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