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