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:
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