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.
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.
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.
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.
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.
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.
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.
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
Translation: George Dudley