Energy storage applications have the ability to alter China’s traditional models for the supply and use of energy, providing major support to China’s energy transition, the user-side energy revolution, ensuring energy safety, energy conservation, and emissions reduction goals. The development of energy storage has already attracted the attention and support of government regulatory agencies, the power system, and numerous related industries such as renewable energy and transportation. Energy storage is no longer being left on its own to mature. Instead, we have seen energy storage being included within the definition of “energy” in the policies of many countries, particularly as a form of renewable energy or listed as a key technology and/or component for support of the energy system.
Energy storage applications can help encourage the use of large-scale renewable energy, increase the proportion of generation sourced from wind and solar power, increase the efficiency of electricity use, decrease reliance on fossil fuels, conserve resources, and lower environmental pollution. Recently, with the push for large-scale reforms of the power system and development of Internet of Energy technologies, we have seen better and brighter prospects for the widespread use of electricity, thermal, and other storage technologies. Energy storage can connect flexibly at the power supply, transmission, or end-user side, allowing multiple energy sources to complement and optimize with one another. The development of energy storage supports the simultaneous development of China’s energy structure and power reforms, bringing a new source of innovative strength to the energy sector.
We can trace the beginning of energy storage in China back to the year 2000. Over the following ten years, energy storage went from early R&D, to demonstration projects, to the early stages of commercialization. Although development during this period was fraught with challenges and setbacks, it was also a period full of innovation and success. In 2011, energy storage left the laboratory, and the “Zhangbei Wind, Solar, and Storage” project, China’s first large scale energy storage demonstration, was launched, signifying the first big step in the creation of a true storage industry.
Energy storage developed rapidly in the years following. According to China Energy Storage Alliance statistics, by 2017, China’s accumulated electrical energy storage capacity (including pumped hydro) totaled 28.88GW. Among this total accumulated storage capacity, electrochemical energy storage growth was most striking, at nearly 390MW by the end of 2017, reflecting an annual growth rate of 45%. From 2016-2017, the total capacity of China’s energy storage projects either planned or under construction neared 1.6GW, 10 times the total accumulated capacity of 2000-2015. China’s energy storage industry is now rapidly transitioning from demonstration applications to the early stages of commercialization.
Many have been delighted to see how quickly the industry has developed, yet this period has not been without problems, some of which have been roadblocks in the path to commercialization. As an emerging technology, energy storage faces challenges including how to define its identity within the power and energy markets, how to create a suitable pricing mechanism for storage to participate in the market, how to manage the dropping of technology costs, how to increase safety and efficiency, and how to create industry standardization and verification systems. Resolving such questions are keys not only to ensuring energy storage can be profitable, but also to ensuring the sustainability of the industry.
In order to promote the healthy development of the energy storage industry, five agencies including the National Development and Reform Commission and National Energy Administration jointly released the Guiding Opinions on Promoting Energy Storage Technology and Industry Development on October 11, 2017. The Guiding Opinions is China’s first guiding policy for large-scale energy storage technology and applications development. The policy outlines the direction in which energy storage should develop from now through the mid- to long-term, including goals for the next ten years. The policy also establishes the five main areas and 17 important tasks for energy storage development, as well as defines safeguard measures based on considerations such as government policy, project demonstrations, compensation mechanisms, and social investment.
In regards to the main issues facing energy storage, the Guiding Opinions stresses energy storage marketization, including the creation of an energy storage market mechanism and price mechanism. The policy also stresses that energy storage should develop in conjunction with power system reforms and the Internet of Energy. At present, one of the greatest barriers to energy storage marketization is that the current market is not able to quantify the value that energy storage applications provide, and storage is therefore unable to act as a true market product. Therefore, for most energy storage applications, the first step is determining what identity storage will have in the market, followed by the second and more important step of defining a reasonable price (compensation) mechanism.
Energy storage in China currently has four major application categories: renewable integration, ancillary services, grid-side, and behind-the-meter. According to CNESA statistics, as of the 2017 year’s end, the proportion of China’s total electrochemical energy storage capacity in renewable integration, ancillary services, grid-side, and behind-the-meter applications totaled 29%, 9%, 3%, and 59%, respectively. Compared to the installation capacities for 2015, ancillary services increased 7 percentage points, and behind-the-meter increased 3 percentage points. These two application areas are ones that hold the greatest earnings potential and the greatest likelihood of seeing initial commercialization.
Recently released power reform policies and supporting documents have provided a foundation and support for the use of energy storage in ancillary services and demand response. These policies have had a great effect on increasing the economic effectiveness of ancillary services and behind-the-meter energy storage, and have been designed to coordinate with market development and the creation of market and pricing mechanisms.
In over ten years of development, the energy storage industry chain has seen a marked improvement. In the early period of application demonstrations, the main market participants included Li-ion battery, lead-acid battery, and flow battery suppliers. Chinese companies in this category include BYD, CATL, eTrust, Narada, Shoto, Rongke, and Puneng. Once China entered the Thirteenth Five-Year Plan period, energy storage applications became more diverse and began expanding into new areas. Some solar PV companies also began expanding into energy storage, such as GCL Power, Trinasolar, and others, who founded energy storage subsidiaries or special departments to expand into combined energy storage and solar applications. At the same time, PCS and other traditional power equipment vendors began expanding into energy storage systems integration. Recent systems integrators of note include Sungrow-Samsung, CLOU, Narada, Shoto Group, Sunwoda, and ZTT.
With the expansion of energy storage applications and the participation of a wide variety of companies, the roles of equipment vendors, systems integrators, and EPCs have largely become clearly defined. The next steps in energy storage development are closely aligned with energy transition and power system reforms. Energy storage has already begun participating in multi-energy systems, Internet of Energy projects, and “energy storage cloud+” virtual power plant demonstration projects. In the future, commercial park developers, energy service companies, and power companies all area likely to become purchasers of energy storage systems and systems integrators. Energy storage systems will thereby become a closer part of the energy and power markets.
The next ten years will be a period of rapid development for energy storage. The Guiding Opinions provides clear goals for the Fourteenth Five-Year plan period: energy storage projects should become widespread, a complete industry system must form, energy storage should become a tool for creating a more economical energy sector, the industry should see large-scale development, and energy storage should become a motivator in the energy transition and development of the Internet of Energy. These goals are objective, and provide a set of guidelines for the direction in which the industry should develop. CNESA has modeled predictions for the future of the energy storage market based on its Global Energy Storage Database. It is expected that the total installed capacity in China will reach 1.794GW by 2020, and 10.794GW by 2025. Based on current development trends, the prospects for meeting such predictions are very good.
At the same time, we do see that energy storage still has a long way to go before it reaches large-scale development. To reach such a goal will require a combined effort from all industry stakeholders. With power market reforms ever increasing, energy storage applications continue to spread throughout the energy sector, and new business models appear. During this period, it is the China Energy Storage Alliance’s goal to support the healthy growth of the energy storage industry, both through tracking and analysis of storage policies, creating a bridge between the government and the storage industry, responding to the needs of the industry, and supplying objective and realistic guidance. The Alliance is also determined to continue providing comprehensive market research, including expansion of the Global Energy Storage Database and providing stakeholders and the public with objective data that will help contribute to the creation of a solid foundation for the industry. Finally, CNESA is dedicated to promoting communication within the industry, including international exchange, market meetings, and standardization committees, platforms that bring stakeholders together and move the industry forward as one.
Author: Tina Zhang, China Energy Storage Alliance Translation: George Dudley