CNESA Global Energy Storage Market Analysis—2019.Q1 (Summary)

1.       The Global Market

According to statistics from the China Energy Storage Alliance Global Project Tracking Database, as of the end of March 2019, global operational energy storage project capacity totaled 181.2GW, an increase of 3.2% compared to Q1 the previous year.  Of this capacity, electrochemical energy storage made up 6829.0MW, or 3.8% of the global total, an increase of 104.0% in comparison to Q1 of the previous year, and an increase of 3.1% since the 2018 year’s end.

Global Distribution of Total Electrochemical Energy Storage Projects in Operation (2000-March 2019)

Data Source: CNESA Project Tracking Database

In the first quarter of 2019 (Jan-Mar), global newly added electrochemical energy storage projects totaled 203.6MW, a decrease of 51.7% in comparison to the first quarter 2018, and a decrease of 88.8% in comparison to the fourth quarter of 2018.

2.       The Chinese Market

At of the end of March 2019, China’s operational energy storage project capacity totaled 31.3GW, or 17.3% of the total global market, an increase of 8.3% in comparison to Q1 the previous year.  Of this capacity, electrochemical energy storage comprised 1123.2MW, or 3.6% of the total Chinese market, an increase of 150.5% in comparison to Q1 the previous year, and a 4.7% increase since the end of 2018.

Distribution of Total Electrochemical Energy Storage Projects Operational in China

Data Source: CNESA Project Tracking Database

In the first quarter of 2019 (Jan-Mar), China’s newly added electrochemical energy storage projects totaled 50.5MW, a decrease of 13.7% in comparison to the first quarter 2018, and a decrease of 84.2% in comparison to the fourth quarter of 2018.

About the CNESA Global Energy Storage Project Database

The CNESA Global Energy Storage Project Database was established in early 2012 by the China Energy Storage Alliance to provide data for the annual CNESA Energy Storage Industry White Paper and other CNESA research products.

As of the end of 2018, the database has collected over 2500 energy storage projects used in the global energy system, covering a wide variety of storage technologies and applications.  Project data is available for over 70 countries and regions around the world.  Over the course of its development, the database has achieved wide recognition from the industry.

About the Global Energy Storage Market Tracking Report

The Global Energy Storage Market Tracking Report is published each quarter by the China Energy Storage Alliance.  The report provides the latest market data and trends in the energy storage industry.  Readers can log on to the official CNESA ES Research web page at www.esresearch.com.cn to download the summary version and/or order the complete version.

About the ES Research Platform

 The ES Research online website launched in January 2018 to provide a platform for CNESA research products and services.  Products and services include the “Global Energy Storage Database,” “Energy Storage Industry Tracking,” “Energy Storage Industry Research Reports,” and “Research Consultation Services.” To learn more, please visit www.esresearch.com.cn. For questions or comments, please contact the CNESA research department by phone at 010-65667068-805.

Regional Energy Storage Subsidies Bring Good News for Behind-the-meter Storage

On March 24, the Suzhou Industrial Park Administrative Committee released Measures for the Management of Special Guiding Funds for Green Development of Suzhou Industrial Park (苏州工业园区绿色发展专项引导资金管理办法). The measures outline subsidies to be used for energy saving modifications, cyclical economic measures, and Internet of Energy projects.  Subsidies are also provided for distributed natural gas generators and energy storage projects. As stated in the policy:

“Owners of natural gas generators and energy storage projects within the industrial park that have undergone pre-connection review, have connected to the grid, and are operational will receive a 3-year subsidy of 0.3 RMB for each kWh of electricity produced.”

Such a subsidy has big implications.  Until now, China’s energy storage industry has lacked a financing mechanism for energy storage, making future profitability unclear.  Industry stakeholders have for many years called for a financial subsidy that can help push the industry forward.  Suzhou has now been the first this year to release clear subsidy standards that are certain to have a positive effect on energy storage, particularly behind-the-meter storage systems.

However, Suzhou is not the first Chinese city to introduce a subsidy policy for energy storage.  In September 2018, Hefei released the Suggestions for Encouraging the Continued Healthy Development of the Solar PV Industry (关于进一步促进光伏产业持续健康发展的意见), which stated that solar-plus-storage projects put into operation after the release of the policy would, beginning in their second month of operation, receive a subsidy of 1 RMB for every kWh charged, with a limit of 1,000,000 RMB per project per year.

Cities like Hefei and Suzhou have begun to release such subsidy plans in response to policies that have caused I&C electricity fees to drop.  Such policies shrink the gap between peak and off-peak power prices, causing the demand for behind-the-meter energy storage projects to decrease.  Yet shrinking peak and off-peak price differences are not the only pressures that energy storage faces.

One example is Jiangsu.  In August 2018, State Grid Jiangsu revised the “Customer-side Energy Storage System Grid Connection Regulations” (客户侧储能系统并网管理规定), preventing behind-the-meter energy storage stations from feeding energy back into the grid. Engineering and construction of behind-the-meter systems must comply with multiple national standards for grid connection and system design, while information relating to energy storage systems must be submitted to State Grid Jiangsu’s monitoring and interaction platform.  For many companies, the entire process, including grid connection, safety inspection, permits, etc. can add an additional 200,000-300,000 RMB in costs to a project. Such policies are a hindrance to the development of the energy storage industry and the ability for projects to be profitable.

Suzhou’s energy storage subsidy is different from the Hefei subsidy in that instead of compensating based on amount of electricity charged, it instead compensates based on the amount of electricity released.  Compensating in this way supports battery products with higher charge/discharge efficiencies, giving them an advantage in the market that contributes to a healthy, competitive growth in the energy storage industry.

From its small beginning 8-9 years ago, to its recent growth spurt over the past two years, the growth of the Chinese energy storage industry has been carried by the behind-the-meter market.  According to CNESA statistics, in 2018, global newly added electrochemical energy storage project capacity was dominated by behind-the-meter storage at 1530.9MW, or 43% of the total.  Concentrated renewable integration and ancillary services held second and third places, respectively, at 26% and 17%.

Despite the large increase in capacity last year due to new, large-scale grid-side energy storage projects, behind-the-meter energy storage will undoubtedly continue to play a key role in capacity growth.  As one industry insider put it:

“China’s energy industry has developed thus far through the efforts of behind-the-meter storage developers.  If the Chinese energy storage industry is to truly stand on its own, behind-the-meter energy storage will be the driver.  National support, whether for electric vehicles or energy storage, is not guaranteed forever.  If the EV industry is to develop, it must do so with the support of the consumer.  If the energy storage industry is to develop, it is the behind-the-meter industry that must foot the bill.”

But this is also where the conundrum lies.  Behind-the-meter storage cannot expect to forever rely on subsidies, yet the current state of the industry necessitates them.  An appropriate subsidy can provide quick stimulation to market capacity while also providing a reasonable standard for projects to follow, awarding funds only to projects that are of good quality.

Of course, the major perquisite to a successful subsidy system is for the issuing region to possess solid financial strength. Besides Suzhou and Hefei, Beijing has been widely rumored to have a similar policy in the works.

From a national perspective, because energy storage is applicable to a wide variety of scenarios and many friendly industries are already receiving subsidies, it is unlikely that we will see a national-level subsidy in the future. At the 2018 Energy Storage 100 Lingnan forum in Shenzhen last December, a representative from China State Grid commented, “at this time, the national government is not going to release a comprehensive subsidy policy for energy storage, though they do support the creation of regional policies. However, such policies would inevitably lead to regional protectionism.”

Such regional protectionism could involve taxation, project developer registration, procurement of local equipment, etc. However, when considering the monumental challenges of how to guide and promote energy storage development, the possibility of regional projects coming with “strings attached” may not be an issue of great concern.

Author: Energy Storage 100
Translation: George Dudley

The International Market--Challenges and Opportunities for Chinese Energy Storage Companies

The 2018 global electrochemical energy storage market saw continued growth from many different players. Projects continued to accumulate, application areas continued to expand, and market capacities increased all at dazzling speeds.

The Global Storage Domain

It is no surprise that countries in the Asia-Pacific, North America, and Western Europe who possess strong industrial power foundations and widespread renewable energy markets are the leaders in energy storage growth.  According to statistics from the China Energy Storage Alliance global energy storage project tracking database, South Korea, the United States, China, the United Kingdom, Japan, Germany, and Australia contributed to 94% of the world’s newly added storage capacity in 2018.  These countries also accounted for 94% of storage capacity between 2000-2018.

The presence of South Korea amongst these countries is somewhat unexpected.  In 2017, South Korea’s energy storage capacity was nearly equal to that of China, yet in just a year, South Korea’s energy storage market experienced a tremendous growth spurt, adding 1580.3MW of new capacity, equivalent to 45% of the globe’s new total for 2018, vastly exceeding that of China, the United States, or any country in Europe.

Graph 1: 2018 Global Distribution of Newly Added Electrochemical Energy Storage Projects

According to statistics from the CNESA Global Energy Storage Project Database, in 2018, global newly operational electrochemical energy storage project capacity totaled 3545.7MW, an increase of 288% from the previous year. Total accumulated capacity reached a total of 6472.3MW.

Graph 2: Global Accumulated Operational Electrochemical Energy Storage Capacity (2010-2018)

An observation of each country’s growth reveals the following: first, the Chinese market’s largest source of growth is grid-side and behind-the-meter applications.  Second, South Korea’s market growth is driven by renewable integration and behind-the-meter applications.  Third, UK market growth is based primarily on ancillary services, while the United States and Australia see a substantial portion of capacity come from residential behind-the-meter markets.

Aside from the seven countries above, other countries—including Canada, France, and Portugal, as well as emerging markets such as India and Brazil—are also growing their energy storage capacities, releasing ambitious plans for storage development.  The addition of new countries to the global stage has brought diversity to global energy storage market needs.

With grid remodeling and renewable energy development acting as drivers for energy storage around the world, the need for energy storage has become widespread. 

The Appeal of the International Market

In comparison to the other countries above, China occupies a somewhat awkward position.  Despite China’s status as the world leader in battery production, the country lags behind in many energy storage applications. Grid-side applications still lack an effective price mechanism.  In behind-the-meter applications, uncertain I&C electricity policies and ever-shrinking peak and off-peak price gaps have had major effects on energy storage project earnings, putting the future of many projects at risk.

In contrast to the pressures and uncertainties that China’s energy storage industry faces, the international energy storage industry displays a more mature level of commercialization.  Yet at the same time, major markets such as the United States, United Kingdom, Germany, and Australia lack sufficient battery production capacities to match needs.  The international market therefore provides one of the biggest opportunities for Chinese energy storage companies to grow.

Fierce competition in the domestic market has already had an effect on some companies.  For example, in August 2018, BYD’s energy storage business division announced plans to cease participation in the domestic competitive bidding process and limit themselves only to the role of equipment supplier.  BYD could only afford to take such a bold measure due to the company’s strong overseas presence.  BYD’s success in Europe and the Americas has become a benchmark for other Chinese energy storage companies seeking to go abroad.

Beginning in 2018, many Chinese solar PV and battery companies began ratcheting up efforts to expand their international market presence.

In the first half of 2018, Sungrow’s energy storage business division reported a revenue increase four times that of the same period in 2017. Following China’s cuts to solar subsidies and feed-in-tariff prices in May 2018, Sungrow began to consolidate its solar and energy storage business lines. Relying on the company’s established international solar marketing channels, Sungrow’s energy storage business line was able to break through to markets in the United States, Germany, and Japan in 2018.

BYD and Sungrow have been established in the international market for some time, giving them an established advantage over other Chinese companies.  For many small and medium-sized companies, emerging markets in the Asia-Pacific, Middle East, and Africa show greater appeal.  One example is Shoto’s contract won last year to provide EPC services for projects totaling 80 million USD in Afghanistan.

With numerous companies competing in a small market, many have been motivated to go abroad. China’s energy storage companies have landed in many regions, from Southeast Asia to India, Europe, America, Africa, and the Middle East.  As China’s lack of an open power market continues to present a challenge for energy companies domestically, it is quite possible that China’s battery and energy storage companies might copy the business model of the country’s solar companies, producing domestically and marketing globally.

In 2019, China’s battery manufacturers and energy storage companies have accelerated their international activities, driven largely by two major factors.  First, Chinese companies have the desire and need to develop internationally.  Second, international market changes have provided Chinese companies with much room for expansion.  In 2018, South Korea’s rapid growth in storage projects caused LG and Samsung to focus more attention on their domestic markets. Prices for international battery and energy storage systems began to rise, providing a great opportunity for Chinese battery manufacturers to supply batteries for global developers and systems integrators.

In the battery industry, South Korea and Japan are China’s biggest competitors. While Japanese batteries have a reputation for being technically advanced and South Korea’s batteries have a reputation for good quality-to-price ratio, Chinese batteries could be said to show technical advancement at the fastest rate.  With the support of strong government subsidies, Chinese battery manufacturers earned a place on the global stage in a few short years.

Unlike the nickel-magnesium-cobalt battery which leads the Li-ion battery market internationally, China’s lithium-iron-phosphate battery is much more price competitive. According to data on battery pack procurement prices for grid-side energy storage projects in 2018, China’s average battery pack price was 1073 RMB/kWh, approximately 30% lower than that of the average price for battery packs in the international market.  It is very likely that China’s manufacturing capacity will allow the country to become the leading supplier for the global battery and energy storage industries, much as the country has done for the solar PV industry.

Revelations from Global Leaders

Europe and North America both possess mature business models for integrated energy services. The development of the power market in these regions follows the proliferation of the “smart grid” concept, including new power industry services brought about through the emerging internet of energy.

Sonnen, recently acquired by Shell, possesses over 30,000 residential energy storage installations worldwide.  Sonnen not only distributes its energy storage equipment to residential users, it also creates virtual power plant networks out of its customer communities, allowing distributed energy storage systems to become dispatchable peak shaving and frequency regulation networks for use by the grid.

With renewable integration applications diversifying, power grids and regulators face major challenges.  Exceptional energy storage systems integrators are adopting increasingly important roles in the electricity system.  According to evaluations by market researcher Navigant, Fluence, Nidec ASI, RES, and Tesla are the leaders in energy storage systems integration.

Fluence has over 10 years of industry experience providing energy storage solutions to power grids, energy developers, and large-scale power customers.  The company has deployed over 600MW of energy storage project capacity globally.  Fluence’s customers require a high level of expertise and financial stability for such projects, which typical battery manufacturers would be unable to provide.

In contrast, China still lacks system integrators with a thoroughly researched understanding of energy storage systems.  Systems integration requires expertise in multiple subjects, including electrochemistry, power electronics, information technology, and power dispatching, while also knowing what components, software, and other equipment will be the proper fit for the multitude of varying applications and scenarios.

For Chinese companies, developing from a battery manufacturer and/or PCS provider into a full solutions provider that can compare with other industry leaders is no small task, yet the window of opportunity is still large.

Looking globally, should Chinese companies wish to enter the Korean and Japanese markets on a large scale, they will have to go up against major competitors such as LG, Samsung, and Panasonic.  Europe and North America are both important energy storage markets, with strong demands for high quality inverters and batteries, and high technical requirements for energy storage systems in general.  Other countries with developing markets may also pose risks that are not present in countries with a more developed energy storage industry.

If Chinese energy storage companies wish to gain a bigger foothold in international markets, they will need to be familiar with local energy policies, power markets, and the variety of applications scenarios required for energy storage systems in each country.  International market expansion is a long-term process, and the questions of how to localize products/services and build cooperative partnerships with local developers and systems integrators are ones that Chinese companies will have to solve before they can be truly successful.

Author: Energy Storage 100
Translation: George Dudley

Understanding the “Notice on Developing Generation-Side Storage Stations in Xinjiang Province”

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:

2000*90%*92%=1656(kWh)

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

Energy Storage in 2019: Spring has Arrived

On January 9, 2019, the second phase of State Grid Jiangsu’s electrical energy storage project in Suzhou-Kunshan passed initial review. This project, which includes 10 energy storage stations, is set to be the largest energy storage installation in the world.  The news comes just six months after Jiangsu province saw the launch of world’s largest scale grid-side energy storage project.

The speed at which these projects have come about is evidence of how quickly China’s energy storage industry is growing.  According to China Energy Storage Alliance statistics, by the end of September 2018, China had a total of 649.7MW of electrochemical energy storage in operation, an increase of 104% in comparison to the same period the previous year. Of this 649.7MW, newly added capacity totaled 260.8MW, an increase of 373% in new capacity in comparison to the same time the previous year.

The energy storage industry in China can be seen as developing in two steps: the first step consists of the initial transition from R&D demonstration projects into commercialization, while the second step entails the transition from the early commercialization stage into the development of large-scale energy storage projects.

In 2019, as more energy storage projects continue to be developed, the energy storage industry will move from the demonstration project stage into the important stage of initial commercialization.  At the same time, new models and a new market are very likely to appear. For energy storage, spring has now arrived.

Policies Push Storage Forward

It is generally agreed that in 2019, China’s energy storage industry will continue its positive momentum, driven by a solid foundation of policy support.

First, the energy revolution and the move towards power structure reforms have brought about--and will continue to bring about--support for the storage industry.  Recent technological breakthroughs have allowed for the development of renewable installations in increasingly larger capacities.  As of the 2018 year’s end, countrywide combined solar and wind capacity totaled 360GW, or 20% of all electrical capacity.  As long as instability issues and difficulties in consuming renewables persist, energy storage will continue to be in demand as a support measure.

Second, China has released a number of national-level policies supportive of storage that have played a key role in pushing the industry’s development. The end of 2015 marked entrance into the Thirteenth Five-Year Plan period, in which energy storage became integrated into the country’s national development plan.  In June 2016, the National Energy Administration released the “Announcement on Promoting Electrical Energy Storage Participation in the ‘Three North’ Regions Ancillary Services Market Compensation Mechanism Pilot,” which helped establish generation-side energy storage infrastructure.  Whether behind-the-meter or front-of-the-meter, energy storage has earned status as an independent market entity.

In November 2017, the National Energy Administration released the “Workplan for Improvement of Ancillary Services Compensation (Market) Mechanisms,” encouraging competition in ancillary services, the increase of ancillary services entities according to need, and the use of energy storage equipment and demand-side resources in ancillary services. The workplan also granted permission for third-parties to provide ancillary services and confirmed support for spot market trials in 2019-2020 that will help open the ancillary services market.

Yet of all national policies in support of storage, none has been more significant than the “Guiding Opinions on Promoting Energy Storage Technology and Industry Development” jointly released by five government bodies including the National Energy Administration and National Development and Reform Commission.  Since its release, this policy has been one of the main driving forces for encouraging development in energy storage technology and industry across China.

Third, regional governments and power grid companies have released policies and regulations that directly drive the development of the energy storage industry.

By the end of May 2018, northeast China (Dongbei), Fujian, Shandong, Shanxi, Xinjiang, Ningxia, Guangdong, and Gansu regions/provinces had begun experimental ancillary services markets. Each of these markets provide energy storage a market entity status equal with that of generation companies, power sellers, and power customers. This means that energy storage can participate in ancillary services at the generation side (such as at traditional coal plants or centralized intermittent power generators), at the load-side, or as an independent market entity.

At the beginning of 2019, China State Grid Corporation released “Suggestions for New Era ‘Fresh Start’ Reforms for Increasing Construction of World-Class Energy Internet Companies,” which states intentions to research and explore the utilization of substation resources for energy storage stations and data centers, expanding customer support areas, and broadening the use of electric vehicles, energy storage, energy services, and other new technology and service models so as to encourage innovative business models to develop concurrently with the grid.  Such actions are a sign of grid planning for continuous use of storage well into the future.

Profit Models: A Mixture of Old and New

The current primary profit models for storage include energy arbitrage and frequency regulation/ancillary services.  In 2019, additional profit models such as distributed energy storage, centralized renewable integration, and grid-side storage will continue to mature.

The development of distributed energy storage has been based on the foundation of distributed renewables, in particular the rapid growth of solar resources.

According to statistics from the China Photovoltaic Industry Association released in early 2019, distributed solar PV development increased significantly throughout 2017, reaching approximately 20GW of capacity in 2018.  Due to the intermittent and fluctuating nature of renewable energy, there is a strong need for energy storage to help support the stability and reliability of such distributed energy systems.

A second model is centralized renewable integration, in which energy storage has great potential to increase.

With greater amounts of renewable resources connecting to the grid, curtailment issues arise for both wind and solar resources, brought about largely due to intermittency, instability, and the inability to be dispatched.  Energy storage technology can allow nondispatchable electricity that would normally be “thrown away” to be transformed into high quality dispatchable electricity. 

A third model is grid-side energy storage, which took off in 2018 and is expected to continue to be a growing trend through 2019.

In the grid-side storage model, energy storage can be used for peak shaving, allowing the grid to better match the time, size, and strength of the load, thereby decreasing the level of investment needed in new grid infrastructure, increasing the consumption of renewables, and increasing safety and efficiency. Grid companies and utilities lead grid-side storage project development through procurement plans directed at storage solutions or service providers.

Costs Decrease, Opportunities Increase

Costs and applications are both expected to see changes in 2019.

There are two main factors for cost decrease: first is the development of storage technologies.  New innovations in technology help strengthen system effectiveness, maturity, and scale, factors which help to decrease overall costs. Second is the overall development of the storage industry, which has allowed production of energy storage products to become more standardized, intelligent, and large-scaled.  The ability to manufacture at larger scales in particular has caused major drops in energy storage costs.

Second, looking at international trends, behind-the-meter system participation in demand response and grid services are two new models for generating profits from energy storage and diversifying business models.  In 2017, the Chinese government granted third parties the right to provide energy storage equipment and demand side resources for use in grid services.  Operations models and compensation mechanisms are currently in the works, with some in trial stages.  In the future, behind-the-meter storage business models are likely to merge with those of grid-side storage.

2018 saw many cities creating energy storage industry clusters, a trend that is likely to continue and even accelerate through 2019.  Among these clusters, two types are likely to have a good chance of development, first are those industry clusters which focus on core critical technologies, helping proprietary technologies to develop in synergy with the industry. The second are those with a strong industry foundation that can improve energy storage’s supporting infrastructure and industry chain.

As one can imagine, industry clusters face as many challenges as they do opportunities.  These opportunities arise in three areas.  First are the needs of the energy revolution, particularly the widespread use of renewables which creates a great need for energy storage.  The second are reforms to the power system and power markets brought about by new government policies.  Third is the accumulation of energy storage technology and infrastructure that has laid the groundwork for fast-paced development.

Challenges arise in a variety of areas.  First is that the full value of storage cannot be realized under current price models because a full compensation model for storage has not yet been released.  Second is that China still needs to advance in the realm of energy storage technologies, particularly holding of proprietary and intellectual property rights and critical technologies.  China still lacks the ability to produce many critical components.  Third is costs and safety, both of which require continued improvements.

Over the next year, the global energy storage market will also see rapid development.  Mature markets in the United States, Australia, Japan, and South Korea will continue to grow steadily, while emerging markets in the United Kingdom, Ireland, and India are likely to see major increases.  Leading Chinese companies already possess strong competitive abilities in the international market, and are certain to continue to play an important role in the international storage market into the future.

Author: Chen Haisheng, China Energy Storage Alliance Chairman and Deputy Director of Chinese Academy of Sciences Institute of Engineering Thermophysics
Translation: George Dudley

Exploring the 2018 Energy Storage Industry in 7 Words

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.

“Projects”

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.

“Regulations”

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.

“Markets”

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.

“Costs”

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.

“Capital”

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.

“Safety”

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.

“Models”

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

CNESA’s 2018 Year in Energy Storage

Since 2010, the China Energy Storage Alliance has maintained a global energy storage project database, tracked global energy storage market changes, and continuously supported energy storage industry development in China.  During these nine years, CNESA has traced the rise of energy storage markets in the United States, Germany, the United Kingdom, Australia, South Korea, and China. While mature energy markets in other countries have seen energy storage projects enjoying installation subsidies, tax reduction and exemption policies, and other renewable energy related policy benefits, China’s energy storage market has had a rocky road to development, and struggled to define itself.

In 2018, China’s energy storage market took a new turn, with grid-side energy storage capacity experiencing a tremendous increase.  CNESA believes that this development marks a critical transition period for energy storage in China, particularly in light of the increasing presence of renewables and burgeoning electricity market reforms.  In the next 1-2 years, energy storage will play an important role in the restructuring of the energy market.  Energy storage currently stands at a crossroads, and determining the direction in which it moves in will require careful consideration and decisionmaking from all industry members.

Global Energy Storage Development Speeds Up, China Enters the “GW/GWh” Era

In 2018, grid-side energy storage saw a sudden and unexpected massive expansion in capacity which thrust China’s energy storage market into the “GW/GWh” era.  According to statistics from the China Energy Storage Alliance Project Database, China’s accumulated operational energy storage capacity for the year 2018 totaled 1018.5MW/2912.3MWh, an increase 2.6 times that of the total accumulated capacity of 2017.  As of the 2018 year’s end, the global accumulated electrochemical energy storage capacity totaled 4868.3MW/10739.2MWh, an increase of 65% in MWh capacity from the previous year, a marked increase in development speed.  Of note is the rise of new energy storage markets in 2018 that have helped promote rapid global growth of storage around the world. Aside from China, South Korea has seen tremendous growth and become an energy storage leader in part due to government policy support.  In light of decreasing energy storage costs and increasing customer energy prices, the behind-the-meter market in Canada’s Ontario province also attracted business from energy storage developers from the United States, China, and other foreign countries.

Diagram 1: China’s total accumulated operational electrochemical energy storage project capacity through 2018 (MW)

Grid-side Energy Storage Projects Take Off, Carrying Energy Storage into Large-Scale Applications

“Grid-side energy storage” was the industry hot topic in China for 2018.  According to statistics from the CNESA Energy Storage Project Tracking Database, China’s newly operational grid-side energy storage capacity (not including planned, under construction, or undergoing initial debugging) totaled 206.8MW, or 36% of all newly deployed energy storage in 2018, making grid-side storage the year’s leading application category in terms of new capacity.

The sudden leap in grid-side energy storage capacity was in many ways both expected and unexpected.  Though Jiangsu province’s call for bids for 100MW of storage projects was caused by the unexpected retirement of a group of generators and the subsequent grid pressure caused by summertime peaks, grid company enthusiasm for energy storage was not a surprise.  Since the start of the Zhangbei Wind, Solar, Energy Storage, and Transmission Project in 2011, grid companies have never ceased interest in exploring energy storage technologies, applications, and models.  A few years ago, one expert predicted, “when energy storage prices dip below 1500 RMB/kWh, we will see large-scale applications in the grid.”  With the proliferation of electric vehicles having caused the price of battery cells to drop significantly, grid-side energy storage has now reached this turning point.

In 2018, the grid companies of Jiangsu, Henan, Hunan, Gansu, and Zhejiang provinces each released their own large-scale energy storage procurement targets. At CNESA’s Grid-Side Energy Storage Project Forum held in Nanjing this past November, many provincial grid companies expressed desires to construct grid-side energy storage projects.  CNESA’s preliminary statistics show that the total capacity of grid-side energy storage projects currently planned/under construction surpasses 1407.3MWh.  Support from China State Grid leadership has given direction to grid-side storage development, and it is likely that in the next 1-2 years grid-side energy storage will see breakthrough development.

Rapid Development of Grid-Side Applications Will Influence the Entire Energy Storage Industry

Because there are currently no defined parameters for what type of energy storage system is needed for the grid, nor specialized energy storage products for the grid, traditional (i.e. electric vehicle) testing and evaluation methods cannot objectively reflect what battery performance parameters the electricity system requires.  Following the launch of the first grid-side storage system and the completion of necessary testing and evaluation methods, future project tenders will be able to include more accurate technological thresholds and requirements, thereby helping to continually improve the performance of energy storage systems with each new project.

China’s grid-side project investors are largely third-party entities (companies within the grid system) who manage the project’s entire construction and operations. Systems integrators and battery manufacturers provide the battery system.  Grid companies supply the land and sign the agreement with the third party.  The agreement will specify what type of payment method will be used, whether a fixed payment plan or profit-sharing model.  As the operator, the grid has already begun to take notice of energy storage’s multiple values. Such attention will help push the improvement of system management and price mechanisms for energy storage.

Because each country’s power market is structured differently and the amount of freedom in each market varies, there is an array of opinions over how much capital in energy storage a grid company should own.  China is currently undertaking the first steps in power market reforms.  Growth in grid-side energy storage projects will create experiences that will help define storage project ownership, define the limits of each players’ role in the market, ensure healthy competition during the market transition period, and help energy storage to thrive within an open power market.

Competition Increases in Thermal Power Frequency Regulation, though Many Challenges Remain

As one of the earliest storage applications to develop a clear business model, worldwide, frequency regulation has not seen significant growth in new applications. In many ways, the current market has already neared its limit.  The experience of the Tesla 100MW energy storage project in South Australia shows that only players who enter the market early can make a profit, while later entrants can only search for new markets to replicate the model.

In comparison to the international market, frequency regulation in China offers both opportunities and challenges.

In the context of ongoing electricity reforms, opportunities arise in regions such as northeast china (Dongbei), Fujian, Gansu, Xinjiang, Shanxi, Ningxia, Beijing-Tianjin-Tangshan, Guangdong, Anhui, Henan, north China (Huabei), east China (Huadong), and northwest china (Xibei), where decisionmakers have shown support for ancillary service markets by encouraging power generation companies, power sellers, power customers, and independent ancillary services providers to invest in the construction of energy storage infrastructure to participate in frequency regulation ancillary services.  In practice, aside from the Shanxi mechanism—which compensates based on the “mileage” and effectiveness of frequency regulation, a model that provides major support for storage—Guangdong is also experimenting with new market regulation designs for frequency regulation, borrowing from compensation mechanisms used in north China (Huabei) and PJM market regulations in the United States, retiring the earlier model of settlement based on quantity of electricity, and adopting a new model based on the duration and quality of frequency adjustment. Such a model will provide major opportunities for energy storage to participate in Guangdong’s frequency regulation market.  Following trial runs of the new rules which began at the end of 2017, power generation companies in Guangdong have signed six contracts for energy storage frequency regulation projects at thermal power plants.

Challenges arise in two major areas.  First, policy support has encouraged many domestic companies to enter the frequency regulation market. Aside from companies such as Ray Power and CLOU, numerous other systems integrators and project developers have been entering the frequency regulation market, including Sunwoda, Hyperstrong, Zhizhong, Beijing Clean Energy Group, and others.  With so many players in a market that has already neared its limit, it is not surprising that competition has been extraordinarily fierce.  In 2018, the proportion of energy storage operators to owners saw continual decrease. In a space where profits are limited, price battles have become increasingly intense. A second challenge is that although numerous thermal power plant storage projects have been announced, truly operational projects are few, in part due to insufficient fire safety standards, a concern which looms over every frequency regulation project.

In 2018, research and testing in battery heat management, fire extinguishment materials and equipment, fire safety standards, and other safety management measures all became areas of increased focus.  CNESA member standardization groups have contributed to standards such as the “Electrochemical Energy Storage System Evaluation Regulations” and “Energy Storage System Fire Alarm and Fire Prevention Systems,” both of which are currently in the working phase and seeking comments.  We hope that the release of these standards will contribute to increased deployment of new systems.

Finally, as the “ancillary services market” works through its current transition period, early stage competitive price models attract fierce price competition, frequency regulation compensation prices continue to drop, and investment risks for frequency regulation energy storage projects continue to rise.  In contrast, mechanisms for energy storage in peak shaving and for backup power applications have yet to be clearly defined.  While northeast China (Dongbei), Xinjiang, Fujian, Gansu, and Anhui have announced needs for peak shaving capacity supplied by independent energy storage market entities, Jiangsu has also announced that energy storage may contribute to high levels of peak shaving and has drafted regulations for compensation. However, dispatch strategies and technological requirements for grid-connected independent energy storage stations, standards for connecting to the grid, pricing for battery charging and discharging, and settlement strategies are all still lacking proper rules and regulations.  In the short term, such issues are an obstacle to energy storage value stacking.

If Penalties and Rewards are Clearly Defined, What Additional Assistance Does Renewable Energy and Storage Need?

Although the development of renewable energy is an important factor contributing to the use of energy storage in the electricity system, in China the two still do not have a close enough relationship.  Examples of renewable energy stations coupled with energy storage are few in China.  Aside from a few individual wind-plus-storage demonstration projects, the majority are projects installed at large-scale solar PV stations with high FIT rates using storage to manage curtailment. In 2018, with the release of the “Renewable Energy Fair Price Policy,” the installation of energy storage for curtailment has lost its advantage.  Future efforts must explore other ways in which energy storage can add value to renewable energy stations.

Internationally, as renewables continue to penetrate grids at increasingly higher levels, grid operators have looked to differentiate the way that renewable generators of varying performance are penalized and compensated.  Generators that are more stable or “trustworthy” earn higher grid purchase prices, or can have their “penalties” minimized.

The recently updated “Two Regulations” for the Northwest (Xibei) region follows this same line of thinking.  Though simply lowering the risk of penalties does not increase motivation for renewable energy stations to install storage, in the future, as the ancillary services market matures, policymakers are certain to consider the advantage of renewable energy stations combined with storage and encourage such installations to participate in market transactions and ancillary services.  Such measures would help highlight the many benefits of storage combined with renewable energy.

Foreign Behind-the-Meter Storage Market Thrives While the Domestic Market Slows

The behind-the-meter market outside of China continued to thrive throughout 2018.  Aside from the United States, Germany, and Australia, emerging behind-the-meter markets in Canada’s Ontario province, South Korea, and Italy all became battlegrounds for new competition between global storage vendors. The behind-the-meter market in the United Kingdom also attracted attention, and is predicted to experience an explosion in growth in 2019.

In contrast to the growth in behind-the-meter storage internationally, China’s behind-the-meter market, which once led the industry’s development, slowed in 2018.

One reason for this is the implementation of new policies which have narrowed the gap in price differences between peak and off-peak periods in many regions.  In Beijing for example, general industrial-commercial customers are permitted to utilize the two-part tariff system, which allows electricity bills to be paid either (a), according to transformer capacity or maximum demand, or (b), according to their actual power usage.  As a result of this plan, price differences between peak and off-peak power periods shrank significantly, making it difficult to sustain a profit using energy storage for energy arbitrage.

Another issue has been the concern of business owners and fire departments towards the use of energy storage systems in commercial buildings, particularly safety issues caused by the installation of energy storage systems in underground parking garages and the lack of proper fire safety standards.  Such issues have caused many commercial storage projects to be delayed indefinitely.

Policy updates and market adjustments have touched a nerve with energy storage stakeholders, and investment in large-scale applications at current technology prices carries a certain amount of risk.  Yet from the viewpoint of project developers, energy storage is just one technology in an entire range of energy services.  An open power market still promises many potential benefits, and customers are the key to increasing the value of energy services. In the future, the ability to provide a full range of energy services will be critical to maintaining customer confidence. Though policies tend to focus on the big picture, planning and design must begin by considering the way in which energy is changing and the market is opening. Doing so will avoid taking actions that support one area while inhibiting another.  In the future, regional government agencies must put additional effort into the creation of environmentally minded power price mechanisms that push for reasonable peak and off-peak prices which reflect actual power supply-and-demand, and encourage customers to use power in a rational and realistic way.

Looking Ahead

2018 was a year of both excitement and disappointment for energy storage.  The sudden leap in grid-side storage capacity infused new vigor into the industry, providing not only market growth but also driving the costs of energy storage technology down and pushing technologies towards applications that are more closely integrated with the grid.  The advancements also helped bring China’s energy storage applications into the global spotlight.  At the same time, the slow development of a mature market mechanism and policy support continues to lag behind the pace in which new storage applications are appearing. Ancillary services market regulations and long-term mechanisms are unclear, a lack of a proper behind-the-meter price mechanism has created increased investment risk, and many other issues have appeared or persist.  The industry’s short-term benefits and long-term existence are still in urgent need of adjustment and resolution.

Despite just ten years of development, the rapid growth of energy storage is visible to all.  Yet a mature storage industry cannot occur overnight.  The support of renewable energy and the new generation of power systems is the natural purpose of energy storage, and the basis of its rapid development.  With the encouragement of proper policies and the hard work of a variety of government bodies, we believe that energy storage can break through from its current challenges to become a driving force in the advancement of China’s energy system.

Author: Liu Wei, CNESA Secretary General

Translation: George Dudley

CNESA Global Energy Storage Market Analysis – 2018.Q4 (Summary)

1.       The Global Market

According to China Energy Storage Alliance Project Tracking Database statistics, as of the end of December 2018, global operational energy storage projects totaled 180.9GW, an increase of 3% compared to the same period the previous year.  Pumped hydro made up the largest portion of this capacity at 170.7GW, an increase of 1.0% from the same period the previous year. Electrochemical energy storage and molten salt energy storage followed at 6.5GW and 2.8GW, an increase of 121% and 8% compared to the same period the previous year, respectively.

Global Operational Electrochemical Energy Storage Project Distribution

Data source: CNESA Project Database, 2019

In 2018, global newly operational electrochemical energy storage projects totaled 5.5GW, of which electrochemical energy storage comprised the largest portion, at 3.5GW, an increase of 288% compared to the previous year.

In the 4th quarter of 2018 (October to December), global newly added electrochemical energy storage projects totaled 1.55GW, an increase of 226% in comparison to the same time the previous year, and 276% since the third quarter of 2018.

2.       The Chinese Market

 According to China Energy Storage Alliance Project Tracking Database statistics, as of the end of December 2018, China’s operational energy storage project capacity totaled 31.2GW, an increase of 8% compared to the same period the previous year.  Pumped hydro made up the largest portion of this capacity at 30.0GW, an increase of 5% in comparison to the same period the previous year.  Electrochemical energy storage and molten salt storage followed at 1.01GW and 0.22GW, an increase of 159% and 1000% in comparison to the same time the previous year, respectively.

China’s Operational Electrochemical Energy Storage Project Distribution

Data source: CNESA Project Database, 2019

In 2018, China’s newly operational energy storage projects totaled 2.3GW.  Of this, electrochemical energy storage made up 0.6GW, an increase of 414% in comparison to the previous year.

In the 4th quarter of 2018 (October – December), China’s newly added electrochemical energy storage project capacity totaled 286.5MW, an increase of 399% compared to the 4th quarter of the previous year, and 80% since the 3rd quarter of 2018.

3.       About this Report

The Global Energy Storage Market Tracking Report, authored by the China Energy Storage Alliance Research Department, provides market data and status updates for each quarter of the year.

The complete version of our Global Energy Storage Market Tracking Report (2018.Q4) can be downloaded from the CNESA ES Research website at www.esresearch.com.cn.

The ES Research website was launched January 18, 2018.  The site provides accurate, authoritative, and up-to-date market data analysis and information on the energy storage industry.  Please visit our website at www.esresearch.com.cn to learn more about the research services we offer.

For questions or comments, please contact the CNESA Research Department:

Phone: 010-65667068-805

Email: na.ning@cnesa.org

This report copyright China Energy Storage Alliance (CNESA). No part of this report may be reproduced or redistributed without the prior permission of the China Energy Storage Alliance. Citations and/or publications of this report with prior permission must give credit to the China Energy Storage Alliance, and no alteration or deletion of information is permitted.

New Edition of “Two Regulations” Released in Northwest China Region

Recently, the Northwest China Energy Regulatory Bureau officially released the long-awaited updated editions 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, often referred to as the “Two Regulations.”  At the Energy Storage West Forum last August, representatives from the Northwest China Energy Regulatory Bureau gave a brief introduction to the revisions.  Below is a summary of their comments from the forum:

The “Two Regulations” were originally enacted in October 2015 and have been in place now for three years.  The release of these regulations was met with much enthusiasm.  In the first half of 2018, the five provinces in the northwest grid were penalized 1.7 billion RMB, compensated 2.77 billion RMB, and showed a service cost allocation/split of 1.16 billion RMB.  These proportions represent the largest of any grid.  From an operations standpoint, not all provinces are the same.  One example is Qinghai province.  As of May 2018, penalties to the Qinghai power grid totaled 85.3 million RMB, with their AGC project responsible for the largest portion of these penalties at 52.99%.  Primary frequency response provided the highest portion of compensation of any project, at 50%.

Revisions to the “Two Regulations” began in 2017.  The reasons for the revisions were based on a few different factors.  First, we wished to increase content on safety in light of new national and industry standards.  Second, we wished to create equal obligations and rights.  The previous regulations focused primarily on the penalization system for renewable energy, with little focus on compensation.  The new regulations make an effort to place importance both on penalization and compensation.  Third was the desire to increase management of peak shaving, including adapting and revising regulations to meet the needs of ancillary services marketization across different provinces.

Currently, there are a few different ways in which the “Two Regulations” relates to energy storage in ancillary services.  First is in peak shaving.  Each province with a peak shaving market has different standards for providing compensation, though when storage is used solely for peak shaving, the rate of return on the initial investment is slow.  Second is in AGC frequency regulation.  In practice, the Northwest power grid leads thermal power plants to invest in AGC based on the frequency of the T&D lines and does not use a model similar to the Huabei Power Grid’s kd value to calculate contributions, instead penalizing or compensating based on a power credit system.  Third is the operations management for renewable energy.  Because the capacity of renewables in the grid continues to grow, dispatch and operations for renewable energy must be improved in order to guarantee system safety, stability, and the maximum use of renewable power.  Renewable energy power stations that contribute to the grid should also receive appropriate compensation.  With these revisions enacted, we will provide a transitional period, allowing renewable energy companies time to adjust to the updates and meet system operation needs.

Author: CNESA Research

2018 Market Summary: How China Can Learn from South Korea on Energy Storage Safety

There is no doubt that in 2018, safety was one of the top talking points in the energy storage industry.  With the recent energy storage station fire in South Korea, the country’s 16th such incident, safety has once again struck a nerve within the industry.  In the following article, the China Energy Storage Alliance takes a look at this accident as well as the Korean government’s response to see what lessons China can learn for the safety and development of its own energy storage industry.

1.       South Korea’s 16th Energy Storage System Fire

In early December 2018, an energy storage project at a cement factory in South Korea’s North Chungcheong Province caught fire, resulting in 4.1 billion won (3.63 million USD) dollars in damage.  This was the 15th of such fires in South Korea in 2018, and 16th total fire as of December 2018.  Worldwide, the fire caused fresh anxiety within the energy sector regarding the safety of energy storage systems.

2.       Why Have Fires Been So Frequent Among Korea’s Energy Storage Systems?

In regards to the frequency of energy storage system fires in South Korea, experts have cited the government’s hurried push for energy storage applications as the cause.  Prof Jeong Yong-hoon of the Korea Advanced Institute of Science and Technology notes that one of the chief causes is government subsidies aimed at energy conservation and the increase of spending on renewables, which has caused numerous companies and institutes to implement energy storage as quickly as possible, without proper consideration for safety and stability.

3.       How Can Korea Manage the Issue?

Korea’s Trade, Industry, and Energy Bureau had already begun safety inspections on the country’s 1253 energy storage projects.  At the time of the Chungcheong cement factory project fire, the bureau had already completed inspections on 669 energy storage stations, and recommended individual users, companies, and other organizations stop use of the 584 remaining energy storage installations across the country that had not yet undergone inspection.

Of the 16 energy storage project fires, half of the energy storage stations were linked with solar PV generators. Due to safety already becoming an issue of concern, the South Korean government has required energy storage installers to take stronger safety measures, such as increased use of monitoring systems and other measures.  However, since the implementation of greater safety measures increases system costs and adds to the burden on already high renewable energy prices, it is quite possible that South Korea is likely to lose motivation to expand the use of renewable energy for a period in the future.

4.       Lessons for China

Don’t panic.  The safety of energy storage installations can be ensured with proper engineering methods, and there is no reason to fear the safety of these systems.  Past accidents have occurred mainly as a result of a lack of strictness in regard to technological thresholds and safety measures.

Don’t blame accidents simply on the choice of batteries. It often appears that the primary cause of accidents has been the flammability of Li-ion batteries combined with thermal runaway.  However, most issues have occurred not because of the battery, but due to an electrical accident.  Safety is a complicated issue, and placing blame on the choice of battery is to simple of an answer, as the supporting system is equally as important.

Don’t sacrifice safety measures to save on costs. Current domestic energy storage project bids have prices near to the cost price and require projects to begin in a relatively short time period.  While low initial costs limit the amount of money that can be invested in safety measures, rushed submission of payment also shortens testing and verification periods, factors which both make it difficult to determine if safety issues are present.  Therefore, one of the major challenges for the energy storage industry is to ensure safety while keeping technology costs at an acceptable level.

Safety standards and related regulations must be established as soon as possible. After an accident happens, the root cause of its occurrence must be determined, and accident management and prevention solutions must be put in place.  Missing or incomplete standards and regulations should be researched thoroughly and put into action by their respective regulatory bureaus. Industry organizations such as CNESA have begun work research and planning standards, inspection, and certification methods for energy storage systems. At present, CNESA has been drafting standards for the evaluation of storage systems and begun trials of such evaluation methods, with the goal of encouraging safe and healthy development of energy storage systems.

Thorough verification and safety assessments must be completed before a project is put into operation. In recent years, Li-ion battery projects in China, South Korea, and Belgium have seen fires, though mainstream Li-ion battery producers in Europe and the United States maintain relatively low accident rates.  Some projects have seen safe operations for more than 8 years.  Internationally, much experience in energy storage has already transitioned into regulations and standards.  What this means in that although Li-ion batteries carry the risk of flammability and thermal runaway, with the proper management methods and an increase in safety thresholds, testing, and verification methods, the safe use of Li-ion batteries can be ensured.

5.       Hopes for 2019

 In 2018, we saw China’s energy storage market see tremendous growth in many areas.  In 2019, we hope to see more industry members and related agencies using the lessons and experiences from 2018 to increase energy storage safety management, continue the push for standards and regulations, and help to move energy storage to a healthier and more ideal development.

Author: Yue Fen
Translation: George Dudley

How International Energy Players Enter the Energy Storage Industry

CNESA’s tracking of the global energy storage market reveals that over the past two years, many large energy industry players have purchased energy storage companies.  Examples include Enel’s purchase of Demand Energy, Total’s purchase of Saft, and Aggreko’s purchase of Younicos.  Such purchases have continued through 2018.  According to CNESA tracking, at least ten battery energy storage companies were acquired by large energy enterprises in the first nine months of 2018.  Two notable examples include ENGIE’s purchase of French microgrid and energy storage company Electro Power Systems (EPS), and international inverter leader SolarEdge’s purchase of Korean energy storage solutions provider Kokam.  Below, we take a look at these two case studies to discuss how these two major energy companies have taken different strategies to enter the energy storage industry.

1.       ENGIE purchases EPS

ENGIE, formerly known as GDF Suez, originates from the July 22, 2008 merger of Gaz de France and Suez.  On April 24, 2015, GDF Suez changed its name to ENGIE, focusing on natural gas, electricity, and energy services as its three main business areas.  The company is currently devoted to becoming a leader in the global energy transition. In recent years, the company has been continuously exploring the use of energy storage as part of its efforts to transition to become a low-carbon energy and solutions provider.

In May of 2016, ENGIE purchased 80% stock equity in American industrial-commercial energy storage systems provider Green Charge Networks (GCN), marking a big leap into the energy storage sector.  After the purchase, GCN changed its name to “ENGIE Storage,” continuing to provide its industrial-commercial behind-the-meter solutions in the United States while also using ENGIE’s foundation in the traditional energy sector to expand its products to grid-scale storage.  One example of such is ENGIE North America’s 3MW/6MWh grid-scale energy storage project developed in conjunction with Massachusetts utility Holyoke Gas & Electric (HG&E) in September 2017.  The project’s equipment, construction, and maintenance was provided by GCN. At the time of its launch, it was also the largest grid-scale energy storage project in Massachusetts.

If ENGIE’s purchase of GCN was made in order to capitalize on a strong industrial-commercial energy storage market in the United States, then ENGIE’s January 2018 purchase of 51% stock in French microgrid manufacturer Electro Power Systems (EPS) can be seen as a move to expand its energy storage business more comprehensively and at a larger geographic scale.  EPS focuses on microgrid projects and energy storage project development, construction, and operations.  Its energy storage projects are concentrated in European countries such as Italy and Spain as well as Africa.  ENGIE’s purchase of EPS strengthens its abilities to provide distributed energy and microgrid solutions while helping the company further its goal of becoming a low-carbon solutions provider.  For EPS, the purchase has also provided a channel and support to expand globally.  According to CNESA’s Global Energy Storage Project Database, following ENGIE’s purchase of EPS, ENGIE quickly helped EPS acquire a bid for a 35MW solar PV plus 45MWh energy storage microgrid project and 30 year PPA in the Pacific island of Palau.

2.       SolarEdge Purchases Kokam

SolarEdge was founded in 2006 and is headquartered in Israel. The company is a leading global provider of an intelligent solar PV power optimization and inverter system solution.  The company’s main business is the R&D, production, and sales of optimized DC PV inverter systems.  Such a system includes a power optimizer, inverter, and cloud monitoring system.  SolarEdge’s products are utilized mainly in distributed PV systems, including residential rooftop power stations and industrial-commercial distributed power stations.  SolarEdge began bringing its products to energy storage applications in 2015.

According to CNESA’s Global Energy Storage Vendor Database, prior to 2018, SolarEdge’s primary advantage was in its inverter business line.  The company collaborated on energy storage projects with major international battery manufacturers such as LG Chem and Tesla.  LG Chem’s 400V RESU10H high voltage residential storage series, featuring 7kWh and 9.8kWh capacities, utilizes SolarEdge’s Storedge single-phase DC inverter.  The product has been sold throughout the North American market.

Since 2018, SolarEdge has begun horizontal expansion into energy storage.  In May, SolarEdge launched a VPP software platform in preparation for the move toward smart management systems.  In October, SolarEdge purchased 75% of shares in South Korean battery manufacturer Kokam for the price of 88 million USD, with plans to purchase the remaining shares in the future. The move allows SolarEdge to now provide batteries as part of its business line.  Aside from providing some energy storage projects with systems integration and turnkey systems, Kokam also provides a full line of batteries, including high-power nickel-magnesium-cobalt (NMC) Li-ion batteries.  According to CNESA tracking, Kokam already possesses over 700MWh of Li-ion deployed in the aerospace, electric vehicle, and energy storage sectors.  The purchase of Kokam has increased SolarEdge’s product line, while also ensuring that SolarEdge inverter solutions and Kokam battery products will be able to integrate seamlessly.

3.       CNESA Summary

ENGIE and SolarEdge’s experiences demonstrate how companies often take different strategies to enter the energy storage sector.  ENGIE’s choice of purchasing GCM was in part due to recognizing the company’s existing accumulation of technology and projects, though more importantly was a recognition of the industrial-commercial behind-the-meter storage market in the United States.  ENGIE’s purchase of EPS also shows that the company also has an optimistic view of future distributed energy storage and microgrid markets in Africa and the Pacific.  In contrast, SolarEdge has looked more towards technology integration, starting with early collaboration with major battery manufacturers on energy storage projects and accumulating experience, to the recent purchase of battery product supplier Kokam, allowing SolarEdge to “fill in the gaps” in its own systems solutions services. SolarEdge has taken steps toward becoming a provider of a complete set of energy storage solutions.

Author: Yue Fen
Translation: George Dudley

Thoughts on the Present and Future of Energy Storage Development

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

CNESA Global Energy Storage Market Analysis – 2018 Q3 (Summary)

1.       The Global Market

As of the end of September 2018, global operational electrochemical energy storage capacity totaled 4037.6MW, or 2.3% of the total of all energy storage technologies, and an increase of 80% in comparison to the end of September 2017.

In the third quarter of 2018 (July through September), global newly operational electrochemical energy storage project capacity totaled 413.9MW, an increase of 173% in comparison to 2017 Q3, and a decrease of 22% in comparison to 2018 Q2.

In a geographic comparison, China showed the greatest increase in newly operational energy storage capacity, at 159.5MW, or 38% of the total, an increase of 667% in comparison to 2017 Q3 and 110% since 2018 Q2.  In applications, the greatest newly operational electrochemical energy storage capacity was concentrated in grid-side projects, at 179.1MW, or 43% of the total, an increase of 1785% from 2017 Q3, and 76% since 2018 Q2.  In technologies, new electrochemical energy storage projects most frequently utilized Li-ion batteries, at 374.7MW, or 91% of the total, an increase of 170% in comparison to 2017 Q3 and a decrease of 29% since 2018 Q2.

2.       The Chinese Market

As of the end of September 2018, China’s operational electrochemical energy storage capacity totaled 649.7MW, 2.1% of the total for all of the country’s energy storage technologies, and an increase of 104% in comparison to the end of September 2017.

In the third quarter of 2018 (July through September), China’s newly operational electrochemical energy storage project capacity totaled 159.5MW, an increase of 697% in comparison to 2017 Q3, and 110% since 2018 Q2.

In a geographic comparison, Jiangsu province showed the greatest increase in newly operational electrochemical energy storage capacity, at 111.5MW, or 70% of the total.  In applications, the greatest newly operational electrochemical energy storage capacity was concentrated in grid-side projects, at 97.6MW, or 61% of the total, an increase of 100% in comparison to 2017 Q3, and 332% since 2018 Q2.  In technologies, new electrochemical energy storage projects most frequently utilized Li-ion batteries, at 137.5MW, or 86% of the total, an increase of 1499% since 2017 Q3, and 86% since 2018 Q2.

3.       About this Report

The full version of our quarterly Energy Storage Market Analysis report is available for purchase through CNESA’s “ES Research” platform: www.es.research.com.cn.

The ES Research platform was launched in January 2018 and features a diverse range of market statistics and industry data.  Sign up at www.es.research.com.cn to learn more about CNESA’s energy storage research products series.

For questions, please contact our research department by phone or email at:

Phone: 010-65667068-805

Email: esresearch@cnesa.org

The Energy Storage Industry’s Urgent Need for Detailed Policy Action

China Energy Storage Alliance Vice Chairman Johnson Yu recently spoke at a National Energy Administration forum on promoting the sustainable development of the energy storage industry.  Vice Chairman Yu provided his thoughts and suggestions on some of the current challenges facing the industry.  Last year marked the release of the Guiding Opinions on Promoting Energy Storage Technology and Development policy, which addresses industry questions regarding government regulations, demonstration projects, compensation mechanisms, social investment, testing and certification, system safety, and other topics. Yet, as the name suggests, the Guiding Opinions only serves as a guideline document.  The industry is still in need of support from specific and practicable policies.  China Electric Power News spoke with China Energy Storage Alliance Vice Chairman Johnson Yu to learn his thoughts on energy storage policy.  The CNESA research department has provided a summary of the interview below:

The Storage Industry’s Most Pressing Issues and Suggestions for How to Resolve Them

Current energy storage applications are mostly centered on renewable integration, ancillary services (such as peak shaving and frequency regulation), grid-side applications, and behind-the-meter applications.  Renewable integration projects have frequently been used to solve curtailment issues at aged solar PV stations where feed-in tariff prices are high.  These projects have a certain economic value, though also hold potential future market risks (should lowering curtailment lead to decreased earnings).  Investors for these applications have mostly been power generation companies themselves, such as Huaneng Group, Huanghe Hydropower Development, and Beijing Enterprises Clean Energy Group, who implement energy storage at solar PV and wind bases.  Such projects help to verify the technology roadmap for storage while also helping to resolve renewable energy consumption issues.

Vendors are more likely to look at the opportunities brought by policies over the next three to five years, and if the policy roadmap will become clearer.  If, in the short term, we can rely on current power policies to provide compensation to energy storage based on market prices, while in the long term taking the proper measures to anticipate the future power markets—including spot markets and ancillary services markets—the industry will be set on a positive development path.

Within the ongoing power market reforms, ancillary services such as frequency regulation and peak shifting have had an early start.  As early as 2008 a quasi-market mechanism was created to pay for services based on their effectiveness, though at present it is generation companies who provide compensation funds.

Therefore, the first suggestion is to consider the sustainability of policies.  Future compensation for storage should come from the end-user who creates the need for the service, benefiting the current “effectiveness-based compensation” model of energy storage in ancillary services. The second suggestion is that if energy storage should enter the ancillary services market as an independent entity, then it should be completely marketized so that it can compete fairly with other market services.  The third suggestion is that regions which are in the early stages of marketization and are awaiting the government to set prices should have their prices set according to contribution value and avoid cost pricing.  Early projects need to display a certain degree of profit margin and iteration.  This includes safety issues, which although can be resolved through technical engineering, are often limited in effectiveness due to cost considerations.  One of the major challenges for energy storage is determining how to ensure safety while at the same time maintaining reasonable technology costs.

According to CNESA research, since the beginning of 2018, Jiangsu, Henan, and Hunan provinces have shown the biggest proportions of new grid-side energy storage.  From the perspective of industry development, grid-side energy storage should be encouraged through the construction of new demonstration projects that can clearly define development models and obligations of all stakeholders.

One possible suggestion for the short term is to review the pricing structures for pumped hydro storage.  However, as CNESA experts have pointed out, from the perspective of the power market, grid-side energy storage investment and power station operations should be relaxed, and requisite measures should be adopted to encourage entities outside of the power grid to join in investment and construction of grid-side energy storage.  When energy storage is operated by the grid itself, it is unable to participate in future power market transactions as doing so may cause distortions in the market.  Future market mechanisms must be designed to ensure that all market players receive fair treatment, a task that will require careful consideration.

Current behind-the-meter storage projects have largely focused on energy arbitrage, relying on energy management contracts to save end users money.  According to CNESA statistics, as of the 2017 year’s end, behind-the-meter electrochemical energy storage accounted for 59% of applications, though the first half of 2018 saw a slowdown in growth, with newly added capacity making up 19% of the total.  Development of behind-the-meter projects faces three main issues.  First, the source of earnings is singular, and the rate of return is low.  In most cases, investment in such a project will have a rate of return of approximately 7-8 years or more.  When considering the total costs of investment versus the rate of return, most projects will not be appealing unless they are among the small number of cases in which peak and off-peak price differences are extremely high.  Second, investors are often focused on the potential risks brought on by future policies.  It is not yet known how the mechanism for energy arbitrage will be restructured in the future.  Such concerns have had a very real effect in causing recent behind-the-meter projects to be put on hold.  Third, more focus must be placed on safety.  Low earnings put a limit on the amounts that stakeholders are willing to invest, in turn meaning that less funding is allocated to safety measures, which can have potentially disastrous consequences.

In the future, related technologies such as electric vehicles, V2G, and demand response will also have room to develop.  The use of demand response abroad has provided a bank of experience that we can learn from, giving priority dispatch to demand side resources like energy storage and renewables.  Priority dispatch of demand-side resources is one of the most effective methods to save money and increase efficiency.  In China, demand response development has seen some experimental use, but without much intensity or significant enthusiasm from customers.

From the perspective of energy storage, if a 100 RMB/kWh~400 RMB/kWh subsidy can be provided to demand-side resources based on response type, and if a sufficient dispatch is called for, then current user-side energy storage projects will increase earnings, providing greater motivation for new projects.  One suggestion is to refer to trial subsidy programs and implement similar programs in areas of the country where power demand is strained.

Needed Market Mechanisms and Industry Regulations for Energy Storage Development

Generally speaking, all energy storage projects—whether they are behind-the-meter, ancillary services, grid-side, or renewable integration applications—are in dire need of a market mechanism that can help bring about sustainable development.

Furthermore, there are two points worthy of caution.  First, policies can easily take the place of the market in determining the technology roadmap.  Policies should be focused on increasing safety, verification methods, and standardization, not simply choosing which the technology roadmap on behalf of the market.  Second, because power marketization is still in its early stages, many models including energy arbitrage and compensation for frequency regulation are currently managed under interim policies.  Only certain regions have developed mechanisms that are capable of supporting such models, while many regions lack the capability to create such models and require subsidies in order to be implemented.

Areas with profitable energy storage projects are also facing uncertain and fluctuating policies.  Detailed regulations for market reforms are urgently needed for long term energy storage investment to become a possibility.  Short-term investment and operations development models rely too heavily on company credit, bringing them major operations risks.

From an economic perspective, our current hopes for policy support include: First, adjusting electricity prices in a way that is flexible according to varying regional conditions.  We recommend the government consider reserving space within power price adjustment for “energy storage subsidy funding” to support energy storage development.  Second, while the Guiding Opinions has laid out a framework for energy storage development, we recommend local governments examine their own capabilities and industry characteristics to create policies that will encourage energy storage development in their own regions.

Article originally published in China Electric Power News
Reporter: Qin Hong
Translation: George Dudley

Navigant Research’s Global Solar-Plus-Storage Vendor Roundup

In October 2018, Navigant Research released its “Leaderboard: Residential Solar PV Plus Energy Storage Providers” report.  The report analyzes the top 12 most active current global residential solar-plus- storage vendors according to their strategies and implementation.  The report scores the companies according to 12 factors, including vision, go-to market strategies, partnerships, production strategies, technologies, geographic reach, sales, marketing and distribution, product performance, product quality and reliability, product portfolio, pricing, and staying power.  Combining statistical analysis with the scores for each company, Navigant released a top 10 list of global residential solar-plus-storage providers.  The purpose of the list is to provide industry members with an objective review of the strengths and weaknesses of these global residential storage suppliers.

Navigant asserts that residential customers have begun turning away from the traditional purchasing of power from utilities to the using of power generated on-site.  Navigant predicts that in the next 10 years, global new deployments of residential solar and storage projects will reach 37.4GW.  Navigant also stresses three factors that they believe will helps drive the development of energy storage over the next few years:

Source: Navigant Research

Energy storage combined with solar PV can solve problems that solar PV systems on their own cannot.  Independent solar PV systems can only generate electricity when sufficient sunlight is available, therefore it is unable to provide many services that other power generation resources can.

Over the past five years, solar PV and energy storage installation costs have dropped considerably. It predicted that costs will continue to drop, particularly for residential solar and storage systems. Solar and storage systems that have had their performances verified can help bring solar and storage hardware and software resources to compete in the global retail power market.

Residential solar, energy storage, and other resources can integrate using virtual power plant networks, allowing distributed energy resources to be dispatchable, saving on electricity costs, decreasing intermittency issues, and providing grid services.

Within Navigant’s rankings, Sunrun placed first.  According to Navigant’s analysis, Sunrun is the only company to show outstanding performance in both strategy and implementation, with a strong customer base and a number of verified systems in the market.  Tesla and Vivint Solar followed closely behind, though ranked lower in sales, vision, and market attractiveness.  SolarWorld and SolarWatt have also been consistent challengers, though their products have not yet demonstrated strong business case examples.

According to Navigant’s analysis, the top 10 global residential energy storage providers include Sunrun, Tesla, Vivint Solar, E.on, Sunpower, Sunplug, Sunnova, Huawei, Soligent, and ZenEnergy.

To learn more about Navigant and access the report, view the official press release here.

A Summary of Energy Storage Development in the First Half of 2018

Electrochemical Energy Storage Maintains Rapid Growth

According to the CNESA Global Energy Storage Database, in the first half of 2018, global newly operational electrochemical energy storage project capacity totaled 697.1MW, an increase of 133% from the same time the previous year, and an increase of 24% since the end of 2017.  China’s newly operational electrochemical energy storage project capacity for the first half of 2018 totaled 100.4MW, 14% of the total new global capacity.  This new capacity reflected an increase of 127% from the previous year, and an increase of 26% since the 2017 year’s end.

Figure 1: global new operational electrochemical energy storage project capacity (2018.H1, MW)

Figure 2: China’s new operational electrochemical energy storage project capacity (2018.H1, MW)

In comparing by distribution of technologies, in both global and Chinese markets, newly added energy storage capacity was dominated by Li-ion batteries, at 99% and 94% of the total, respectively.  In applications, ancillary services dominated the global market’s new energy storage capacity, at 51%, while China’s market saw grid-side energy storage dominate, at 42%.  In a regional comparison, the United Kingdom showed the greatest increase in both newly added capacity and in comparative growth with the same time the previous year (2017.H1).  The United Kingdom’s newly added capacity totaled 307.2MW, nearly 45% of the global market, an increase of 441% in comparison to 2017.H1.

Figure 3: distribution of global operational electrochemical energy storage by application (2018.H1, MW)

Figure 4: distribution of China’s operational electrochemical energy storage by application (2018.H1, MW)

Figure 5: global distribution of operational electrochemical energy storage by region (2018.H1, MW)

Global Competitors Release Large-Scale Energy Storage Projects

At the end of 2017, Tesla launched its 100MW/129MWh Li-ion battery project in Southern Australia. Following the launch of this system, many other countries followed with their own large-scale energy storage systems, with many in the 100MW and above range (see chart below).  Energy storage is being recognized by increasing numbers of countries as a reliable and flexible source of energy.

Chart: Representative Examples of Large-Scale Energy Storage Projects

Source: CNESA Data Collection

Domestic Grid-Side Storage Projects See Large-Scale Development

In the first half of 2018, Jiangsu and Henan provinces led the way in large-scale grid-side energy storage projects. Both provinces launched similar projects consisting of a total of over 100MW of distributed energy storage stations deployed near a series of substations.  Project investors included State Grid subsidiaries such as Xuji Group, Shandong Electrical Engineering, Jiangsu Energy Services Co, and Pinggao Group, as well as battery manufacturers ZTT, eTrust, CLOU, Lishen, and Narada, and additional PCS and BMS suppliers.  Though development on the projects has been vigorous and reactions have been positive, questions such as whether the business model will be replicable and what kind of investment returns can be expected will depend on whether the industry will continue to develop at a large scale.

The Question of Safety

The fire at South Korea’s South Jeolla wind farm battery storage system once again brought attention to the energy storage system safety.  Unstandardized installation and use of battery systems can have disastrous consequences, yet current standards are still incomplete and/or flawed, in dire need of update and clarification.  Despite these issues, we cannot deny the value of energy storage applications.  The energy storage industry must grapple with the challenge of how to clarify storage standards without hindering the development of the industry, a question that is worthy of further discussion and exploration amongst industry leaders.

Major Energy Companies Update Storage Business Models

Many traditional energy companies have begun turning their business activities towards renewable energy in response to global energy trends.  For some companies, this means establishing new renewable energy operations, while for others it means the acquisition of smaller renewable energy companies.  Many traditional energy companies have also looked for outstanding renewable energy companies for business collaboration, making use of each other’s advantages for mutual benefit.  Some energy storage companies have begun reforming their business practices to better fit market needs, striving to become more economical and effective and make better use of their advantages.  For example, S&C has discontinued manufacture of PCS, instead choosing to focus on microgrid and grid-scale energy storage system aggregation.  Mercedes-Benz has discontinued manufacture of its residential storage batteries, focusing instead on grid-scale energy storage applications.  Finally, Younicos has introduce its “storage-as-a-service” model to meet the immediate energy storage needs of customers.

National and Regional Support in Response to the Guiding Opinions

Following the October 2017 release of the Guiding Opinions on Promoting Energy Storage Technology and Development a number of new policy efforts have appeared at both the national and regional levels that support the goals of the Guiding Opinions.  These include such policies as the Bijie City Energy Storage Industry Development Plan (Draft), Regulations for Operations and Ancillary Services Management of Grid-Connected Energy Storage Stations in Southern Regions, North China Ancillary Services Market Establishment Plan (Draft), standards for lead-carbon batteries and Li-ion batteries used in energy storage systems, and many other recent policy measures that have helped to stimulate the domestic energy storage market.

Author: Ning Na
Translation: George Dudley

A Look at China’s 2018 New Market Competitors

According to statistics from CNESA’s Global Energy Storage Project Database, in the first half of 2018, China’s new operational electrochemical energy storage capacity totaled 100.4MW, an increase of 127% from the same time the previous year.  Newly added electrochemical projects either planned or under construction totaled 2251.1MW.  With the scale of energy storage projects rapidly increasing, the market has seen a number of new players eager to make their name in a variety of energy storage applications.

I.       Frequency Regulation/Ancillary Services

Combined thermal power and energy storage frequency regulation projects continue to thrive in 2018 through the activities of numerous market competitors:

1.       WLY Group (万里扬集团有限公司)

In June, WLY group won a bid to supply Guangdong Yudean Power Generation Co. with a 9MW/4.5MWh combined thermal generation and energy storage frequency regulation project.  The winning bidder is responsible for engineering that includes equipment and debugging, electrical testing, grid connection, etc.  Construction on the project began in July.  The project signifies WLY Group’s formal entrance into the ancillary services market.  WLY was China’s first auto transmission company to go public.  The company provides transmissions for use in passenger cars and commercial vehicles, as well as drive systems for electric vehicles and interior components.

2.       Huatai Energy (Beijing) Tech.Co.,LTD (华泰慧能(北京)能源技术有限公司)

In August, Huatai Energy won an EPC bid to supply Inner Mongolia Power Generation Co. (IMEIGC) with a 9MW/4.5MWh frequency regulation project.  The project distributes shared earnings from AGC compensation. Huatai Energy was founded in 2016 and specializes in energy storage technologies.

3.       Zhejiang Wanke Renewable Energy Technology Co. (浙江万克新能源科技有限公司)

In May, Inner Mongolia Power Generation Investment Group announced the candidates for bidding on the new 9MW/4.5MWh frequency regulation project at the Wusitai thermal plant.  Wanke beat out both Narada and Shenzhen Advanced Clean Energy Technology Research Co. for the bid.  According to publicly released information on the tender, although Wanke’s proposed cost of 39,800,000 RMB for the project was higher than Narada’s proposed 37,500,000 RMB, Wanke’s proposal of a 50-50 share of investments return with the plant owner went far beyond the traditional return of 70-80% for the investor and 20-30% for the plant owner.  Wanke Renewable Energy was founded in 2015.  This project is the first domestic energy storage project for the company.

II.       Behind-the-meter

Wiscom (江苏金智竞泰储能科技有限公司)

In August, Wiscom released plans to construct a 500kW/1000kWh behind-the-meter energy storage system at the Huitong screw factory in Qidong.  The project is a collaborative development between Wiscom, the Huitong screw factory, and State Grid Jiangsu Energy Services Co.  Wiscom is an energy storage company formed in June of this year by a cooperative investment of 50,000,000 RMB between four energy companies.

III.       Grid-side

1.        Golmud Meiman Renewable Energy Technology Co. (格尔木美满新能源科技有限公司)

In July, Golmud Meiman begin construction of its 16MW/64MWh grid-side energy storage project at the Haixi 110KV Baiyang substation.  The project is the first grid-side energy storage project lead by State Grid Qinghai, and the first grid-side project for Golmud Meiman.

2.       Xi’an Actionpower Electric Co.,Ltd.  西安爱科赛博电气股份有限公司

In August, Henan Power Grid announced a call for bids for the second round of equipment purchases for its 100.8MW/100.8MWh battery storage demonstration project.  This second round of bids seeks 59 sets of energy storage equipment.  Bidders during the first round included well known energy storage companies such as EVE, ZTT, and Lishen, among others.  During this second round of bidding, Actionpower submitted bids to supply four containerized energy storage systems at the Xinyang energy storage station.  The company’s total bidding was more than 900,000 RMB lower than that of EVE.   Actionpower was founded in 1996.  The company is currently expanding from its main business focus of power inverters and power control products to explore renewable energy and smart microgrid technologies.  Actionpower’s bid for the Xinyang energy storage power station marks the company’s first foray into energy storage.

Summary

Active players in the 2018 energy storage market include specialized energy storage companies such as Huatai Energy and Wiscom, as well as companies heavily involved in renewable energy and/or the power industry that have recently begun expanding into energy storage activities, such as Golmud Meiman, Vanke Renewables, and Actionpower.  Other new players even include electric vehicle manufacturers such as WLY Group that have begun investing in storage projects.

In terms of market strategies, these players have frequently used low-costs to gain an advantage in the market.  These competitors have expanded the traditional project earnings models while exploring new and varied storage business models

Author: Cao Zhengxin
Translation: George Dudley

Energy Storage Safety Standards and Regulations Must Meet the Pace of Industry Development

The news of a fire at an energy storage station in Zhenjiang brought attention once again to the issue of energy storage safety.  How do we guarantee the safety of storage systems? How can the developing storage industry maintain a reasonable balance between cost and safety?  China Electric Power News sat down with China Energy Storage Alliance Vice Chairman Johnson Yu to discuss these questions.  CNESA has provided a summary of the content below:

Current Domestic Energy Storage Safety Situation

Energy storage is still an emerging industry in China.  The industry got its start relatively late in China in comparison to other countries, and domestic projects are still few.  The coexistence of numerous technologies, each with their own unique safety needs, has meant that industry regulations, standards, and verification practices are still lacking. Therefore, performing strict evaluations of energy storage systems remains difficult, and irregularity between systems exists.  Such conditions can lead to a number of hidden dangers.

Causes of Energy Storage System Accidents

At present, the major cause of accidents is the combination of Li-ion battery flammability with thermal runaway.  However, the source of the accident is usually not the battery cell itself, but an electrical accident.  Safety is a complicated issue, and it is not possible to trace the cause of an accident back simply to the choice of battery or battery cell.  The supporting system is equally important.  However, many peripheral system components and measures surrounding battery cells currently lack proper safety standards, such as the designs of battery management systems, energy management systems, and system containers, as well as emergency handling procedures, choice of insulation materials, and fire extinguishment methods.

In addition, safety issues will differ based on technology.  Because Li-ion batteries rely on an organic electrolyte solution, they are susceptible to thermal runaway and combustion.  Lead-acid and flow batteries will not combust, but this does not mean that these technologies are not susceptible to other electrical accidents.  Last year’s newly constructed energy storage capacity totaled 127 MW.  Lead-carbon, Li-ion, and flow battery technologies each made up part of this capacity, and each technology has its own different level of developmental maturity, attributes, and system needs.  Accidents also have their own degree of randomness, and it is impossible to have a complete evaluation method for one individual system.  The problem also cannot be solved by simply eliminating the use of a certain technology or battery cell to prevent accidents from occurring.

It is also difficult to compare the probability of accident occurrence due to the wide variety of settings for energy storage applications.  For example, grid-side storage and behind-the-meter storage, open air deployment and indoor deployment—such variations each have their own standardization needs.  Energy storage for grid frequency regulation requires the use of high frequencies and heavy electric current for charge and discharge, requirements that are much higher than that needed for behind-the-meter systems.  However, that does not mean we can say that grid-side systems are inherently less safe than behind-the-meter systems.  Many other factors are at play, such as the design requirements of each system, control strategies, operating regulations, etc.

The Effects of the Zhenjiang Fire on the Domestic Energy Storage Industry

Energy storage projects in China that have experienced fires are those that are innovative and exploratory, though are the types of projects that would be considered already mature in many other countries.  Safety issues can be resolved through engineering techniques, and it is unlikely that safety issues will cause a panic within the public, though it is imperative that industry players still place system safety as a priority.

Most of the accidents that have occurred have been due to a lack of strictness regarding technological thresholds and safety measures.  Another factor is that cost restrictions can lead to a lowering of requirements for safety.  One of the industry’s major challenges is guaranteeing system safety while still preserving technology costs that are reasonable.

CNESA Vice Chairman Johnson Yu sits down for an interview at ESIE 2017

Suggestions for Improving the Safety of China’s Energy Storage Systems

China’s energy storage safety standards and related regulations still have a lot of catching up to do.  Whenever an accident happens, it is crucial that we determine its true cause so that proper measures for dealing with the problem can be enacted.  Updating and improving standards will require regulators to put greater effort into research and reform. Proper verification or certification of projects before they are implemented should also not be taken lightly.

Though China has taken greater consideration to safety issues in recent years, more attention has been paid to technological choices.  In the long term, we should encourage more safe technologies to enter the market, such as solid-state batteries.  Yet in the short- and medium-term, improving system safety will require considering the entire system design, analyzing the cause and site of accidents and taking the proper measures to prevent them.  We also must of course ensure that proper measures are in place to maintain the safety of the public and our utilities.

Globally, Li-ion batteries are widespread, particularly in electric vehicles, and their qualities are well-known in the industry.  Most new energy storage projects rely on Li-ion batteries.  In the past year, projects in China, South Korea, and Belgium have all had fires, though mainstream Li-ion battery manufacturers in the European and American markets maintain a low accident rate.  Some projects have seen continued safe use for over eight years.  Much of the valuable experience accumulated in other countries has lent itself to the creation of standards and regulations.  What this means is that though Li-ion batteries still carry the risk of flammability and thermal runaway, with proper and strict management, safety of such systems can be maintained.  Increasing safety measures is not only a necessity, it will also help our industry develop in a healthy direction.

Originally published in China Electric Power News, 2018-9-27
Reporter: Deng Huiping
Translation: George Dudley

CNESA Hosts its First Webinar Event: Introducing the California Energy Storage Market

On September 5, the China Energy Storage Alliance Held its first webinar event, “Introducing the California Energy Storage Market.”  The hour-long webinar was hosted by George Dudley of CNESA, with guest panelists Melanie Davidson, Director of Marketing at Strategen Consulting, and Terry Maddox, Principal Manager of Generation for Eastern Operations at Southern California Edison. The webinar content included an overview of the California energy storage market, an introduction to SCE’s Center Hybrid energy storage facility, and highlights from the upcoming Energy Storage North America conference.   

Melanie Davidson begin the webinar by providing background on the current state of California’s energy storage market, highlighting some of the factors that have contributed to the growth of energy storage in the state.  California currently possesses 717MW of operational energy storage capacity, with 463 MW of approved additional capacity on the way.  Northern California electricity provider PG&E has also recently announced a procurement target of 567MW of energy storage, the largest such procurement goal ever released.  Recent government developments of note include SB 700, a bill that will continue funding for SGIP until 2025, providing an additional 800 million USD of funding for storage incentives in California.  The bill has already passed the state senate and is currently waiting for approval by governor Jerry Brown. An additional bill of note awaiting approval is SB 100, landmark legislation to commit California to 100% renewable energy by 2045. Should both bills be approved by the governor, California can expect to see significant growth in both front-of-the meter and behind-the-meter energy storage systems.

Melanie also provided information on the Energy Storage North America 2018 conference, to take place this November 6-8 in Pasadena.  The event will feature three days of forums, workshops, and expo events.  Pre-conference workshops include “Energy Storage 101,” “Trends in the Electric Power Industry and the Growing Role for Energy Storage,” “Best Practices in Utility Procurement of Energy Storage,” and others.  The seven forum tracks include such themes as “Mobility and Storage,” “Advanced Solutions,” “Microgrids, Resiliency, and Security,” and “North American Market Transformation.”  This year’s site tour program includes 8 different centers and installations, including Proterra’s West Coast Battery-Electric Bus Manufacturing Facility, the Romeo Power Manufacturing Facility, LADWP Beacon Solar Plant and Beacon Energy Storage System, and a variety of other tours.  The ESNA conference is one of the largest energy storage events in North America, and the can’t-miss event for industry members.  More information on the event can be found on the official website at esnaexpo.com.

Terry Maddox of Southern California Edison followed with an introduction to SCE and in-depth look at the Center Hybrid facility.  Southern California Edison is one of the largest electricity providers in California, providing 87TWh of energy annually to 15 million customers.  The Center Hybrid facility combines a 10MW/4.3MWh battery energy storage system with a 50MW traditional gas-fired peaking unit.  The facility cuts down on greenhouse gases, provides 50MW of operating reserve, instant response, primary frequency response, and black start capabilities.  The battery component helps lower fuel consumption, reduces system costs, and increases customer value.  The Center Hybrid facility is one of two such systems, both of which have been extremely successful so far.  Following Terry’s presentation, the webinar concluded with a brief question and answer session.

The webinar event also served to highlight CNESA’s planned visit to the Energy Storage North America Conference in November 2018.  CNESA will be bringing a group of China’s energy storage industry delegates to the Los Angeles area November 5-12 to participate in the ESNA forum and expo events, while also touring additional sites in the Los Angeles area.  The event hopes to provide opportunity for exchange between industry members in the United States and China, fostering understanding of the most recent updates in the global energy storage markets, and building new international business relationships.

China Energy Storage Alliance hopes to host more webinar events in the future, providing a chance for our energy storage colleagues in China and abroad to connect with one another and learn more about the latest energy storage technology, applications, and market trends around the world.

Click below to view the recording of the webinar:

CNESA Global Energy Storage Market Analysis – 2018 Q2 (Summary)

1.       The Global Market

As of the end of June 2018, the global capacity of electrochemical energy storage projects in operation totaled 3623.74MW, or 2.1% of the total capacity of all energy storage technologies, and an increase of 0.4 percentage points since the 2017 year’s end.

In the first half of 2018, global newly added electrochemical energy storage projects totaled 697.1MW, an increase of 133% from the same period the previous year, and 24% since the 2017 year’s end.  In a regional comparison, the United Kingdom had the highest amount of newly installed capacity, at 307.2MW, or 44% of the total, an increase of 441% from the same period the previous year.  In applications, ancillary services saw the highest growth in new capacity, at 354.2MW, or 51% of the total, an increase of 344% from the previous year.  In technologies, Li-ion batteries were most widespread, with a total installed capacity of 690.2MW, or 99% of the total, an increase of 142% from the previous year.

2. The Chinese Market

As of the end of June 2018, China’s electrochemical energy storage projects in operation totaled 490.2MW, or 1.6% of the total of all energy storage technologies in the country, and an increase of 0.3 percentage points since the 2017 year’s end.

In the first half of 2018, China’s newly added electrochemical energy storage projects totaled 100.4MW, an increase of 127% from the previous year, and 26% since the 2017 year’s end.  In a regional comparison, Jiangsu province saw the greatest increase in newly operational capacity at 25% of the total, a 996% increase since the end of the 2017 year.  In applications, grid-side energy storage held the largest portion of capacity, at 42.6MW, nearly 45% of the total.  In technologies, the vast majority of capacity was in Li-ion batteries, at 94.1MW, or 94% of the total, and increase of 172% compared to the same time the previous year.

Author: CNESA Research
Translation: George Dudley