak price gaps have had major effects on energy storage project earnings, putting the future of many projects at risk.

In contrast to the pressures and uncertainties that China’s energy storage industry faces, the international energy storage industry displays a more mature level of commercialization.  Yet at the same time, major markets such as the United States, United Kingdom, Germany, and Australia lack sufficient battery production capacities to match needs.  The international market therefore provides one of the biggest opportunities for Chinese energy storage companies to grow.

Fierce competition in the domestic market has already had an effect on some companies.  For example, in August 2018, BYD’s energy storage business division announced plans to cease participation in the domestic competitive bidding process and limit themselves only to the role of equipment supplier.  BYD could only afford to take such a bold measure due to the company’s strong overseas presence.  BYD’s success in Europe and the Americas has become a benchmark for other Chinese energy storage companies seeking to go abroad.

Beginning in 2018, many Chinese solar PV and battery companies began ratcheting up efforts to expand their international market presence.

In the first half of 2018, Sungrow’s energy storage business division reported a revenue increase four times that of the same period in 2017. Following China’s cuts to solar subsidies and feed-in-tariff prices in May 2018, Sungrow began to consolidate its solar and energy storage business lines. Relying on the company’s established international solar marketing channels, Sungrow’s energy storage business line was able to break through to markets in the United States, Germany, and Japan in 2018.

BYD and Sungrow have been established in the international market for some time, giving them an established advantage over other Chinese companies.  For many small and medium-sized companies, emerging markets in the Asia-Pacific, Middle East, and Africa show greater appeal.  One example is Shoto’s contract won last year to provide EPC services for projects totaling 80 million USD in Afghanistan.

With numerous companies competing in a small market, many have been motivated to go abroad. China’s energy storage companies have landed in many regions, from Southeast Asia to India, Europe, America, Africa, and the Middle East.  As China’s lack of an open power market continues to present a challenge for energy companies domestically, it is quite possible that China’s battery and energy storage companies might copy the business model of the country’s solar companies, producing domestically and marketing globally.

In 2019, China’s battery manufacturers and energy storage companies have accelerated their international activities, driven largely by two major factors.  First, Chinese companies have the desire and need to develop internationally.  Second, international market changes have provided Chinese companies with much room for expansion.  In 2018, South Korea’s rapid growth in storage projects caused LG and Samsung to focus more attention on their domestic markets. Prices for international battery and energy storage systems began to rise, providing a great opportunity for Chinese battery manufacturers to supply batteries for global developers and systems integrators.

In the battery industry, South Korea and Japan are China’s biggest competitors. While Japanese batteries have a reputation for being technically advanced and South Korea’s batteries have a reputation for good quality-to-price ratio, Chinese batteries could be said to show technical advancement at the fastest rate.  With the support of strong government subsidies, Chinese battery manufacturers earned a place on the global stage in a few short years.

Unlike the nickel-magnesium-cobalt battery which leads the Li-ion battery market internationally, China’s lithium-iron-phosphate battery is much more price competitive. According to data on battery pack procurement prices for grid-side energy storage projects in 2018, China’s average battery pack price was 1073 RMB/kWh, approximately 30% lower than that of the average price for battery packs in the international market.  It is very likely that China’s manufacturing capacity will allow the country to become the leading supplier for the global battery and energy storage industries, much as the country has done for the solar PV industry.

Revelations from Global Leaders

Europe and North America both possess mature business models for integrated energy services. The development of the power market in these regions follows the proliferation of the “smart grid” concept, including new power industry services brought about through the emerging internet of energy.

Sonnen, recently acquired by Shell, possesses over 30,000 residential energy storage installations worldwide.  Sonnen not only distributes its energy storage equipment to residential users, it also creates virtual power plant networks out of its customer communities, allowing distributed energy storage systems to become dispatchable peak shaving and frequency regulation networks for use by the grid.

With renewable integration applications diversifying, power grids and regulators face major challenges.  Exceptional energy storage systems integrators are adopting increasingly important roles in the electricity system.  According to evaluations by market researcher Navigant, Fluence, Nidec ASI, RES, and Tesla are the leaders in energy storage systems integration.

Fluence has over 10 years of industry experience providing energy storage solutions to power grids, energy developers, and large-scale power customers.  The company has deployed over 600MW of energy storage project capacity globally.  Fluence’s customers require a high level of expertise and financial stability for such projects, which typical battery manufacturers would be unable to provide.

In contrast, China still lacks system integrators with a thoroughly researched understanding of energy storage systems.  Systems integration requires expertise in multiple subjects, including electrochemistry, power electronics, information technology, and power dispatching, while also knowing what components, software, and other equipment will be the proper fit for the multitude of varying applications and scenarios.

For Chinese companies, developing from a battery manufacturer and/or PCS provider into a full solutions provider that can compare with other industry leaders is no small task, yet the window of opportunity is still large.

Looking globally, should Chinese companies wish to enter the Korean and Japanese markets on a large scale, they will have to go up against major competitors such as LG, Samsung, and Panasonic.  Europe and North America are both important energy storage markets, with strong demands for high quality inverters and batteries, and high technical requirements for energy storage systems in general.  Other countries with developing markets may also pose risks that are not present in countries with a more developed energy storage industry.

If Chinese energy storage companies wish to gain a bigger foothold in international markets, they will need to be familiar with local energy policies, power markets, and the variety of applications scenarios required for energy storage systems in each country.  International market expansion is a long-term process, and the questions of how to localize products/services and build cooperative partnerships with local developers and systems integrators are ones that Chinese companies will have to solve before they can be truly successful.

Author: Energy Storage 100
Translation: George Dudley

Understanding the “Notice on Developing Generation-Side Storage Stations in Xinjiang Province”

Last month Xinjiang Autonomous Region Development and Reform Commission released the Notice on Developing Generation-Side Storage Stations in Xinjiang Province.  The document states intention to “emphasize and encourage solar PV stations to incorporate storage systems, with a recommended installment of systems at a capacity 20% of that of the solar PV station.”  The notice also allows solar PV projects incorporating energy storage to produce an additional 100 hours of electricity annually.

Data on energy storage procurements from 2018 reveals that winning energy storage project bids averaged at approximately 2 RMB/Wh.  According to the Notice, a 10MW solar PV station adding energy storage capacity at 20%, or the equivalent of 2MWh, would require an initial investment of approximately 4 million RMB.

Currently, the Xinjiang region electricity settlement process is based on two factors, base load and traded electricity. Traded electricity accounts for the majority of settlement prices.  Base load prices average at approximately 0.25 RMB/kWh, while traded electricity prices hover between 0.05 RMB/kWh and 0.1 RMB/KWh.

The Notice states that solar PV projects adding storage can produce an additional 100 hours of electricity to the grid. Ideally, such additional electricity could be offered based on hourly power pricing.  If a power station does not install energy storage, the 100 hours of electricity could instead be offered through power trading.  If energy storage has been added, the actual power price would be determined by the difference between the base load price and traded electricity price, which would be between 0.15 RMB/kWh and 0.2 RMB/kWh.

If no additional fees are factored, then a 10MW solar PV station’s pre-tax annual profit can be calculated at a minimum of 150,000 RMB and maximum of 200,000 RMB.  The above-mentioned additional 100h of generation would also lower curtailment rates.  A portion of these 100 hours can be provided by or put towards energy storage, while the remaining can be put towards AGC frequency regulation.

Battery storage system rates of effectiveness will vary based on the type of system. For example, lead-carbon systems will have an efficiency of approximately 83%, while lithium-ion battery system efficiency is normally around 92%.  If we suppose that a Li-ion battery system is used, the depth of discharge will be approximately 90% (a 0.5C charge-discharge rate), therefore, a 2MWh energy storage system will have a daily one-time full charge/discharge capacity as follows:

2000*90%*92%=1656(kWh)

For a 10MW capacity solar PV station, this equates to the addition of 1656/10000=0.1656h, for an annual total of 60.444h.  According to statistics, Xinjiang solar PV station losses due to curtailment or nonproduction average at around 135h.  This curtailed energy can instead be stored, and remaining energy can be put towards frequency regulation.  For solar PV stations in which nonproduction and/or curtailment rates are low, the above goals can still be met by using a smaller capacity storage system.

For a 4 million RMB investment with a minimum annual profit of 150,000 RMB and maximum annual profit of 200,000 RMB, a static payback period is likely to be between 20-26 years, not factoring in costs for storage system maintenance and battery replacement.  Therefore, in the eyes of developers, the payback period is considerably long, and such an investment may be stressful.

Article originally appeared on the Candela University official WeChat account

Energy Storage in 2019: Spring has Arrived

On January 9, 2019, the second phase of State Grid Jiangsu’s electrical energy storage project in Suzhou-Kunshan passed initial review. This project, which includes 10 energy storage stations, is set to be the largest energy storage installation in the world.  The news comes just six months after Jiangsu province saw the launch of world’s largest scale grid-side energy storage project.

The speed at which these projects have come about is evidence of how quickly China’s energy storage industry is growing.  According to China Energy Storage Alliance statistics, by the end of September 2018, China had a total of 649.7MW of electrochemical energy storage in operation, an increase of 104% in comparison to the same period the previous year. Of this 649.7MW, newly added capacity totaled 260.8MW, an increase of 373% in new capacity in comparison to the same time the previous year.

The energy storage industry in China can be seen as developing in two steps: the first step consists of the initial transition from R&D demonstration projects into commercialization, while the second step entails the transition from the early commercialization stage into the development of large-scale energy storage projects.

In 2019, as more energy storage projects continue to be developed, the energy storage industry will move from the demonstration project stage into the important stage of initial commercialization.  At the same time, new models and a new market are very likely to appear. For energy storage, spring has now arrived.

Policies Push Storage Forward

It is generally agreed that in 2019, China’s energy storage industry will continue its positive momentum, driven by a solid foundation of policy support.

First, the energy revolution and the move towards power structure reforms have brought about--and will continue to bring about--support for the storage industry.  Recent technological breakthroughs have allowed for the development of renewable installations in increasingly larger capacities.  As of the 2018 year’s end, countrywide combined solar and wind capacity totaled 360GW, or 20% of all electrical capacity.  As long as instability issues and difficulties in consuming renewables persist, energy storage will continue to be in demand as a support measure.

Second, China has released a number of national-level policies supportive of storage that have played a key role in pushing the industry’s development. The end of 2015 marked entrance into the Thirteenth Five-Year Plan period, in which energy storage became integrated into the country’s national development plan.  In June 2016, the National Energy Administration released the “Announcement on Promoting Electrical Energy Storage Participation in the ‘Three North’ Regions Ancillary Services Market Compensation Mechanism Pilot,” which helped establish generation-side energy storage infrastructure.  Whether behind-the-meter or front-of-the-meter, energy storage has earned status as an independent market entity.

In November 2017, the National Energy Administration released the “Workplan for Improvement of Ancillary Services Compensation (Market) Mechanisms,” encouraging competition in ancillary services, the increase of ancillary services entities according to need, and the use of energy storage equipment and demand-side resources in ancillary services. The workplan also granted permission for third-parties to provide ancillary services and confirmed support for spot market trials in 2019-2020 that will help open the ancillary services market.

Yet of all national policies in support of storage, none has been more significant than the “Guiding Opinions on Promoting Energy Storage Technology and Industry Development” jointly released by five government bodies including the National Energy Administration and National Development and Reform Commission.  Since its release, this policy has been one of the main driving forces for encouraging development in energy storage technology and industry across China.

Third, regional governments and power grid companies have released policies and regulations that directly drive the development of the energy storage industry.

By the end of May 2018, northeast China (Dongbei), Fujian, Shandong, Shanxi, Xinjiang, Ningxia, Guangdong, and Gansu regions/provinces had begun experimental ancillary services markets. Each of these markets provide energy storage a market entity status equal with that of generation companies, power sellers, and power customers. This means that energy storage can participate in ancillary services at the generation side (such as at traditional coal plants or centralized intermittent power generators), at the load-side, or as an independent market entity.

At the beginning of 2019, China State Grid Corporation released “Suggestions for New Era ‘Fresh Start’ Reforms for Increasing Construction of World-Class Energy Internet Companies,” which states intentions to research and explore the utilization of substation resources for energy storage stations and data centers, expanding customer support areas, and broadening the use of electric vehicles, energy storage, energy services, and other new technology and service models so as to encourage innovative business models to develop concurrently with the grid.  Such actions are a sign of grid planning for continuous use of storage well into the future.

Profit Models: A Mixture of Old and New

The current primary profit models for storage include energy arbitrage and frequency regulation/ancillary services.  In 2019, additional profit models such as distributed energy storage, centralized renewable integration, and grid-side storage will continue to mature.

The development of distributed energy storage has been based on the foundation of distributed renewables, in particular the rapid growth of solar resources.

According to statistics from the China Photovoltaic Industry Association released in early 2019, distributed solar PV development increased significantly throughout 2017, reaching approximately 20GW of capacity in 2018.  Due to the intermittent and fluctuating nature of renewable energy, there is a strong need for energy storage to help support the stability and reliability of such distributed energy systems.

A second model is centralized renewable integration, in which energy storage has great potential to increase.

With greater amounts of renewable resources connecting to the grid, curtailment issues arise for both wind and solar resources, brought about largely due to intermittency, instability, and the inability to be dispatched.  Energy storage technology can allow nondispatchable electricity that would normally be “thrown away” to be transformed into high quality dispatchable electricity. 

A third model is grid-side energy storage, which took off in 2018 and is expected to continue to be a growing trend through 2019.

In the grid-side storage model, energy storage can be used for peak shaving, allowing the grid to better match the time, size, and strength of the load, thereby decreasing the level of investment needed in new grid infrastructure, increasing the consumption of renewables, and increasing safety and efficiency. Grid companies and utilities lead grid-side storage project development through procurement plans directed at storage solutions or service providers.

Costs Decrease, Opportunities Increase

Costs and applications are both expected to see changes in 2019.

There are two main factors for cost decrease: first is the development of storage technologies.  New innovations in technology help strengthen system effectiveness, maturity, and scale, factors which help to decrease overall costs. Second is the overall development of the storage industry, which has allowed production of energy storage products to become more standardized, intelligent, and large-scaled.  The ability to manufacture at larger scales in particular has caused major drops in energy storage costs.

Second, looking at international trends, behind-the-meter system participation in demand response and grid services are two new models for generating profits from energy storage and diversifying business models.  In 2017, the Chinese government granted third parties the right to provide energy storage equipment and demand side resources for use in grid services.  Operations models and compensation mechanisms are currently in the works, with some in trial stages.  In the future, behind-the-meter storage business models are likely to merge with those of grid-side storage.

2018 saw many cities creating energy storage industry clusters, a trend that is likely to continue and even accelerate through 2019.  Among these clusters, two types are likely to have a good chance of development, first are those industry clusters which focus on core critical technologies, helping proprietary technologies to develop in synergy with the industry. The second are those with a strong industry foundation that can improve energy storage’s supporting infrastructure and industry chain.

As one can imagine, industry clusters face as many challenges as they do opportunities.  These opportunities arise in three areas.  First are the needs of the energy revolution, particularly the widespread use of renewables which creates a great need for energy storage.  The second are reforms to the power system and power markets brought about by new government policies.  Third is the accumulation of energy storage technology and infrastructure that has laid the groundwork for fast-paced development.

Challenges arise in a variety of areas.  First is that the full value of storage cannot be realized under current price models because a full compensation model for storage has not yet been released.  Second is that China still needs to advance in the realm of energy storage technologies, particularly holding of proprietary and intellectual property rights and critical technologies.  China still lacks the ability to produce many critical components.  Third is costs and safety, both of which require continued improvements.

Over the next year, the global energy storage market will also see rapid development.  Mature markets in the United States, Australia, Japan, and South Korea will continue to grow steadily, while emerging markets in the United Kingdom, Ireland, and India are likely to see major increases.  Leading Chinese companies already possess strong competitive abilities in the international market, and are certain to continue to play an important role in the international storage market into the future.

Author: Chen Haisheng, China Energy Storage Alliance Chairman and Deputy Director of Chinese Academy of Sciences Institute of Engineering Thermophysics
Translation: George Dudley

Exploring the 2018 Energy Storage Industry in 7 Words

At the start of each new year, the China Energy Storage Alliance looks back at the previous year’s global energy storage industry to reflect on some of the biggest trends and influential events that occurred.  In 2018, industries in South Korea, Canada, China, and other countries were marked by incredible growth in certain areas.  Yet globally, energy storage still faces challenges related to fire safety, market regulation adjustment, gaps in standardization, and other issues.  Below, CNESA has chosen seven words to explore the 2018 energy storage industry.

“Projects”

China’s grid-side storage took off in 2018 with the launch of a set of major projects.  First came the announcement of Jiangsu’s 101MW/202MWh grid-side energy storage project in East Zhenjiang, followed just a few months after with the Henan Grid Co. 100MWh project and the first phase of Hunan’s 120MWh project in Changsha. Jiangsu followed with an additional announcement of a set of projects procured by Pinggao Group totaling 352MWh.

This wave of new grid-side storage projects was the biggest since energy storage began developing in China 10 years ago, and caught the attention of many abroad. Though this substantial growth in grid-side storage is remarkable, it also makes the need for mature business models, safety standards, and system management mechanisms all the more urgent.

“Regulations”

In February of 2018, the United States Federal Energy Regulatory Commission (FERC) passed the “Final Rule on Electric Storage Resource Participation in Markets Operated by RTO and ISOs,” requiring ISO distribution networks around the country to modify their market rules to allow energy storage to more easily connect to the grid.

The FERC ruling permits energy storage to participate in capacity, energy, and ancillary markets, a major step for energy storage in the United States.  The FERC ruling serves as a guide to market regulators around the world on how to modify regulations to better adapt the grid to energy storage and make use of energy storage’s full potential.

“Markets”

In November of 2018, clean energy generation company Tempus Energy launched the claim that the United Kingdom’s capacity market was biased in favor of large generators and discriminatory towards demand-side response.  A European court ruled in favor of Tempus, ordering the UK to cease its capacity auction.  The ruling brought the entire capacity market to a halt, with the capacity auction originally scheduled for early 2019 being suspended indefinitely.

The lack of capacity payments has had a significant effect on the earnings of UK energy companies Centrica, RWE, Uniper, SSE, and others.  Some companies have ceased their development of new battery energy storage projects.  Although the halting of the capacity market is not likely to pose any risk to the UK’s power supply, it is possible that generation companies may look to wholesale spot markets to make up the losses in the capacity market, which could lead to prices increases in the wholesale spot market.

“Costs”

In January 2018, the California Public Utilities Commission (CPUC) gave PG&E permission to use four energy storage projects to replace natural gas peaker plants.  The four projects each used four-hour Li-ion battery systems, altogether totaling 567.5MW in capacity.

Although in 2016 California regulators had launched a bill to increase the speed of battery storage procurement as a means to reduce the state’s reliance on natural gas, these four projects were California’s first instance of using battery storage to replace active natural gas generators.  The decision shows that the costs for an energy storage project’s full life cycle can now compete with natural gas generators, and possibly even hold a competitive advantage over natural gas generators.

“Capital”

In October 2018, the World Bank announced 1 billion USD in funding for its “Accelerating Battery Storage for Development” plan, to be used for investment in battery energy storage in developing and middle-income countries.

The plan will mobilize an additional 4 billion USD in social capital to provide funding for 17.5GWh of battery storage by 2025, equivalent to over three times the approximately 4-5GWh of energy storage presently installed across all developing countries.

“Safety”

As of December 2018, South Korea has experienced a total of 16 battery energy storage station fires.  The new incident brought the world’s attention once again to the issue of energy storage system safety.  The South Korean government has responded by requiring storage system installers to utilize stricter safety measures, including increase use of monitoring systems and other measures.

Increasing safety measures will also lead to an increase in system costs and provide additional burden to already pricey renewable energy, leading to predictions that in the short term, South Korea may lose motivation to expand additional utilization of renewables.

“Models”

In November 2018, after a successful first round of testing, the South Australia government partnered with Tesla to launch the second phase of the South Australia Virtual Power Plant (VPP).  The second stage will require 1000 homes to install solar PV panels and Tesla Powerwall home energy storage systems.  According to CNESA tracking of global VPP projects, multiple companies providing behind-the-meter energy storage products in Australia, Germany, Japan, the United States, and China have been actively exploring “cloud platform” models to provide customers with added value to their services.

Hopes for 2019

In 2019, the China Energy Alliance hopes for an increase in project applications across new scenarios, and improvements in storage business models, management mechanisms, and relevant market regulations that will help storage to not only compete in a fair market but also receive reasonable compensation. We also hope for increased capital in the storage market that will motivate project development. In regards to safety issues, we hope that measures can be taken that will be both objective and rational, and that safety standards can be defined as soon as possible in order to ensure the sustainable, safe development of energy storage systems.

Author: Cao Zhengxin

Translation: George Dudley

CNESA’s 2018 Year in Energy Storage

Since 2010, the China Energy Storage Alliance has maintained a global energy storage project database, tracked global energy storage market changes, and continuously supported energy storage industry development in China.  During these nine years, CNESA has traced the rise of energy storage markets in the United States, Germany, the United Kingdom, Australia, South Korea, and China. While mature energy markets in other countries have seen energy storage projects enjoying installation subsidies, tax reduction and exemption policies, and other renewable energy related policy benefits, China’s energy storage market has had a rocky road to development, and struggled to define itself.

In 2018, China’s energy storage market took a new turn, with grid-side energy storage capacity experiencing a tremendous increase.  CNESA believes that this development marks a critical transition period for energy storage in China, particularly in light of the increasing presence of renewables and burgeoning electricity market reforms.  In the next 1-2 years, energy storage will play an important role in the restructuring of the energy market.  Energy storage currently stands at a crossroads, and determining the direction in which it moves in will require careful consideration and decisionmaking from all industry members.

Global Energy Storage Development Speeds Up, China Enters the “GW/GWh” Era

In 2018, grid-side energy storage saw a sudden and unexpected massive expansion in capacity which thrust China’s energy storage market into the “GW/GWh” era.  According to statistics from the China Energy Storage Alliance Project Database, China’s accumulated operational energy storage capacity for the year 2018 totaled 1018.5MW/2912.3MWh, an increase 2.6 times that of the total accumulated capacity of 2017.  As of the 2018 year’s end, the global accumulated electrochemical energy storage capacity totaled 4868.3MW/10739.2MWh, an increase of 65% in MWh capacity from the previous year, a marked increase in development speed.  Of note is the rise of new energy storage markets in 2018 that have helped promote rapid global growth of storage around the world. Aside from China, South Korea has seen tremendous growth and become an energy storage leader in part due to government policy support.  In light of decreasing energy storage costs and increasing customer energy prices, the behind-the-meter market in Canada’s Ontario province also attracted business from energy storage developers from the United States, China, and other foreign countries.

Diagram 1: China’s total accumulated operational electrochemical energy storage project capacity through 2018 (MW)

Grid-side Energy Storage Projects Take Off, Carrying Energy Storage into Large-Scale Applications

“Grid-side energy storage” was the industry hot topic in China for 2018.  According to statistics from the CNESA Energy Storage Project Tracking Database, China’s newly operational grid-side energy storage capacity (not including planned, under construction, or undergoing initial debugging) totaled 206.8MW, or 36% of all newly deployed energy storage in 2018, making grid-side storage the year’s leading application category in terms of new capacity.

The sudden leap in grid-side energy storage capacity was in many ways both expected and unexpected.  Though Jiangsu province’s call for bids for 100MW of storage projects was caused by the unexpected retirement of a group of generators and the subsequent grid pressure caused by summertime peaks, grid company enthusiasm for energy storage was not a surprise.  Since the start of the Zhangbei Wind, Solar, Energy Storage, and Transmission Project in 2011, grid companies have never ceased interest in exploring energy storage technologies, applications, and models.  A few years ago, one expert predicted, “when energy storage prices dip below 1500 RMB/kWh, we will see large-scale applications in the grid.”  With the proliferation of electric vehicles having caused the price of battery cells to drop significantly, grid-side energy storage has now reached this turning point.

In 2018, the grid companies of Jiangsu, Henan, Hunan, Gansu, and Zhejiang provinces each released their own large-scale energy storage procurement targets. At CNESA’s Grid-Side Energy Storage Project Forum held in Nanjing this past November, many provincial grid companies expressed desires to construct grid-side energy storage projects.  CNESA’s preliminary statistics show that the total capacity of grid-side energy storage projects currently planned/under construction surpasses 1407.3MWh.  Support from China State Grid leadership has given direction to grid-side storage development, and it is likely that in the next 1-2 years grid-side energy storage will see breakthrough development.

Rapid Development of Grid-Side Applications Will Influence the Entire Energy Storage Industry

Because there are currently no defined parameters for what type of energy storage system is needed for the grid, nor specialized energy storage products for the grid, traditional (i.e. electric vehicle) testing and evaluation methods cannot objectively reflect what battery performance parameters the electricity system requires.  Following the launch of the first grid-side storage system and the completion of necessary testing and evaluation methods, future project tenders will be able to include more accurate technological thresholds and requirements, thereby helping to continually improve the performance of energy storage systems with each new project.

China’s grid-side project investors are largely third-party entities (companies within the grid system) who manage the project’s entire construction and operations. Systems integrators and battery manufacturers provide the battery system.  Grid companies supply the land and sign the agreement with the third party.  The agreement will specify what type of payment method will be used, whether a fixed payment plan or profit-sharing model.  As the operator, the grid has already begun to take notice of energy storage’s multiple values. Such attention will help push the improvement of system management and price mechanisms for energy storage.

Because each country’s power market is structured differently and the amount of freedom in each market varies, there is an array of opinions over how much capital in energy storage a grid company should own.  China is currently undertaking the first steps in power market reforms.  Growth in grid-side energy storage projects will create experiences that will help define storage project ownership, define the limits of each players’ role in the market, ensure healthy competition during the market transition period, and help energy storage to thrive within an open power market.

Competition Increases in Thermal Power Frequency Regulation, though Many Challenges Remain

As one of the earliest storage applications to develop a clear business model, worldwide, frequency regulation has not seen significant growth in new applications. In many ways, the current market has already neared its limit.  The experience of the Tesla 100MW energy storage project in South Australia shows that only players who enter the market early can make a profit, while later entrants can only search for new markets to replicate the model.

In comparison to the international market, frequency regulation in China offers both opportunities and challenges.

In the context of ongoing electricity reforms, opportunities arise in regions such as northeast china (Dongbei), Fujian, Gansu, Xinjiang, Shanxi, Ningxia, Beijing-Tianjin-Tangshan, Guangdong, Anhui, Henan, north China (Huabei), east China (Huadong), and northwest china (Xibei), where decisionmakers have shown support for ancillary service markets by encouraging power generation companies, power sellers, power customers, and independent ancillary services providers to invest in the construction of energy storage infrastructure to participate in frequency regulation ancillary services.  In practice, aside from the Shanxi mechanism—which compensates based on the “mileage” and effectiveness of frequency regulation, a model that provides major support for storage—Guangdong is also experimenting with new market regulation designs for frequency regulation, borrowing from compensation mechanisms used in north China (Huabei) and PJM market regulations in the United States, retiring the earlier model of settlement based on quantity of electricity, and adopting a new model based on the duration and quality of frequency adjustment. Such a model will provide major opportunities for energy storage to participate in Guangdong’s frequency regulation market.  Following trial runs of the new rules which began at the end of 2017, power generation companies in Guangdong have signed six contracts for energy storage frequency regulation projects at thermal power plants.

Challenges arise in two major areas.  First, policy support has encouraged many domestic companies to enter the frequency regulation market. Aside from companies such as Ray Power and CLOU, numerous other systems integrators and project developers have been entering the frequency regulation market, including Sunwoda, Hyperstrong, Zhizhong, Beijing Clean Energy Group, and others.  With so many players in a market that has already neared its limit, it is not surprising that competition has been extraordinarily fierce.  In 2018, the proportion of energy storage operators to owners saw continual decrease. In a space where profits are limited, price battles have become increasingly intense. A second challenge is that although numerous thermal power plant storage projects have been announced, truly operational projects are few, in part due to insufficient fire safety standards, a concern which looms over every frequency regulation project.

In 2018, research and testing in battery heat management, fire extinguishment materials and equipment, fire safety standards, and other safety management measures all became areas of increased focus.  CNESA member standardization groups have contributed to standards such as the “Electrochemical Energy Storage System Evaluation Regulations” and “Energy Storage System Fire Alarm and Fire Prevention Systems,” both of which are currently in the working phase and seeking comments.  We hope that the release of these standards will contribute to increased deployment of new systems.

Finally, as the “ancillary services market” works through its current transition period, early stage competitive price models attract fierce price competition, frequency regulation compensation prices continue to drop, and investment risks for frequency regulation energy storage projects continue to rise.  In contrast, mechanisms for energy storage in peak shaving and for backup power applications have yet to be clearly defined.  While northeast China (Dongbei), Xinjiang, Fujian, Gansu, and Anhui have announced needs for peak shaving capacity supplied by independent energy storage market entities, Jiangsu has also announced that energy storage may contribute to high levels of peak shaving and has drafted regulations for compensation. However, dispatch strategies and technological requirements for grid-connected independent energy storage stations, standards for connecting to the grid, pricing for battery charging and discharging, and settlement strategies are all still lacking proper rules and regulations.  In the short term, such issues are an obstacle to energy storage value stacking.

If Penalties and Rewards are Clearly Defined, What Additional Assistance Does Renewable Energy and Storage Need?

Although the development of renewable energy is an important factor contributing to the use of energy storage in the electricity system, in China the two still do not have a close enough relationship.  Examples of renewable energy stations coupled with energy storage are few in China.  Aside from a few individual wind-plus-storage demonstration projects, the majority are projects installed at large-scale solar PV stations with high FIT rates using storage to manage curtailment. In 2018, with the release of the “Renewable Energy Fair Price Policy,” the installation of energy storage for curtailment has lost its advantage.  Future efforts must explore other ways in which energy storage can add value to renewable energy stations.

Internationally, as renewables continue to penetrate grids at increasingly higher levels, grid operators have looked to differentiate the way that renewable generators of varying performance are penalized and compensated.  Generators that are more stable or “trustworthy” earn higher grid purchase prices, or can have their “penalties” minimized.

The recently updated “Two Regulations” for the Northwest (Xibei) region follows this same line of thinking.  Though simply lowering the risk of penalties does not increase motivation for renewable energy stations to install storage, in the future, as the ancillary services market matures, policymakers are certain to consider the advantage of renewable energy stations combined with storage and encourage such installations to participate in market transactions and ancillary services.  Such measures would help highlight the many benefits of storage combined with renewable energy.

Foreign Behind-the-Meter Storage Market Thrives While the Domestic Market Slows

The behind-the-meter market outside of China continued to thrive throughout 2018.  Aside from the United States, Germany, and Australia, emerging behind-the-meter markets in Canada’s Ontario province, South Korea, and Italy all became battlegrounds for new competition between global storage vendors. The behind-the-meter market in the United Kingdom also attracted attention, and is predicted to experience an explosion in growth in 2019.

In contrast to the growth in behind-the-meter storage internationally, China’s behind-the-meter market, which once led the industry’s development, slowed in 2018.

One reason for this is the implementation of new policies which have narrowed the gap in price differences between peak and off-peak periods in many regions.  In Beijing for example, general industrial-commercial customers are permitted to utilize the two-part tariff system, which allows electricity bills to be paid either (a), according to transformer capacity or maximum demand, or (b), according to their actual power usage.  As a result of this plan, price differences between peak and off-peak power periods shrank significantly, making it difficult to sustain a profit using energy storage for energy arbitrage.

Another issue has been the concern of business owners and fire departments towards the use of energy storage systems in commercial buildings, particularly safety issues caused by the installation of energy storage systems in underground parking garages and the lack of proper fire safety standards.  Such issues have caused many commercial storage projects to be delayed indefinitely.

Policy updates and market adjustments have touched a nerve with energy storage stakeholders, and investment in large-scale applications at current technology prices carries a certain amount of risk.  Yet from the viewpoint of project developers, energy storage is just one technology in an entire range of energy services.  An open power market still promises many potential benefits, and customers are the key to increasing the value of energy services. In the future, the ability to provide a full range of energy services will be critical to maintaining customer confidence. Though policies tend to focus on the big picture, planning and design must begin by considering the way in which energy is changing and the market is opening. Doing so will avoid taking actions that support one area while inhibiting another.  In the future, regional government agencies must put additional effort into the creation of environmentally minded power price mechanisms that push for reasonable peak and off-peak prices which reflect actual power supply-and-demand, and encourage customers to use power in a rational and realistic way.

Looking Ahead

2018 was a year of both excitement and disappointment for energy storage.  The sudden leap in grid-side storage capacity infused new vigor into the industry, providing not only market growth but also driving the costs of energy storage technology down and pushing technologies towards applications that are more closely integrated with the grid.  The advancements also helped bring China’s energy storage applications into the global spotlight.  At the same time, the slow development of a mature market mechanism and policy support continues to lag behind the pace in which new storage applications are appearing. Ancillary services market regulations and long-term mechanisms are unclear, a lack of a proper behind-the-meter price mechanism has created increased investment risk, and many other issues have appeared or persist.  The industry’s short-term benefits and long-term existence are still in urgent need of adjustment and resolution.

Despite just ten years of development, the rapid growth of energy storage is visible to all.  Yet a mature storage industry cannot occur overnight.  The support of renewable energy and the new generation of power systems is the natural purpose of energy storage, and the basis of its rapid development.  With the encouragement of proper policies and the hard work of a variety of government bodies, we believe that energy storage can break through from its current challenges to become a driving force in the advancement of China’s energy system.

Author: Liu Wei, CNESA Secretary General

Translation: George Dudley

CNESA Global Energy Storage Market Analysis – 2018.Q4 (Summary)

1.       The Global Market

According to China Energy Storage Alliance Project Tracking Database statistics, as of the end of December 2018, global operational energy storage projects totaled 180.9GW, an increase of 3% compared to the same period the previous year.  Pumped hydro made up the largest portion of this capacity at 170.7GW, an increase of 1.0% from the same period the previous year. Electrochemical energy storage and molten salt energy storage followed at 6.5GW and 2.8GW, an increase of 121% and 8% compared to the same period the previous year, respectively.

Global Operational Electrochemical Energy Storage Project Distribution

Data source: CNESA Project Database, 2019

In 2018, global newly operational electrochemical energy storage projects totaled 5.5GW, of which electrochemical energy storage comprised the largest portion, at 3.5GW, an increase of 288% compared to the previous year.

In the 4th quarter of 2018 (October to December), global newly added electrochemical energy storage projects totaled 1.55GW, an increase of 226% in comparison to the same time the previous year, and 276% since the third quarter of 2018.

2.       The Chinese Market

 According to China Energy Storage Alliance Project Tracking Database statistics, as of the end of December 2018, China’s operational energy storage project capacity totaled 31.2GW, an increase of 8% compared to the same period the previous year.  Pumped hydro made up the largest portion of this capacity at 30.0GW, an increase of 5% in comparison to the same period the previous year.  Electrochemical energy storage and molten salt storage followed at 1.01GW and 0.22GW, an increase of 159% and 1000% in comparison to the same time the previous year, respectively.

China’s Operational Electrochemical Energy Storage Project Distribution

Data source: CNESA Project Database, 2019

In 2018, China’s newly operational energy storage projects totaled 2.3GW.  Of this, electrochemical energy storage made up 0.6GW, an increase of 414% in comparison to the previous year.

In the 4th quarter of 2018 (October – December), China’s newly added electrochemical energy storage project capacity totaled 286.5MW, an increase of 399% compared to the 4th quarter of the previous year, and 80% since the 3rd quarter of 2018.

3.       About this Report

The Global Energy Storage Market Tracking Report, authored by the China Energy Storage Alliance Research Department, provides market data and status updates for each quarter of the year.

The complete version of our Global Energy Storage Market Tracking Report (2018.Q4) can be downloaded from the CNESA ES Research website at www.esresearch.com.cn.

The ES Research website was launched January 18, 2018.  The site provides accurate, authoritative, and up-to-date market data analysis and information on the energy storage industry.  Please visit our website at www.esresearch.com.cn to learn more about the research services we offer.

For questions or comments, please contact the CNESA Research Department:

Phone: 010-65667068-805

Email: na.ning@cnesa.org

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New Edition of “Two Regulations” Released in Northwest China Region

Recently, the Northwest China Energy Regulatory Bureau officially released the long-awaited updated editions of the Regulations for Operations and Management of Grid-Connected Power Stations in Northwest Regions and Regulations for Ancillary Services Management of Grid-Connected Power Stations, often referred to as the “Two Regulations.”  At the Energy Storage West Forum last August, representatives from the Northwest China Energy Regulatory Bureau gave a brief introduction to the revisions.  Below is a summary of their comments from the forum:

The “Two Regulations” were originally enacted in October 2015 and have been in place now for three years.  The release of these regulations was met with much enthusiasm.  In the first half of 2018, the five provinces in the northwest grid were penalized 1.7 billion RMB, compensated 2.77 billion RMB, and showed a service cost allocation/split of 1.16 billion RMB.  These proportions represent the largest of any grid.  From an operations standpoint, not all provinces are the same.  One example is Qinghai province.  As of May 2018, penalties to the Qinghai power grid totaled 85.3 million RMB, with their AGC project responsible for the largest portion of these penalties at 52.99%.  Primary frequency response provided the highest portion of compensation of any project, at 50%.

Revisions to the “Two Regulations” began in 2017.  The reasons for the revisions were based on a few different factors.  First, we wished to increase content on safety in light of new national and industry standards.  Second, we wished to create equal obligations and rights.  The previous regulations focused primarily on the penalization system for renewable energy, with little focus on compensation.  The new regulations make an effort to place importance both on penalization and compensation.  Third was the desire to increase management of peak shaving, including adapting and revising regulations to meet the needs of ancillary services marketization across different provinces.

Currently, there are a few different ways in which the “Two Regulations” relates to energy storage in ancillary services.  First is in peak shaving.  Each province with a peak shaving market has different standards for providing compensation, though when storage is used solely for peak shaving, the rate of return on the initial investment is slow.  Second is in AGC frequency regulation.  In practice, the Northwest power grid leads thermal power plants to invest in AGC based on the frequency of the T&D lines and does not use a model similar to the Huabei Power Grid’s kd value to calculate contributions, instead penalizing or compensating based on a power credit system.  Third is the operations management for renewable energy.  Because the capacity of renewables in the grid continues to grow, dispatch and operations for renewable energy must be improved in order to guarantee system safety, stability, and the maximum use of renewable power.  Renewable energy power stations that contribute to the grid should also receive appropriate compensation.  With these revisions enacted, we will provide a transitional period, allowing renewable energy companies time to adjust to the updates and meet system operation needs.

Author: CNESA Research

2018 Market Summary: How China Can Learn from South Korea on Energy Storage Safety

There is no doubt that in 2018, safety was one of the top talking points in the energy storage industry.  With the recent energy storage station fire in South Korea, the country’s 16th such incident, safety has once again struck a nerve within the industry.  In the following article, the China Energy Storage Alliance takes a look at this accident as well as the Korean government’s response to see what lessons China can learn for the safety and development of its own energy storage industry.

1.       South Korea’s 16th Energy Storage System Fire

In early December 2018, an energy storage project at a cement factory in South Korea’s North Chungcheong Province caught fire, resulting in 4.1 billion won (3.63 million USD) dollars in damage.  This was the 15th of such fires in South Korea in 2018, and 16th total fire as of December 2018.  Worldwide, the fire caused fresh anxiety within the energy sector regarding the safety of energy storage systems.

2.       Why Have Fires Been So Frequent Among Korea’s Energy Storage Systems?

In regards to the frequency of energy storage system fires in South Korea, experts have cited the government’s hurried push for energy storage applications as the cause.  Prof Jeong Yong-hoon of the Korea Advanced Institute of Science and Technology notes that one of the chief causes is government subsidies aimed at energy conservation and the increase of spending on renewables, which has caused numerous companies and institutes to implement energy storage as quickly as possible, without proper consideration for safety and stability.

3.       How Can Korea Manage the Issue?

Korea’s Trade, Industry, and Energy Bureau had already begun safety inspections on the country’s 1253 energy storage projects.  At the time of the Chungcheong cement factory project fire, the bureau had already completed inspections on 669 energy storage stations, and recommended individual users, companies, and other organizations stop use of the 584 remaining energy storage installations across the country that had not yet undergone inspection.

Of the 16 energy storage project fires, half of the energy storage stations were linked with solar PV generators. Due to safety already becoming an issue of concern, the South Korean government has required energy storage installers to take stronger safety measures, such as increased use of monitoring systems and other measures.  However, since the implementation of greater safety measures increases system costs and adds to the burden on already high renewable energy prices, it is quite possible that South Korea is likely to lose motivation to expand the use of renewable energy for a period in the future.

4.       Lessons for China

Don’t panic.  The safety of energy storage installations can be ensured with proper engineering methods, and there is no reason to fear the safety of these systems.  Past accidents have occurred mainly as a result of a lack of strictness in regard to technological thresholds and safety measures.

Don’t blame accidents simply on the choice of batteries. It often appears that the primary cause of accidents has been the flammability of Li-ion batteries combined with thermal runaway.  However, most issues have occurred not because of the battery, but due to an electrical accident.  Safety is a complicated issue, and placing blame on the choice of battery is to simple of an answer, as the supporting system is equally as important.

Don’t sacrifice safety measures to save on costs. Current domestic energy storage project bids have prices near to the cost price and require projects to begin in a relatively short time period.  While low initial costs limit the amount of money that can be invested in safety measures, rushed submission of payment also shortens testing and verification periods, factors which both make it difficult to determine if safety issues are present.  Therefore, one of the major challenges for the energy storage industry is to ensure safety while keeping technology costs at an acceptable level.

Safety standards and related regulations must be established as soon as possible. After an accident happens, the root cause of its occurrence must be determined, and accident management and prevention solutions must be put in place.  Missing or incomplete standards and regulations should be researched thoroughly and put into action by their respective regulatory bureaus. Industry organizations such as CNESA have begun work research and planning standards, inspection, and certification methods for energy storage systems. At present, CNESA has been drafting standards for the evaluation of storage systems and begun trials of such evaluation methods, with the goal of encouraging safe and healthy development of energy storage systems.

Thorough verification and safety assessments must be completed before a project is put into operation. In recent years, Li-ion battery projects in China, South Korea, and Belgium have seen fires, though mainstream Li-ion battery producers in Europe and the United States maintain relatively low accident rates.  Some projects have seen safe operations for more than 8 years.  Internationally, much experience in energy storage has already transitioned into regulations and standards.  What this means in that although Li-ion batteries carry the risk of flammability and thermal runaway, with the proper management methods and an increase in safety thresholds, testing, and verification methods, the safe use of Li-ion batteries can be ensured.

5.       Hopes for 2019

 In 2018, we saw China’s energy storage market see tremendous growth in many areas.  In 2019, we hope to see more industry members and related agencies using the lessons and experiences from 2018 to increase energy storage safety management, continue the push for standards and regulations, and help to move energy storage to a healthier and more ideal development.

Author: Yue Fen
Translation: George Dudley