Southern Region's First Ancillary Services Spot Market Transaction Category Enters Trials

Recently, the southern region’s first electricity spot market trading category—regional frequency regulation market technology systems (hereafter referred to as the “regional frequency regulation system”) entered trial operations.  The trials symbolize a big step forward in the construction of electricity spot markets, and supports the China Southern Grid’s optimization of frequency regulation across its entire grid.

The regional frequency regulation system is organized and constructed by China Southern Grid.  Following half a year of deployment and testing, a price clearing model was created, and the first test linking Guangxi province with the Southern Grid frequency regulation control area was successfully completed, confirming the possibility for both eastern and western dispatch agencies to jointly participate in unified frequency regulation of the entire grid.  Beginning November 5th of this year, the regional systems and the existing Southern Grid frequency regulation market technology support system (based in Guangdong) began simultaneous operations.  During the simultaneous operations trials, price clearing and settlement are still carried out on the Guangdong frequency regulation system.  Once proper conditions are available, clearance and settlement will be handled through the regional frequency regulation system, and the market will be expanded throughout the entire grid network.

The regional frequency regulation system is designed for smooth access by all southern provinces, as well as the different price-clearing practices of the main grid and the Yunnan asynchronous grid.  The clearing algorithm supports the entire grid network of frequency regulation resources in meeting the diverse safety constraints across a varied grid geography.

On November 5th, the National Energy Administration released Announcement on the Status of Ancillary Services in the First Half of 2019.  The report reveals that in the first half of 2019, there were 4,566 power generation companies in China (excluding Tibet) participating in compensated ancillary services, with an installed capacity of 1.37 billion KW and compensation for services totaling 13.033 billion RMB, equivalent to 1.47% of total grid purchase fees. Among these, ancillary services compensation in the southern region reached 4.64 billion RMB, accounting for 3% of total grid purchase fees, second only to 3.27% in the northwest region.

Among ancillary services in the southern region, frequency regulation compensation totaled 48.389 million RMB, among which the frequency regulation market compensation of Guangdong in the first half of 2019 totaled 33.105 million RMB.

Graph: Ancillary Services Compensation by Region

Since the implementation of the Guangdong Frequency Regulation Ancillary Services Market Transaction Regulations (Trial) on September 1, 2018, the energy storage frequency regulation market in Guangdong has seen vigorous development.  According to the China Energy Storage Alliance Global Energy Storage Project Database, as of September 2019, frequency regulation projects in Guangdong (including those operational, under construction, or planned) covered 13 cities, with a total capacity of 388MW, and all projects utilizing Li-ion battery energy storage technologies.  Among these cities, Guangzhou, Shanwei, and Zhanjiang featured the largest capacities, at 71MW, 50MW, and 42MW, respectively.  The Shanwei Xiaomo power station project is currently the largest capacity domestic frequency regulation energy storage project in operation, at 30MW/15MWh.

5G: The Next Opportunity for Li-ion Energy Storage?

Recently, the Guangdong Development and Reform Commission released an announcement lowering electric power prices for 5G telecom stations.  The announcement states that electricity fees for telecom stations including 5G stations across the entire province of Guangdong (excluding Shenzhen) would be billed at the general I&C price rate.  In addition, Guangdong 5G may volunteer to participate in peak and off-peak pricing plans, at a maximum price difference of 0.77 RMB/kWh.  For the energy storage industry, this announcement is good news.

5G technology has been moving forward with great momentum.  For Li-ion batteries, 5G presents new room for development opportunities.  Below, we take a look at the commercialization of 5G, the history of development from 1G to 5G in China, regional policies and plans related to 5G across China, and the opportunities which 5G offer to energy storage.

5G Enters the Commercial Market

On June 6, China launched its first commercial licenses for 5G, accelerating the construction of new 5G infrastructure.

On September 9, China Unicom and China Telecom each launched public statements announcing their signing of the “5G network co-construction and sharing framework cooperation agreement,” a plan to develop a 5G-connected network nationwide.

On October 31, Ministry of Industry and Information Technology Director Chen Zhaoxiong spoke at the 2019 China International Telecommunications Exhibition, announcing the official launch of commercial 5G with plans for 130,000 5G stations to be launched in Beijing, Shanghai, and other major cities by the end of the year.  The announcement symbolized the start of a new era of consumer telecom services led by 5G.  That evening, Shanghai Mobile held an opening ceremony for its 5000th 5G station, officially opening a 5G base station located atop a building at 21 Yuanmingyuan Road. The ceremony marked a new milestone in 5G construction for Shanghai.

As we enter 2020, China’s three main telecom operators are sparing no effort to implement the construction of 5G networks and services.

From 1G to 5G, Innovation Brings Development

To understand the development of 5G, it is worth understanding how it is grown from the foundation of 1G.  In 1987, China formally entered the 1G era.  Classic “brick phones” made an impression on the populace, but China had no core technologies or standards of its own.  In 1994, 2G appeared in China.  Text messaging became possible, and cell phones became more readily available.  In 2009, the Ministry of Industry and Information Technology began releasing commercial licenses for 3G, allowing higher bandwidths and more stable transmission speeds, making mobile internet a reality.  Domestically manufactured mobile phones also began to appear.  2013 saw the release of the first commercial licenses for 4G.  China’s domestically researched TD-LTE standards saw widespread use, ushering in mobile payments, short video sharing, and other new mobile capabilities.

China has come a long way since the 1G era.  The successful development of 5G in China depends on holistic design and planning from the national government, and innovative business practices from private industry.

Provincial Policies Continue to Benefit 5G, and 11 Cities Release Base Station Construction Schedules

Throughout 2019, many regions have issued opinions on further supporting the construction and development of 5G communication networks, calling for acceleration of network construction. Such documents include the “2019-2021 Action Plan for the Development of the 5G Industry in Hubei,” “Implementation Plan for Promotion of 5G Telecom Networks in Guizhou,” Gansu province’s “Suggestions for Increasing Support of 5G Telecom Network Construction & Development,” and others.  With support from multiple local governments, China is experiencing a vigorous period of 5G network construction.  11 cities have already issued 5G telecom station construction schedules.  With so many regions across the country working to develop 5G networks, total domestic coverage should not be far away.

5G Telecom Station Development Schedules:

• Beijing: estimated that by the end of 2019, over 10,000 stations will be constructed across the city. By 2021, all key functional areas should be covered.

• Shanghai: 10,000 5G stations are expected to be completed by the end of 2019. Accumulated construction is expected to reach 20,000 in 2020, achieving total 5G coverage by the end of the same year.

• Guangzhou: the city has set a goal of constructing no less than 20,000 5G stations by the end of 2019.  By 2021, the city aims to have completed 65,000 5G stations, with full coverage across the city’s central and key areas.

• Shenzhen: 15,000 5G stations are planned for completion by the end of 2019.  By the end of August 2020, the city plans to have full citywide 5G coverage.

• Wuhan: over 20,000 5G stations are planned for construction by 2021, with total city coverage expected the same year.

• Hangzhou: over 10,000 5G stations are planned for construction before the end of 2019, with total 5G signal coverage by 2020.

• Chongqing: 10,000 5G stations are planned for completion by the end of 2019.  The city hopes to achieve full 5G coverage over its city center by 2022.

• Tianjin: over 10,000 commercial 5G stations are planned for construction by 2020.

• Suzhou: 5000 5G stations are planned for construction before the end of 2019. Over 23,000 5G stations are to be constructed before the end of 2021, with a goal of providing over 85% of the city with 5G coverage by the end of the same year.

• Zhengzhou: initial steps for developing full 5G coverage will begin in 2019.

• Shenyang: full 5G coverage is planned for key areas in Shenyang and Shenfu New District by the end of 2019.

As 5G becomes more widespread and the construction of 5G stations speeds up, the demand for Li-ion energy storage batteries will also increase.  The Li-ion industry chain is now actively working to meet the new standards needed for 5G.

Opportunities & Challenges for Li-ion Batteries

The demand among 5G base stations for energy storage batteries provides the entire energy storage industry an excellent opportunity for development.  At a recent CNESA salon on 5G, Zhang Xin of East Group Co. expressed that establishing a 5G network requires many changes to the energy system. Aside from peak shaving strategies, efforts must also be made to prepare for increased system stability requirements.  Whether using a UPS to keep important devices powered on, or supporting energy intensive equipment during peak periods, energy storage can help to increase stability and increase the quality of the power supply.  In remote areas where the supply of grid electricity can be unreliable, energy storage is also a valuable supporting tool.

Of course, for the energy storage industry, 5G presents both challenges and opportunities. One example is battery safety.  As Li Gang of Svolt expressed, 5G telecom stations have an electricity use rate 2-3 times that of 4G stations, and backup power requirements at least double that of 4G. High quality-to-price ratio second-life batteries are an obvious choice as a backup power supply source for 5G stations, yet in recent years safety concerns regarding battery energy storage have become more apparent.  Second-life batteries must place safety as priority.  Narada Power Assistant Chief Engineer Li Bingwen expressed that the industry must emphasize the safety of 5G energy storage, noting that all safety issues will be preceded by indicators which the BMS must be able to detect and react to by immediately isolating any problematic batteries before the possibility of fires or thermal runaway.

During the forum, China Mobile Communications Design Institute Co. Research Consulting Director Li Yusheng commented on the problems facing energy storage batteries, stating that four requirements must be met when designing power sources for 5G stations.  First, multiple energy sources should be used, thereby strengthening the ability to provide stable electricity. Second, intelligent operations and maintenance, thereby increasing operations efficiency.  Third, digitalization of power for high density and efficiency.  Fourth, “intelligentization” of batteries to derive maximum value from the full battery life cycle.  Guo Qiming of Sacred Sun Co. also provided suggestions for 5G power sources, stating that what is first needed is LiFePo batteries that are highly safe, have high specific energy, small size, light weight, long lifespan, and a “smart” design.  Second is the introduction of “blade power supplies” to save space and provide low-cost, reliable operations.

Will Li-ion Energy Storage Find its Next Opportunity in 5G?

China’s energy storage industry is currently experiencing a period of slowdown and adjustment after the enormous growth of 2018.  New developments in Li-ion storage may be the key to injecting new vitality into the industry. Advances in Li-ion technologies and safety are necessary for continued growth of the Li-ion battery industry and allow for its contribution to the development of 5G networks.

As the 5G era enters commercialization, we hope that Li-ion batteries can continue to see new advancements, enjoy new growth potential, and provide new opportunities for development of the entire energy storage industry.

Can China’s Northwest Lead the Way for the Country’s Energy Storage Industry?

Editor’s Note

The 2019 Energy Storage West Forum opened on September 26 in Xining, Qinghai province, bringing together over 200 industry members for two days of presentation and discussions on energy storage.  The cold late September air of Xining was a reminder of how the energy storage market has too slowed and cooled.  Many wonder how long this “winter” will be for the energy storage market, and when spring will finally arrive.

On the afternoon of the 26th, the forum hosts held a closed-door discussion featuring fifty representatives from the government, generation groups, the power grid, energy storage companies, and other organizations.  The meeting allowed participants to discuss the problems of energy storage and find directions for their solutions.  With the current energy storage industry entering a period of slowdown and adjustment, this year’s Energy Storage West Forum was marked with intense discussion and a gradual consensus which provided hope that the industry will soon usher in a new season of positive development.

In 2018, China’s energy storage industry experienced a period of rapid development, with an accumulated annual growth rate exceeding 175.2%, and a new capacity annual growth rate of 464.4%.  This new growth brought China’s electrochemical energy storage into the “GW/GWh” era.  After ten years of development, energy storage seemed to finally be reaching a turning point.  However, according to CNESA project database statistics, as of the end of June 2019, China’s electrochemical energy storage capacity totaled 1189.6MW, with 116.9MW being new capacity having been added in the first half of the year, an increase of -4.2%.  This was the first time that energy storage capacity had seen negative growth in comparison to the previous year since recording began.  Following rapid growth, the industry has now entered an adjustment period.  One reason for this includes the government’s announcement that the costs of energy storage infrastructure investments made by the grid could not be included in T&D pricing, putting a halt to many of the grid-side projects which had been rapidly expanding.  Another factor is the numerous energy storage system accidents which have occurred worldwide, igniting concerns within the industry and among the public over the safety of energy storage systems and adding yet another roadblock to the industry.  These factors have caused investors to take a more cautious approach towards investment in energy storage.

China’s Energy Storage Market Growth as of 2019.1H

Western China is one of the country’s primary locations for energy storage deployment.  As of the end of June 2019, the six provinces of western China (Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, and Tibet) were host to 215.958MW of energy storage capacity (not including pumped hydro and thermal energy storage).  This number comprises over 18% of the country’s total operational energy storage capacity.  Energy storage in northwest China has been primarily used in renewable integration applications.  As of the end of June 2019, renewable integration energy storage applications totaled 187.1MW, or 11% of total energy storage capacity.  Of note is that in the first half of 2019, there was no new installed capacity in the renewable integration category.  Compared to other applications categories which have had rapid growth over the past two years, the growth of energy storage in renewable integration applications has not been as bright, especially after the release of the 531 policy last year, pressure from grid parity, and the relatively high cost of storage, challenges all of which shed doubts on the sustainability of the “solar-plus-storage” model.  However, as the national government continues to adjust the energy structure, opportunities for development continue to form.

In 2017, the National Development and Reform Commission released Energy Production and Consumption Revolution Strategies (2016-2030), which stated that by 2020, non-fossil fuel energy should comprise 15% of primary energy consumption.  By 2030, non-fossil fuel energy should comprise 20% of primary energy consumption. At around 2030, carbon emissions should reach their peak, though special emphasis is made on reaching peak carbon even earlier.  With this goal in mind, China’s solar PV and wind have seen speedy growth, with project sizes and generation capacity continuously increasing.  As a result, solar and wind curtailment issues and intermittency have caused stress on the grid, increasing the power system’s need for flexible adjustment resources.  According to the Electrical Planning and Design Institute predictions on national peak shaving resources, from 2020-2025, the national peak shaving shortage will exceed 100 million kW, primarily across the northern China region.  This peak shaving shortage will continue to expand through 2030.  Apart from the northern region, more than half of the country’s peak shaving shortage will be concentrated in East China (Huadong), Central China (Huazhong), and southern China.  With such high demand for peak shaving, apart from flexibility improvements to thermal plants, creation of new pumped hydro plants, hydropower, and natural gas, the remaining major gap in peaking shaving must be covered by energy storage and load-side peak shaving.

Energy storage is set to have a large potential future market, but only if current challenges are handled carefully and thoroughly.  Below, we summarize energy storage industry developments in western China based on the discussions that took place at the Energy Storage West Forum closed door meeting.

1.       Exploring the New Model of “Shared Energy Storage”

On April 15, 2019, the first marketized transaction agreement for peak shaving ancillary services between an energy storage station and concentrated solar PV station was signed in Xining, Qinghai province.  The agreement marks the launch of the Qinghai shared energy storage peak shaving ancillary services market.  After a successful 10-day trial in April, Qinghai shared energy storage market transactions opened across the province in June.  At present, single 50,000kWh/100,000kWh energy storage stations have created an additional 6,442,800kWh of renewable energy. Profits have been prorated, allowing both the renewable energy station and energy storage station to derive benefit.

The implementation of the shared energy storage model boosts the coordinated development of energy storage with the power grid and renewable energy stations.  The model helps break through traditional energy storage applications, creates a new method for energy storage to participate in grid dispatch, takes full advantage of the many values of energy storage, and helps to bring more capital towards storage investment. 

The shared energy storage model currently is still limited by high costs and is primarily only economical in solar PV stations with high feed-in tariffs.  Yet as the ancillary services market continue to take shape, the shared model will continue to expand to new energy storage applications and create new revenue opportunities.

2.       Region-specific Policies Emerge

In 2017, the Qinghai Development and Reform Commission released the Qinghai Province 2017 Wind Power Development and Construction Plan, which required new wind power stations to install energy storage matching 10% of constructed system capacity, bringing new debate to the issue of how energy storage should develop along with renewables.  In July 2019, the Xinjiang Development and Reform Commission released the Notice on the Development of Generation-side Solar-plus-storage Projects, which announced the development of solar-plus-storage trial projects in four southern regions of Xinjiang, to be completed by October 31, 2019.  Beginning in 2020, these solar PV stations would add an additional 100 hours of priority generation each year for five years.  36 projects were announced as qualifying for the first batch, at a total capacity of 221MW/446MWh.  Though the projects have not met the October 31 deadline for completion, a large batch have begun construction while many others are in the works.  Issues such as unclear revenue estimates, the lack of a coordinated operations mechanism with the grid, and the absence of supporting project management methods have all caused investors to take a step back.

Although Xinjiang’s policies still need improvement, the recent steps have been a beneficial exploration into the use of energy storage applications for renewables.  The plan’s ability to provide 100 hours of priority solar PV generation is the first domestic policy to add a quantified amount of generation, providing a boost to the consumption of renewable energy, and is a notable recognition of the value of storage.

Polices in Xinjiang and Qinghai are an important exploratory step for the use of energy storage with renewable energy stations.  Whether these steps bring about positive or negative results, they provide important reference point for future energy storage policies.  For an emerging industry such as energy storage, achieving government acknowledgment and support is a long process that should be approached rationally.  In the process of policy development, it is important for stakeholders to be involved and for a proper coordination mechanism to be developed to allow capital to be guided by policies.

3.       The New Version of the “Two Regulations” Provides Hope for the Northwest Ancillary Services Market

At this year’s Energy Storage West Forum, Northwest Energy Regulatory Bureau Market Supervision Department Deputy Director Lu Rui stated, “It is my opinion that only with a reasonable market mechanism and an open mechanism for grid connection can energy storage fully contribute to the increased consumption of renewables and develop successfully.”  Currently, the five provinces of northwest China are home to 33.77% of the country’s wind and solar power installations.  Of these provinces, Gansu, Qinghai, and Ningxia possess renewable energy capacities that surpass the needs of their maximum power loads.  Under such conditions, the need for high-quality renewable generation increases each day.  At the end of 2018, the Northwest Energy Regulatory Bureau released the fourth version 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.”  This new version of the “Two Regulations” provides new indexes for measuring available power, including indexes for renewable energy AGC, fast response, and SVC, as well as providing cap prices for both penalization and compensation, creating a balanced reward and penalty system.

In addition, the Northwest Energy Regulatory Bureau is also taking steps to construct an ancillary services market.  Marketized ancillary services would help create new peak shaving resources in the northwest and lower curtailment of renewable energy, among other benefits.  In June of 2019, the Northwest Energy Regulatory Bureau released Notice on the Release of Qinghai Ancillary Services Market Operations Regulations (Trial), which clarified that energy storage stations could act as market entities participating in peak shaving and other ancillary services.  The notice also provides requirements for participation, transaction rules, and defines the dispatch price for energy storage used in peak shaving as 0.7 RMB/kWh. The notice also provides policy-based support for the Qinghai “shared energy storage” model and provides a new model for energy storage to participate in peak shaving transactions.

The new version of the “Two Regulations” and the creation of an ancillary services market helps promote the use of renewable energy at a much broader range.  The new regulations also increase the utilization of energy storage stations, and in turn their profitability.  They also help promote the participation of independent ancillary services providers, providing a foundation for new and varied ancillary services models to participate in the future.

4.       Improving the Quality and Performance of Energy Storage Systems is the Cornerstone of Healthy Industry Development

In 2018, the global energy storage industry entered a period of rapid development.  South Korea experienced the fastest development, leading the world in total energy storage capacity.  The growth came largely due to South Korea’s use of a renewable energy quota system and power price discount plan.  Under the encouragement of these policies, developers quickly began construction of energy storage projects in order to recoup costs in as short of a period of time as possible. Yet speedy construction of projects meant that developers neglected proper safety measures.  By May 2019, South Korea had experienced at least 23 fires at energy storage stations, resulting in a freeze in the development of further projects in South Korea, and providing a wake-up call for China’s energy storage stakeholders.

During the closed-door meeting, Guangzhou Zhiguang Chairman Jiang Xinyu stated that current energy storage technologies have yet to mature, and that projects launched in 2018 still have many issues.  As an energy storage industry stakeholder, Chairman Jiang stressed the need for enterprises to continually improve quality and performance while maintaining reasonable costs.  When policies and markets mature, energy storage will be able to experience true industry development. As State Power Investment PV Innovation Center Deputy General Manager Pang Xiulan also stated, renewable energy companies must work together with energy storage vendors to create a competitive price/performance ratio, thereby helping turn renewable energy stations into conventional sources of energy.  This cooperation will lead to a long-term mutual benefit for both industries.

Over the past ten years of energy storage industry progress, stakeholders have sought longer system lifespans, low costs, and better safety.  With mainstream energy storage technologies becoming increasingly mature and new energy storage technologies emerging every day, we believe that China will soon see “fair-price energy storage.”

The world is currently experiencing a major transition in its energy structure.  As China’s energy system continues its transition, the integration of energy storage and renewable energy systems is inevitable.  Energy storage is a critical technology for supporting the construction of energy systems dominated by renewables.  CNESA believes that energy storage planning and development should be incorporated in the national Fourteenth Five-year Plan, thereby strengthening the coordinated development of storage with the power grid and renewables. Renewable infrastructure which incorporates energy storage should be provided policy benefits such as priority grid connection, priority inclusion in guaranteed electricity prices, tax incentives, and similar benefits.  As spot markets develop, energy storage should be allowed a place to participate and make full use of its value and characteristics.  The Plan should also explore incentives which combine energy storage and renewable energy quotas to bring forth the full economic value of energy storage in the renewables sector through market-based means.

Finally, to borrow words from Former National Energy Administration Deputy Director and Executive Vice Chairman of the China Energy Research Association Shi Yubo, “The current slowdown in energy storage development is an opportunity to prepare, and is a necessary transition into the next stage of development. On the development path, it is not a problem to take slow and stable steps. A solid foundation will help us to better welcome a flourishing industry in the future.”  Indeed, as we move through a period of slowdown, it is important to remember that only through patience and diligent effort can we move towards the next stage of energy storage growth.

Author: China Energy Storage Alliance
Translation: George Dudley

2019 Sees New Solar-storage-charging Stations Launched Across China

 “Solar-storage-charging” refers to systems which use distributed solar PV generation equipment to create energy which is then stored and later used to charge electric vehicles.  This model combines solar PV, energy storage, and vehicle charging technologies together, allowing each to support and coordinate with one another.

Solar-storage-charging has seen a flourish of new expansion in 2019, powered by improvements in all three technologies and growing policy support.

Solar-storage-charging technologies in China began with the 2017 launch of the first solar-storage-charging station in Shanghai’s Songjiang District.  Rapid technological advances have led to increased charging speeds and increasingly widespread use of charging stations.

In the Thirteenth Five-year Plan policy, energy storage was included as part of the National Climate Change Plan.  The plan called for development of low-carbon technologies, including increased solar and wind generation, as well as large-scale renewable integration with energy storage.  Emphasis was placed on developing solar-plus-storage technologies.  The release of the Guiding Opinions on Promoting Energy Storage Technology and Industry Development helped to increase the development of the combined solar PV, energy storage, and EV charging model.

With investment and construction of solar-storage-charging infrastructure rapidly expanding, the green power era may not be far away.  Below, CNESA explores some of the solar-storage-charging infrastructure that has been put into operation this year.

1.      Zhejiang Province’s First Solar-storage-charging Microgrid

In April, Zhejiang province’s first solar-storage-charging integrated micogrid was officially launched at the Jiaxing Power Park, providing power for the park’s buildings.  The project integrates solar PV generation, distributed energy storage, and charging stations.  Generation is enough to meet the demands of the park, and production and demand are nearly balanced.  The system also provides a reference point and data for research into integrated energy systems.

2.      TBEA Launches First Industrial Park Solar-storage-charging Demonstration Project

Also in April, TBEA’s first solar-storage-charging microgrid demonstration project based on a two-part demand response pricing system completed its three-month trial operation.  The project is located at TBEA’s Xi’an industrial park.  The project includes a 2MWp solar PV generation system, 1MW/1MWh energy storage system, and a 960kW EV charging system.  The project helps lower the industrial park’s electricity costs by 30%, and the PV generation also has a 100% self-use rate, making the system a good model for commercial promotion across other industrial and commercial parks.

3.      Changjiang Smart Distributed Energy Deploys its First Solar-storage-charging System

In May, the “Shanghai Yangtze River Solar Charging Station” was officially put into operation.  The station was an investment of Three Gorges Electric subsidiary Changjiang Smart Distributed Energy Co.  The station became the first integrated solar PV, energy storage, and EV charging smart microgrid demonstration project in Shanghai’s Jiading District.  Once this logistics-dedicated charging station enters regular operation, it will reduce the cost of freight transportation across Jiading by up to 60%。

4.      Guangxi‘s First Solar-storage-charging Integrated Energy Services Station

In July, Guangxi’s first integrated energy services station began official operations in Liuzhou.  The project was the result of a 30 million RMB investment by the China Southern Grid Guangxi Liuzhou Power Supply Bureau to build two integrated energy service stations in the Liubei and Liunan Districts of Liuzhou city.  The service station integrates DC fast charging, solar PV, and energy storage, and is currently the biggest comprehensive energy storage service station investment in Guangxi, featuring the greatest number of parking spaces and most advanced technologies of any station in the province.

5.      State Grid Hubei’s First Solar-storage-charging Station Launched in Wuhan City

October saw the launch of State Grid Hubei’s first solar-storage-charging station in Wuhan. According to reports, Wuhan had a total of 452 EV charging station as of September 2019. Of these, State Grid operated 73 stations, while others were operated by TGood, Star Charge, Potevio, and other private operators. The entire city of Wuhan was home to approximately 60,000 chargers and a nearly equal number of electric vehicles, for a ratio of almost 1:1.

6.      The First “Nonstop Power” Integrated Smart Charging Station in Datong, Shanxi

Also in October, Shanxi City Power New Energy Co. and Huazhong University of Science and Technology’s joint research and construction project, a “nonstop power” smart charging station, went into operation in Datong, Shanxi province.  The system functions by utilizing rooftop solar generation during peak daytime periods to power buildings and electric vehicles, with unused generation stored in a battery system. During daytime periods when daylight is not at its peak, the system will use both solar generation and stored energy to power buildings and vehicles, providing a stable supply of energy.  Charging is also conducted in the evening when energy prices are lower while discharge occurs during daytime peak energy use periods.  This peak shifting model helps cut down electricity expenditures.  If the power grid should shut down, the energy storage station can provide power for buildings independently, providing an emergency power source that is safe to use, and guaranteeing “nonstop power.”

7. Shaanxi Province’s First Solar-storage-charging Station

October also saw the launch of Shaanxi province’s first integrated, high-power solar-storage-charging smart station.  The station is named the “Tengfei Charging Station” and is located at the Xi’an Xianyang International Airport. It is the airport’s first fast-charging station to be available to the public.  The system features 18 fast-charging dual DC charging points, allowing 36 electric vehicles to be charges simultaneously.  The station is also equipped with one set of 600 kW and two sets of 360 kW flexible group charging and group control units, as well as a 100 kW photovoltaic canopy consisting of 360 photovoltaic panels and a 300 ampere-hour energy storage system. The distributed solar PV system is expected to provide a yearly generation capacity of up to 120,000 kWh.  During off-peak and normal pricing periods, the energy storage system will store energy and release it during peak price periods, allowing for two charge cycles and two discharge cycles in one day, providing the chargers with up to 600 kWh of energy.  Annual charge and discharge capacity is as high as 220,000 kWh.

8.      Fujian Province’s First Solar-storage-charging Integrated Bus Station

As of October, the Jinjiang Chenye Binjiang Business District bus charging station can now charge electric buses using solar power.  The charging station is part of the Quanzhou Power Supply Company’s series of Internet of Things construction projects, and is the province’s first integrated solar-storage-charging station.  Eight million RMB was invested to construct the charging station.  According to the regulations of the Provincial Price Bureau and current collection of charging service fees in the market, the bus charging station has an annual income of approximately 580,000 RMB.  The investment recovery period is expected to be six years, and the project can save 50,000 to 100,000 kWh of electricity for bus charging each year.  In addition, in comparison to traditional buses which use diesel fuel, an electric bus traveling 200 km a day would be able to reduce carbon emissions by 47 kg.

For more information on the above and other solar-storage-charging stations, CNESA database subscribers can visit the official CNESA Research website (www.esresearch.com.cn) “Industry Tracking” and “Global Energy Storage Database.”

Conclusion

Solar-storage-charging technology is steadily advancing.  Yet the road forward is not necessarily smooth.  Energy storage costs are still high, investment costs for solar-storage-charging developers are large, return periods are long, and numerous other problems still encircle investors and inhibit development.  However, as technological advancements continue, restrictive costs fall, and with the global recognition of decarbonization, green energy solutions are being given an ever-greater development space.  Solar-storage-charging will likewise have room to expand, providing an additional avenue for a commercial and profitable energy storage industry.

CNESA Global Energy Storage Market Analysis – 2019.Q3 (Summary)

1. The Global Market

As of the end of September 2019, global operational electrochemical energy storage project capacity totaled 7577.1MW, 4.1% of the total global energy storage market.

Graph 1: total global operational electrochemical energy storage capacity growth

In the third quarter of 2019, global newly operational electrochemical energy storage capacity totaled 149.6MW, a -78% increase in comparison to the same period in 2018, and a -62% increase in comparison to the second quarter of 2019.  Regionally, China saw the largest increase in new operational capacity, at 52.3% of the total, an increase of -59.6% in comparison to the same period in 2018, and an increase of 29.3% in comparison to the second quarter of 2019. Nearly all new global capacity utilized Li-ion batteries.  Among energy storage applications, ancillary services saw the largest increase in new capacity, at 40.8% of the total.

In the third quarter of 2019, newly operational energy storage capacity saw a decrease both in comparison to the same period of 2018 and the second quarter of 2019.  Yet projects newly planned and/or under construction saw a significant increase in comparison to the first and second quarters of 2019, at 6.7GW.  The majority of this planned/under construction capacity was located in Australia, at 38.3%

2. The Chinese Market

As of the end of September 2019, China’s operational electrochemical energy storage capacity totaled 1267.8MW, or 4.0% of the country’s total energy storage market.

Graph 2: China’s total operational electrochemical energy storage capacity growth

In the third quarter of 2019, China’s newly operational electrochemical energy storage capacity totaled 78.2MW, a -59.6% increase in comparison to the same period in 2018, and a 29.3% increase in comparison to quarter two of 2019.  Regionally, Guangdong province was the leader in newly operational energy storage capacity, at 41.6% of the total.  In line with the global market, China’s new energy storage projects nearly all utilized Li-ion batteries.  Among energy storage applications, ancillary services saw the greatest increase in new capacity, at 53.7% of the total, an increase of 133.3% in comparison to the same period in 2018.

3. About this Report

CNESA Research customers can access the full version of the CNESA Global Energy Storage Market Analysis – 2019.Q3 by visiting the ESResearch website.

The ES Research website launched in January 2018 to provide an online 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 at the email or phone number below.

Phone: 010-65667068-805

Email: esresearch@cnesa.org

Reflecting on China's Energy Storage Industry Development in the First Half of 2019

In 2018, China’s electrochemical energy storage capacity experience a growth spurt.  The accumulated annual growth rate reached 175.2%, while the annual growth rate for new capacity reached 464.4%. The energy storage industry in China displayed an unprecedented level of new growth and saw major new breakthroughs, including the achievement of over 1GW of total accumulated capacity, breakthroughs in large-scale grid-side energy storage applications, Li-ion battery system construction costs reaching 1500 RMB per kWh, and the proliferation of energy storage throughout a variety of applications, including traditional power generators, solar PV stations, wind farms, the power grid, low-carbon transportation, telecommunications, logistics, shipping, and other industries.

According to CNESA project database statistics, as of the end of June 2019, China’s accumulated electrochemical energy storage capacity totaled 1189.6MW, with 116.9MW of capacity newly added in the first half of the year, a change of -4.2% in comparison to the first half of 2018.  The figures represent a market slowdown following a major increase in capacity in 2018.

A look at the installation rate for each major energy storage application reveals that, in the first half of 2019, renewable integration applications saw the slowest rate of growth, having no new capacity installed.  The once active behind-the-meter sector saw little development. Energy storage in frequency regulation applications, which saw great expansion in 2018, slowed significantly in the first half of 2019.  The first half of 2019 saw the official launching of multiple grid-side energy storage projects that had begun planning in 2018, yet continued project construction in the future is likely to be difficult due to the lack of a profit mechanism for grid-side storage.  Looking forward, it is likely that growth will slow at a quicker and more severe pace than the industry has anticipated.

Since 2016, when energy storage began its transition to commercialization, the central difficulty for the industry has been long investment return periods and profit instability.  Market and price mechanism policies also have a major influence on the industry.  Though rigid market requirements have gradually become clear this year, restrictions on energy storage system profits and costs have still not become a major driver for sustainable industry development.

In 2018, the launching of new grid-side energy storage projects brought tremendous new growth to the industry as well as confidence in continued future growth.  According to CNESA data from the first half of 2019, projects which are anticipated to go operational between 2019-2020 have a total capacity of approximately 1000MW.  These include stage two projects in Hunan, Guangdong, Jiangsu as well as projects in Zhejiang, Fujian Jinjiang, and Gansu.  China State Grid’s Guiding Opinions on Promoting the Healthy Development of Electrochemical Energy Storage released in February 2019 stated the goal of “including all provincial power company  grid-side energy storage investment costs as part of grid asset T&D pricing.” In other words, recouping the costs of energy storage construction investments through T&D prices.  Yet the June release by the National Development and Reform Commission of the Transmission & Distribution Pricing Cost Supervision Methods stated clearly that grid company investments in energy storage infrastructure cannot be included in T&D power prices.  The NDRC’s policy is a wakeup call that if no other method for generating profits is to be found soon, then the future development of grid-side energy storage is likely to be severely affected.  State Grid’s recent announcement of plans to slow their construction of new grid-side energy storage projects is also no doubt related to the NDRC policy.

The recent shrinking of the peak and off-peak price gap, capital difficulties, and other problems have inhibited the growth of behind-the-meter energy storage.  Energy storage companies take on the majority of the pressure of project funding.  Policy changes can affect the investment return period for energy storage projects.  When potential profits from peak and off-peak power price arbitration become unattainable, vendor enthusiasm for developing new projects and expanding the market begins to fade.  Energy storage frequency regulation applications have suffered the same fate, yet the primary reasons have been due to policies which have lowered frequency regulation prices, competition in a limited market, payment delays, and funding difficulties, among other issues.

The China Energy Storage Alliance organized a series of studies between July and August of 2018, visiting local governments, energy storage vendors, systems integrators, power companies, design institutes, investment agencies, and other organizations.  Almost all organizations supported the use of energy storage technologies and applications, yet on the question of how to establish a stable business model and realize profitability, most of those interviewed did not have an answer.  Many are eagerly awaiting policy updates that can help resolve this question.

Industry development is once again experiencing a rocky period and many stakeholders have begun to share their woes.  Yet if we take a rational look at the market, we can still see that there are many active elements guiding development.  Following the release in October 2017 of the Guiding Opinions on Promoting Energy Storage Technology and Industry Development and the June 2019 release of the 2019-2020 Action Plan for the Guiding Opinions on Promoting Energy Storage Technology and Industry Development, local governments and grid companies have also released their own policies for energy storage promotion and development.  Power system reform policies and renewable energy policies have also included energy storage in their range of support.  Because energy storage technologies and applications are still relatively new, it is unrealistic to hope that policies will be able to have an instant effect.  The effects of policies can often take considerable time to appear, and many policies often require adjustment after release.  Recent regional policies have helped support the efforts towards energy storage commercialization and electric power marketization, with over 200MW of energy storage project capacity planned and/or under construction as a result.  Although support for these policies may have regional limits, they are significant in their function for demonstration and promotion.

With the support of regional solar-plus-storage subsidy policies, the investment period for behind-the-meter energy storage has shortened, helping to promote the development of energy storage combined with solar.

Renewable integration is a large market for energy storage with high demand.  Recently, both the government and private industry have worked to rouse the market, and energy storage shows good potential for development in the area of concentrated renewables.

In 2019, in parallel with the introduction of new policies, new developments in potential electric power system applications have also appeared.  One such application is shared energy storage.  In April of this year, the Qinghai Electric Power Company implemented shared energy storage market transactions in Qinghai, with Luneng Group Qinghai Branch, China Longyuan Qinghai Branch, and SDIC New Energy Investment participating in the program. The Qinghai Energy Big Data Center, constructed and operated by Qinghai Power, can integrate energy storage power stations used in behind-the-meter, generation-side, or grid-side applications for power grid dispatching.  The original idea to circumvent the limits of energy storage station installations, serve multiple renewable energy stations, and resolve issues with curtailment and grid connection quality was first discussed in 2015.  The current implementation provides a new revenue point for both wind and solar stations.  If supplemented with a compensation policy similar to that of Xinjiang, the model would provide additional benefit by sharing excess resources while increasing power generation, in turn promoting the application of energy storage. These shared resources can also serve as regulatory resources used by the power grid, and can relieve some of the pressures of investment. Shared energy storage shows promise as an innovative energy storage application with potential for future expansion.

Demand response is another application which has seen recent development.  In order to meet peak summer demands, Jiangsu and Zhejiang provinces each implemented demand response in July 2019.  On July 30, the Zhejiang Energy Bureau launched demand response in Ningbo, Hangzhou, and Jiaxing.  A subsidy of up to 4 RMB/kWh was provided for real-time peak shaving response.  On the same day, the Jiangsu Development and Reform Commission and State Grid Jiangsu coordinated to implement demand response.  Of note was that this marked the first time in which Jiangsu’s energy storage participated in demand response.  A total subsidy of 80,000 RMB was provided to industrial electric power customers, providing a chance for energy storage users to earn additional revenue. Industrial and commercial energy storage user participation in demand response is one potential application for behind-the-meter energy storage.  However, in the past, due to low compensation and limited application regions, it has not been carried out. The opening of demand response in both provinces this year provides a new space for behind-the-meter energy storage projects to increase revenue.

Though the first half of 2019 saw a slowdown in the energy storage market, project profits have not seen a significant improvement, and the future of many energy storage applications seems bewildering, industry development is not as desperate as it might seem at first glance.  Policies continue to push the market forward and grid companies are focused on breaking through current profit limitations to ensure that energy storage can continue to serve the grid network and support greater integration of renewables.  The government, grid, traditional generators, wind power, and solar power are all eagerly deploying storage, and new applications continue to be realized.

CNESA’s investigations also revealed some of the ways in which private companies have been working to resolve many industry development issues.  Some companies have focused on resolving battery safety management and design issues to ensure safe and stable operations of energy storage systems.  Many battery producers have focused on increasing the life cycle of batteries, thereby decreasing system costs and opening the door to new potential technology applications.  Many industry leaders have also expressed the need for rational thinking, resisting premature action, and avoiding heated price competitions in order to survive challenging periods.  Though a developing industry is bound to experience setbacks and hardships, the role and value of energy storage in the global energy transformation is destined to be realized.

Author: China Energy Storage Alliance
Translation: George Dudley

Industry Watch: Xinjiang Solar-plus-storage Projects in a Deadlock

The ambitious south Xinjiang solar-plus-storage demonstration plan has yet to take the next few critical steps.  Xinjiang’s first batch of solar-plus-storage projects, originally scheduled to go operational at the end of October, have been postponed.

After several months of research, consultation, and policy revisions, in July this year, the list of the first batch of solar-plus-storage demonstration projects to be launched in Xinjiang was released. A total of 36 projects were selected at a total scale of 221MW/446MWh.

Though the list of projects did not reach the initially planned total of 350MW, the announcement was still encouraging news in the context of the industry’s shortage of new projects this year.  However, as the deadline approached, many issues that were originally thought could be resolved were unable to be resolved.

The Xinjiang solar-plus-storage policy, the key stimulus driving development of the projects, provides an additional 100 hours per year of priority generation to solar PV stations with co-located energy storage for a period of five years.

But there are two different understandings regarding the 100 hours of priority power generation.  One interpretation is that solar PV stations will directly add 100 hours of generation. In such a case, a 100MW solar PV station will add an additional 3 to 5 million RMB in revenue per year.  The other interpretation is that the 100 additional hours will be added to the original guaranteed purchased hours.  In other words, traded electricity becomes guaranteed electricity.  For example, if the grid guarantees a purchase of 600 hours, these hours would instead become 700 hours of guaranteed electricity, with the remaining generation being handled as traded energy. In this way, the 100 hours of generation would amount to a small fraction of additional RMB revenue per kilowatt, meaning that a 100MW solar PV station would see an additional several hundred thousand RMB in revenue each year.

Obviously, the difference in revenue between the two interpretations is huge, despite the calculation being based on the same 100 hours.  The current situation suggests that the second interpretation is likely to be used.  Though this means that potential revenue is lower, lower revenue is better than no revenue.

In order to attract investors, Xinjiang has a kilowatt subsidy in addition to the explicit documented incentives. This subsidy is calculated based on the charging port.  For every kilowatt charged, a 0.4 RMB subsidy is provided.  This subsidy was established as a verbal agreement made during a series of consultations.  Because the agreement deals with funding sources and must be coordinated with the Energy Regulatory Bureau and grid companies, it was not included in the written agreement.

According to calculations, the current financing costs for private companies remain high, and solar PV subsidies are delayed by 2-3 years. Under a subsidy of 0.4 RMB and taking into account two years of financial costs, a direct increase of 100 hours of power generation would provide an investment return of about 9%.  If the 100 hours is calculated as part of the guaranteed purchased hours, then the project yield would be 3-4%.  With such a rate of return, it is difficult to convince a company or external strategic investor to invest.

In addition, renewable energy owners, as the hosts for energy storage projects, also need to obtain certain benefits. At present, some energy storage enterprises and renewable energy owners plan to adopt an 8:2 or 9:1 revenue sharing model, while some companies plan to adopt a distribution mode in which the revenue from additional generation is provided to the solar PV owner and the peak shaving subsidy is provided to the energy storage project investor.

In order to regulate the market and stress the seriousness of the policy, Xinjiang released an additional supplementary notice in August.  Those energy storage companies which cannot implement the pilot projects will be blacklisted and not allowed to invest in or construct energy storage projects in Xinjiang in the future.  This is a dilemma for those companies which have already been selected for project development.  Should they pull out of the project, they will be blacklisted in Xinjiang, which could affect not only their energy storage business, but could also other potential business activities in the region as well.

Most of the companies that originally came to Xinjiang did so with an optimistic view of the region’s energy storage market opportunities and/or with the hope of completing large-scale solar-plus-storage stations.  However, to achieve a basic return on investment and successfully promote the construction of demonstration projects, a more thorough and clear policy environment must be put in place.

Even with a 100 hour “transacted power to guaranteed power” scheme, a 0.4 RMB/kW subsidy can only provide an up to 3-4% annual revenue rate.  Yet the exact source of this subsidy has yet to be defined.  Some suggest referring to the practices of neighboring provinces by having the region’s power companies share the costs. However, such a plan would require the understanding and approval of multiple entities including the power generation companies, grid companies, and regulatory authorities.

As an emerging industry, electrochemical energy storage creates complicated business relationships in many scenarios.  All parties involved in energy storage development may face challenges if coordination from high-level regulatory agencies and a strong policy foundation are lacking.  The establishment and implementation of a settlement mechanism, coordinating grid connection responsibilities, and the distribution of benefits between the energy storage enterprises, renewable energy owners, and potential strategic investors involved—these are all major steps that must be developed from the ground up.

The original intention of the Xinjiang solar-plus-storage projects was twofold.  First, to increase the consumption of solar energy, and second, to create a new point of economic growth.  From the point of view of the energy storage industry, if the demonstration can provide clear benefit, it is very likely to stimulate other provinces to follow with their own projects, thus opening a broad new field of development for the industry.  Such an opportunity would create value for all parties.

The deadline has already arrived, and the project has unfortunately fallen behind schedule. Besides installation and commissioning, one of the most time-consuming factors is the shipping of large quantities of Li-ion batteries due to their classification as hazardous chemicals.  Insiders have reported that while the originally scheduled shipping time was estimated at 25 days, the actual shipping time for one batch of batteries from Jiangsu to Kashgar was 44 days.  Other delays have arisen from efforts to introduce external funding, and it is likely that more time will be needed to discover additional strategic partners.  Regardless of these delays, the key factor to the successful development of the Xinjiang projects still lies in the creation of a complete policy system and clear project development process.

Author: Hu Bufei, Energy Storage 100

A Look at China's Energy Storage Industrial Parks

As a carrier for innovation, incubation, investment management, production services, and product trading, Energy Storage Industrial Parks not only provide a creative industrial space for energy storage, they also bring together numerous related resources and convenient services, while fostering collaboration between companies that helps promote the energy storage industry.

China is currently expanding its energy storage industrial parks.  Many are familiar with how industrial parks have become a key driver for development in many regions across China.  The formation of large-scale energy storage industrial parks is another step forward for the commercialization of the energy storage industry.

Below, we take a look at some of the large-scale energy storage industrial parks under construction in China.  With luck, these parks will be able to take China’s energy storage industry to the next level.

Chengdu Jianzhou New City Energy Storage Industrial Park

Not long ago, the news of the Chengdu Jianzhou New City Energy Storage Industrial Park in Sichuan swept the energy storage circle.  The park is reported to include an Energy Storage Technology Research Institute, an energy storage module production line, a 100MW/400MWH large-scale energy storage demonstration station, a 110kV substation, and an energy storage station operations headquarters.  The first phase of the industrial park requires an initial investment of 13 billion RMB, covers nearly 200 acres, and includes a total of 14 intelligent automated standard production lines. The production lines have an annual capacity of 40GWh of modules per year at a value of 40 billion RMB.  The first phase of the project will also include the 100MW/400MWh large-scale energy storage demonstration station.  Phase two of the industrial park requires a 50 billion RMB investment, an addition of over 980 acres, and the addition of 60 new intelligent automated standard production lines.  Once both phases of the project are complete, module production capacity will increase to 200GWh per year.

The integration of research institute, production line, and energy storage station, large-scale investment, and the participation of many companies in the project promise a bright future for the energy storage industry in Chengdu.

Shanxi Datong Graphene + New Materials Energy Storage Industrial Park

Energy storage industrial parks have had good development prospects this year.  Besides the Chengdu project, earlier this year the city of Datong also announced the construction of an energy storage industrial park. It is reported that the construction area of the “graphene + new material” energy storage industrial park in Shanxi Datong New Energy Industrial City will reach 140,000 square meters, with a planned investment of 2.5 billion yuan.  Upon completion of the project, annual production revenue is estimated to be 10 billion RMB, generating taxes of 1.5 billion RMB and creating over 5000 jobs.  The large-scale size of the project, its capacity to create jobs, and an expected production value of tens of billions of dollars will all help drive regional economic growth and provide an avenue for commercialization of energy storage.

Fangchenggang Economic Development Zone Energy Storage Industrial Park

The Fangchenggang Energy Storage Industrial Park is one representative of the good momentum that energy storage industrial park development has had over the past few years.  It is estimated that the total investment of the Fangchenggang Energy Storage Industrial Park project is 12.2 billion yuan. Upon completion, the project will provide an annual output of 250,000 tons of high-purity vanadium, 2 million tons of electrolyte, 500,000 tons of sodium hydroxide, and 20GWh of vanadium flow battery production.  The project will allow Fangchenggang to bring its advanced energy storage materials, equipment, and technology from the Fangchenggang Economic Development Zone to the rest of the country and the world. The Energy Storage Industrial Park allows Fangchenggang to use energy storage as a window for promoting regional visibility.

Hunan Loudi Renewable Energy Electric Vehicle Battery and Energy Storage Industrial Park

The Hunan Loudi Renewable Energy Electric Vehicle Battery and Energy Storage Industrial Park is reported to have a total planned area of nearly 500 acres and will focus on the development of three core industry groups, including electronic ceramics, EV batteries, and energy storage power supplies.  The park will introduce and incubate companies and projects focused on the design and development of battery cathode materials, anode materials, battery membranes, battery management system (BMS), and other components.  The park will increase R&D and applications development of electric vehicle battery and energy storage batteries through support of companies and projects involved in charging stations, power equipment, EV parts, and complete EV production.

The Hunan Loudi Energy Storage Industrial Park offers an integrated industry chain of raw materials supply, production R&D, and sales, allowing for greater cooperation between upstream and downstream enterprises and thereby greater mutual benefit for participating companies.

Conclusion

The “Twelfth Five-Year Plans” of many regions called for launching and expansion of industrial parks.  Forecasts show that in the next five years, China will enter a peak period of industrial park construction, with a development scale in the trillions of RMB.

The current planning and implementation of energy storage industrial parks in China continues to improve, attracting the interest of many leading companies in energy storage and related industries.  The overall development of these industrial parks is bright, promising large investments, local employment opportunities, and utilization of the entire energy storage industry chain, elements which will help stimulate regional economies.  Though not currently widespread, we can expect to see greater development of energy storage industrial parks in the future, and they are likely to become a major driver for energy storage industry growth in the coming years.

Looking Back at Nine Major Energy Storage Events in the First Half of 2019

According to statistics from the China Energy Storage Alliance Global Energy Storage Database, in the first half of 2019, China’s operational energy storage project capacity totaled 31.4GW, an increase of 5.7% compared to the first half of 2018.  Of this total, newly operational electrochemical energy storage projects totaled 116.9MW, a decrease of 4.2% compared to the first half of 2018.  Though the rate of growth has decreased since 2018, this is not abnormal for an emerging industry, particularly in a market such as the domestic Chinese market where a fully developed market mechanism and industry standards have yet to take shape.  The negative influence of the numerous energy storage system accidents that have occurred in South Korea and other countries, as well as the massive increase in new capacity during 2018 due to a series of large-scale grid-side projects are also factors that have influenced 2019 growth statistics, yet do not suggest that the industry is unprepared for stable, long-term growth.

Below, CNESA’s research department looks back at nine major events in China's energy storage industry that occurred in the first half of 2019.

1.       Four Government Bureaus Release Cooperative Energy Storage Action Plan (2019-2020)

On June 25, 2019, the National Development and Reform Commission, Ministry of Science and Technology, Ministry of Industry and Information Technology, and the National Energy Administration jointly released the 2019-2020 Action Plan for the ‘Guiding Opinions on Promoting Energy Storage Technology and Industry Development.’  The plan is intended to help implement the goals of the Guiding Opinions on Promoting Energy Storage Technology and Industry Development released in 2017, promoting growth of energy storage technology, the healthy development of the industry, and supporting the use of safe, efficient, and low-carbon energy systems.

The action plan includes six work items, which are as follows:

·       Strengthen innovative energy storage technology R&D and increase intelligent manufacturing

·       Develop and implement policies that encourage technology and industry development

·       Expand the use of pumped hydro storage

·       Promote energy storage project demonstrations and applications

·       Promote energy storage applications for electric vehicle batteries

·       Accelerate the standardization of energy storage

The action plan provides clear and specific tasks for energy storage industry development in the “post-Guiding Opinions” period, helping realize the goal of transitioning energy storage from R&D to early-stage commercialization as outlined in the Thirteenth Five-Year Plan, and creating a foundation for the Fourteenth Five-Year Plan goal of further developing from early stage commercialization to a large-scale energy storage industry.

2.       Two Grid Companies Announce their Own “Guiding Opinions”

In early 2019, China Southern Grid and China State Grid released the China Southern Grid Co. Guiding Opinions on Promoting Electrochemical Energy Storage Development (Draft for Comment) and the China State Grid LLC Guiding Opinions on Promoting the Healthy Development of Electrochemical Energy Storage.  Each policy incorporates electrochemical energy storage into the planning and grid network development of its respective corporation. 

Current business models for grid-side energy storage projects puts the burden on grid companies.  Therefore, these companies hope energy storage can become an effective asset generating profits through T&D pricing. Yet China’s two power grids do not necessarily support such a model in the same way.  For China Southern Grid, only projects that can ensure system safety, can act as investment substitutions, and can provide emergency support can be considered effective grid assets, while China State Grid has yet to define what specific purpose energy storage should have on the grid side.

3.       The National Development and Reform Commission and National Energy Administration Decide Not to Include Energy Storage in T&D Pricing Costs

On May 24, the National Development and Reform Commission and the National Energy Administration released the Transmission & Distribution Pricing Cost Supervision Methods (referred to as the Methods below.  The Methods were first introduced in a trial version in 2015.  The revised version incorporates experiences derived not only from this trial period, but also many observed from foreign T&D regulators. The Methods state that the costs of pumped hydro storage stations, electrical energy storage installations, and similar facilities that are not related to grid company T&D services cannot be included in T&D pricing.  The policy also states that the depreciation costs of energy storage assets which are transferred to the grid free of charge once a leasing period has finished should also not be included in T&D pricing.  Such policy terms are an indicator that if in the short term no other profit models appear, then the future development of grid-side energy storage is certain to be impacted.

Earlier this year grid companies had expressed a desire to slow the construction of new large-scale grid-side energy storage projects.  Although the Methods has caused grid companies to lose some of their enthusiasm for investment in grid-side energy storage projects, in a mature, competitive market, fair and balanced rules are needed to foster vitality.  To bring about such conditions, regulators must put greater effort towards creating a market mechanism, thereby allowing all market players to invest, construct, and operate projects according to proper regulations and generate profits by way of a mature electric power market.

4.       Grid-side Energy Storage Market Remains Warm

On April 23, the Furong energy storage project in Changsha, Hunan province successfully connected to the grid, marking the completion of the first stage of the Changsha grid-side demonstration project.  The project came after the completion of two other 100 megawatt scale projects in Jiangsu and Henan provinces last year.  The 120MW/240MWh Hunan grid-side energy storage demonstration project provides critical support for the Changsha power grid.  The project will be completed in two phases, the first at a scale of 60MW/120MWh, with energy storage stations located at three 220 mv substations in Changsha’s Furong, Langli, and Yannong regions.  The recently completed Furong station is currently China’s largest indoor energy storage station.

Last year, China’s grid-side energy storage sector saw massive new growth.  Although the release of the Transmission & Distribution Pricing Cost Supervision Methods in the first half of this year dashes hopes for grid companies to include energy storage in T&D pricing, the announcement of new project tenders and development in regions such as Hunan, Jiangsu, Zhejiang, Beijing, and others signifies that the market is still likely to continue growing.  Also of note are the differences in each project’s choice of technology, construction method, business model, and other characteristics.  For example, the Jiangbei project in Nanjing, Jiangsu province is equipped with second-life batteries.  The Suzhou, Jiangsu grid-side project is designed with “energy storage station+data center+N” functionality.  The Jinling grid-side storage project in Huzhou, Zhejiang is equipped with lead-acid batteries.  The Huairou, Beijing grid-side project uses an advanced battery monitoring technology and fire suppression system, providing the system with an extended lifespan and an increased level of safety.

5.       Guangdong Energy Storage Frequency Regulation Changes from Blue Ocean Market to Red Ocean Market

 In August 2018, the South China Energy Regulatory Bureau released Market Transaction Rules for Frequency Regulation Ancillary Services in Guangdong (Trial) (hereafter referred to as the Rules).  The Rules allow energy storage systems to work in conjunction with generation units as one entity to provide frequency regulation ancillary services.  Just four months after the implementation of the policy in September 2018, China Southern Grid’s first combined energy storage and thermal generation project went operational—the Yunfu power plant AGC frequency regulation and energy storage project in Guangdong.

The trial implementation of the Rules marked the beginning of a blue ocean market for AGC frequency regulation in Guangdong.  According to CNESA Global Energy Storage Database statistics, as of June 2019, 25 energy storage projects participating in frequency regulation have been announced in Guangdong, with a total scale of 364MW.  Of these, the largest project is the CR Power Haifeng power station project, at 30MW/15MWh.  Following a year of implementation of the policy, available capacity is now extremely limited and competition is fierce.  Aside from frequency regulation pioneers such as Ray Power and CLOU, other market players include Zhiguang, Tuna New Energy, SCER, Guangte Electric, WLY, and others.  What was once a blue ocean market has quickly turned into a red ocean market.

Considering these conditions, many companies have begun reevaluating the market.  During a CNESA forum hosted in Guangdong in late July of this year, many companies expressed frustration at the numerous difficulties they face.  One difficulty arises from an increasingly fierce price war leading to greater investment risks.  Another difficulty comes from the power stations themselves.  As many companies reported, some power stations have required project owners to share part of the costs for frequency regulation compensation fees, once again adding to investment risks.  Faced with these problems, many companies have decided to slow their business activity observe the market.  Current ancillary service market rules and an unsteady relationship with power station owners have put energy storage companies in a weakened state, highlighting how the industry is still quite far from a truly fair, competitive market.

6.       Suzhou Provides Industrial Park Energy Storage Projects with 0.3RMB/kWh Subsidies

On March 24, the Suzhou Industrial Park Management Committee released Measures for the Management of Special Guiding Funds for Green Development of Suzhou Industrial Parks, which provides subsidies for projects which provide energy saving modifications, cyclical economic practices, internet of energy technologies, and other environmentally friendly measures for industrial parks.  For operational distributed natural gas and energy storage projects, a three-year subsidy is provided according to the amount of electricity generated, with each kWh compensated with 0.3 RMB.  The subsidy policy hopes to encourage the creation of behind-the-meter energy storage projects that will help lower reliance on public utilities, while also lowering costs through peak shaving.

The government’s lowering of industrial and commercial power prices to close the gap between peak and off-peak prices, as well as the increased costs for safety and grid connection have had a major impact on project profits.  The Suzhou industrial park subsidies can benefit by helping projects generate profits, shortening investment return periods, and maintaining developer interest in project investment.

7.       Xinjiang Launches Generation-side Combined Solar PV+Energy Storage Project Trials

After two rounds of revisions, on June 28, the Xinjiang Regulatory Office of the National Energy Administration released the Notice on the Development of Generation-side Solar-plus-storage Projects (hereafter referred to as the Notice). The Notice calls for the deployment of solar-plus-storage demonstration projects in four regions of southern Xinjiang.  The energy storage systems are specified to have a capacity no less than 15% that of the solar PV system, a duration of no less than 2 hours, and a capacity no greater than 350MW.  The demonstration projects are to be completed before October 31, 2019.  Beginning in 2020 and continuing for a period of five years, each solar PV station is required to add an additional 100 hours of priority generation.  The Notice also stipulates that power prices for the solar PV+energy storage should be determined by current price policies for solar PV stations and should receive the same subsidies that are provided to current qualifying solar PV stations.  The solar PV+energy storage stations are also encouraged to participate in the ancillary services market. Also of note, and unlike previous drafts of the Notice, the final version has also included requirements for energy storage system safety, such as a battery protection system, automatic fire alarm, and fire suppression system.

Following the release of the Notice, the Xinjiang Development and Reform Commission and Xinjiang Regulatory Office of the National Energy Administration released the Notice on the Release of the First Batch of Generation-side Combined Solar-plus-storage Projects, which contained 36 projects developed by 10 different companies with a total energy storage capacity of 221MW/446MWh.

8.       China Tower Plans Purchase of 5GWh of Second-life Batteries

In order to increase their use of second-life batteries, China Tower Co. announced plans to acquire 5GWh of second-life batteries to replace nearly 150,000 tons of lead-acid batteries.  As the largest user of retired batteries for second life usages in China, China Tower ceased all purchase of lead-acid batteries in 2018 in favor of second-life batteries.  The company reported ownership of 1,954,000 telecom towers (not including indoor units) as of the end of June 2019, an increase of 4.0% in comparison to the first half of 2018.  Each of these towers contains its own energy storage system, with total capacity exceeding 17.1GWh.  In addition, with 5G service infrastructure now beginning to proliferate, many new towers are being built while old towers are being retrofitted, meaning that China Tower is likely to require an event greater number of energy storage batteries in the near future.

According to CNESA’s Electric Vehicle Battery Recycling & Second-life Usages report, by 2025, China’s new second-life battery capacity is predicted to reach 33.6GWh.  Despite a promising future, at present there are still many challenges for the second-life battery market.  Some of the many issues include costs, safety, business model maturity, and battery performance, among others.  Before a fully developed second-life battery market can form, more research and development, explorative projects, and stakeholder coordination is needed.

9.   Battery Energy Storage Safety Issues Raise the Alarm

Over the past two years, a number of electric vehicle fires around the world have raised consumer concerns.  According to data from the State Administration for Market Regulation, in 2018, more than 40 fires involving electric vehicles occurred in China.  Such accidents have raised concerns among many consumers about the safety of battery systems.  Most current electric vehicle systems rely on lithium-ion batteries.  The primary cause of fires for such batteries is thermal runaway.  The causes of thermal runaway can be varied and complicated.  In the stationary battery energy storage sector, lithium-ion batteries are also the most frequently used technology.  According to CNESA Global Energy Storage Database statistics, as of June 2019, 86% of global operational battery storage project capacity utilized lithium-ion batteries. 

Electric vehicle battery fires and stationary energy storage battery fires have brought more attention to the need for safety research, evaluation, and standardization.  From July 18 to 20, 2019, the University of Science and Technology of China, China Energy Storage Alliance, and the Chemical Safety Committee of the Chemical Industry and Engineering Society of China co-hosted the first annual International Lithium-ion Battery Fire Safety Seminar in Hefei.  The seminar featured discussions on thermal runaway, heat transfer and numerical modeling, capacity fading and lifespan, thermal control, fire suppression, and many other topics in energy storage system safety.  Such platforms are beneficial to ensuring that energy storage development will be able to prioritize safety.

When it comes to safety standards, in October 2018, the National Energy Administration released the Letter Addressing the Collection of Suggestions for the “Action Plan for Strengthening Energy Storage Technology Standards.”  The plan emphasizes the need to intensify standardization of energy storage technologies.  From the standpoint of system applications, standards must be developed that cover the planning, design, operations, and maintenance of energy storage systems, as well as the equipment, components, and materials used in their construction.  The plan seeks to support the implementation of energy storage standards and improvement of energy storage technologies.

In March 2018, CNESA was approved by the Standardization Administration of China to be a part of the second batch of group standards developers. Since then, CNESA has developed nine energy storage standards. Of these, Evaluation Specifications for Electrochemical Energy Storage Systems was released in May of 2019.  This standard focuses on factors such as safety, performance, and environmental suitability to evaluate the stability, safety, and reliability of electrochemical energy storage systems.  CNESA is also working with third party testing and certification bodies to respond to industry needs for research and development of industry standards.  In the future, CNESA will continue to push for the advancement of energy storage standards with the help of industry partners, working together towards a safe, sustainable future for energy storage.

Author: CNESA Research
Translation: George Dudley

Compressed Air Energy Storage: The Path to Innovation

Energy storage supports the large-scale integration of renewables onto the grid, increases the effectiveness of traditional energy systems and distributed energy systems, and is a provider of safe and economical energy.  Energy storage has been viewed as a key component of the energy revolution and has seen extensive national support as an emerging technology.

Compressed Air Energy Storage (CAES) is one technology that has captured the attention of the industry due to its potential for large scalability, cost effectiveness, long lifespan, high level of safety, and low environmental impact.

Recently, the Chinese Academy of Sciences Institute of Engineering Thermophysics (IET) Energy Storage R&D Center published an article in the international journal Energy on some of their recent findings in CAES research. The research used computational fluid dynamics to create a three-dimensional numerical model of the internal flow field of a compressed air turboexpander. Researchers studied the variation in aerodynamic efficiency and wear of the turboexpander in relation to the turbine tip clearance and expansion ratio.  The results found that, under the condition that the efficiency of the turboexpander is low, the optimal range of the tip clearance and the operating range of the turboexpander can be significantly reduced.

From Slow Growth to Leading Technology

As assistant director of the IET Dr. Chen Haisheng shared with China Science Daily, CAES technology originates from traditional gas turbine energy storage technology.  During low energy use periods, the system’s electric motor will drive an air compressor to compress air and store it in a container, thereby converting electric energy into internal energy in the form of compressed air.  During peak energy use periods, the compressed air will be released from the container and combine with a fuel in a combustor where it will ignite, driving a turbine that will generate power.

However, as Dr. Chen explained, traditional CAES energy storage technology relies on gas storage caverns, fossil fuels, and has relatively low efficiency, among other drawbacks.

IET Lead Engineer Ji Lu told reporters that IET has worked over 10 years to achieve breakthroughs in critical technologies for CAES systems of a scale of 1~10MW.  In 2013, IET deployed a 1.5MW new model CAES demonstration project in Langfang, and in 2016 released the world’s first, and currently still only, 10MW new model CAES demonstration project in Bijie, Guizhou, with an efficiency rate of 60.2%.  It is currently the highest efficiency CAES system in the world.

The new model CAES systems are characterized by three major technological innovations.  First, the systems use thermal storage technology to capture and reuse the heat that is generated during air compression, thereby eliminating the need to burn fossil fuels to generate heat. Second, the system eliminates the need for a gas storage cavern by relying on liquefied compressed air or high-pressure gas during the compression stage. Third, the system uses highly efficient compression, expansion, and supercritical heat storage and heat transfer methods in an optimized system, thereby increasing the overall efficiency of the complete system.

As assistant researcher Dr. Wang Xing stated, “the turboexpander is the core power generation device of the system, its efficiency and operating characteristics have a decisive factor on the overall operations of the system.”

As researchers explained, their most recent research was focused on developing CAES systems that can meet the environmental conditions of China’s western regions, optimizing the turboexpander according to such conditions.  Although western China possesses abundant wind and solar resources that make the region suitable for CAES systems, the high concentration of dust and particles in the air present dangers for turboexpanders, the core component of any CAES system.

As Wang Xing and other researchers discovered, increasing the clearance between turbine blades and the housing can decrease wear, though increasing such clearance also causes flow loss.  The complex internal flow pattern of the turboexpander also means that the movement of dust will likewise be complex, necessitating thorough research into and proper design of the flow field to optimize the resistance to wear of the components.  To solve these problems, researchers coupled the Navier-Stokes equation and the Tabakoff & Grant erosion model to create a three-dimensional gas-solid multiphase flow model of the turboexpander.  The model was used to measure the extent of wear of the components.  The results showed significant wear to the trailing edge of the guide vane, leading edge of the moving vane, the hub, and the casing.  Researchers recommended measures such as increased filtration and the applications of an anti-wear coating to improve performance of the system.

According to Ji Lu, following intense foundational research and breakthroughs in critical technologies, IET completed development of its 1~10MW new model CAES system, creating “the world’s first, largest, and most efficient” system of its kind. Researchers spent 10 years bringing the technology to its current state, first beginning research in 2005, achieving technological breakthroughs in 2009, and establishing the first 10MW demonstration project in 2016.

In 2017, IET begin research into a 100MW-scale CAES system.  Research of the prototype system is expected to be complete in 2020 and will have a rated efficiency of approximately 70%.  Once complete, the demonstration project will be the largest scale and highest efficiency CAES energy storage station in the world.  Developers hope that the project will help stimulate the growth of China’s CAES technology and industry.

The Trillion RMB Value Chain

What is the value of constructing energy storage systems, particularly CAES energy storage systems?

According to Dr. Chen, current electric power systems are host to five major value chains: raw materials, power generation, transmission, distribution, and use. “The electricity market has many of the same elements as a retail consumer market in that we have raw materials, production, shipping, distribution, and consumption, the only element that is missing is storage” said Dr. Chen.

As Dr. Chen explained, the electric power demand at the end-user side fluctuates frequently, while the peak and off-peak price gap continues to increase over time.  To ensure needs are met, generation and grid infrastructure must be built which can handle the maximum peak demand.  Power is then generated according to the real-time conditions and needs of the end-user side. During off-peak periods, generators are turned off or operate at a low load level, leading to a low utilization rate of generation capacity and grid capacity. Moreover, the dynamic balance of such a system is risky.  For example, India, South Korea, the United States, and the United Kingdom have all experienced large-scale power outages in recent years.  The addition of energy storage provides the system with a buffer that can act as an effective solution for minimizing the risk of power loss or shortage.

According to Dr. Chen, as of the end of 2018, China’s operational energy storage capacity totaled 31.2GW, close to 1.6% of the country’s total power installation, but lower than the average global total of 2.7%.  According to International Energy Agency predictions, by 2050, China’s installed energy storage capacity will be above 200GW, approximately 10% to 15% of the country’s total installed power capacity.  Growth of this size will lead to a trillion RMB industry.

Energy Storage: Supporting the Energy Revolution

Aside from the ability to help tackle fluctuations in the power load, energy storage is also a valuable tool for the support of renewable energy integration into the grid and the development of distributed energy resources.

According to Dr. Chen, energy storage technology can store the intermittent, unstable, and often unreliable energy produced by renewable power generators, releasing it later in a stable and controllable manner.  Energy storage can also help limit curtailment from wind and solar generators, allowing energy that would normally go unused to be stored and sent to the grid at a later time.

Distributed energy is viewed as one component of the safe, efficient, and low carbon energy system of the future.  However, in comparison to a large-scale grid network, distributed energy systems have many issues, such as large load fluctuations, system control difficulties, high fail rates, and others.

As Dr. Chen stated, energy storage technology can serve as a resource for load balancing and backup power, addressing many of the above issues by providing a reliable and stable energy source.  Because of this, energy storage has been called the “supporting technology of the energy revolution.”

By acting as a voltage regulator, CAES can help turn unstable and low-quality renewable and distributed energy into high quality, usable energy, thereby providing huge benefit to other innovative new energy sources.

The Future of CAES

As Dr. Chen explained to reporters, development of CAES from the current stage will require continued focus on performance, demonstrations, and power pricing mechanisms.

First, increasing system performance also means decreasing costs.  Large scale systems will be the trend for future CAES, and are also the pathway to high performance systems at low cost.

Second, there are currently only a few demonstrations projects for new model CAES systems, and those that exist are small in scale, unable to meet the needs for further technological development.  Therefore, critical support is needed from government, private industry, and academic researchers to bring greater investment to new project demonstrations that will promote new technology applications and commercialization.

Finally, other large-scale energy storage technologies have not yet enjoyed the same two-part power price mechanism as pumped hydro storage. As Dr. Chen states, “If we can do more to show the benefit of CAES to the electricity system and create a reasonable power price system, we will be able to provide an effective stimulus to CAES and other new energy storage technologies that will support industry development and widespread applications.”

Author: Chi Han, China Science Daily
Translation: George Dudley

10 Years of Energy Storage: Still Mountains to Climb

In 2009, BYD constructed China’s first lithium-ion energy storage station in Shenzhen. In the ten years since that first project, the energy storage industry has seen ups and downs and all number of difficulties as stakeholders and leading enterprises have worked to bring energy storage from the demonstration project phase to the threshold of commercialization.

Over these ten years, and particularly with the help of the electric vehicle market, lithium-ion battery prices have dropped over 85%, and the kilowatt price of energy storage has decreased to just a third of what it once was.  While energy storage may still seem like a small industry today, the changes over a decade have been massive. The next decade of energy storage is sure to see continued growth that will shape the entire energy industry.

Energy storage is a critical component of the global energy revolution.  In many ways, renewable energy resources such as solar PV still have yet to reach their full potential.  Combining energy storage with solar PV and other renewable energy sources for “renewables+storage” applications can help maximize the benefit of these resources.  As costs continue to decline, so does demand rise, and global electrochemical energy storage continues to grow.

Despite global energy storage growth, China is losing its first-mover advantage.  Although China is the world’s largest producer of electric vehicle batteries, its battery storage market is still far from mature.  One significant issue is that a market mechanism and policy drivers are developing at a speed significantly behind that of what the industry needs.  Though 2018 brought about a massive surge in growth thanks to new grid-side energy storage projects, many problems that have plagued the industry for years have still yet to be solved, while some have even intensified.  Below, we explore five major problems that must be addressed.

1.       The Problem of Policy

The release of the first national level policy on energy storage at the end of 2017 brought unprecedented interest to the industry.  Optimistic market predictions brought waves of eager investors to a relatively small-scale industry, with over a hundred large and small companies competing in what soon became an increasingly narrow market space.

Over the past two years, numerous national and regional level policies have been released.  Yet a review of these policies reveals that many are repetitive and similar, do not work cohesively, and/or take action only in small steps.  The vast majority only serve to state the importance of energy storage without taking practical action.  As a result, while researchers and private enterprise remain enthusiastic about energy storage, the response of regulators continues to be lukewarm.

Some regional policies and regulations can be bewildering. Frequent administrative adjustments can leave investors confused.  The advancement of demonstration projects becomes more difficult.  Many local governments also require local manufacturing of components or the use of local suppliers, putting even greater stress on energy storage companies.

Policy direction is of great importance to industry structure and the survival of energy storage companies.  The current policy landscape is not sufficiently developed to bring about substantive results.  In the past two years, many of the most active energy storage companies have found themselves in financial difficulty, particularly those companies who operate in a riskier “investment+operations” development model.

The experience of foreign energy storage markets shows that for energy storage to experience scaled development, stimulus policies and a developed market mechanism are essential.  At the China Energy Storage Price Innovations Development Forum in August 2017, a representative from the National Development and Reform Commission Pricing Bureau stated that, aside from subsidies, the government has many ways of supporting industry development, with common methods including financing, taxation, and price setting. “We support the comprehensive use of financing, taxation, and proper pricing for the support of energy storage” stated one government official.  Nevertheless, as of 2019, we are still waiting for the proper policies to appear.

2.       The Problem of Power Market Reforms & the Market Mechanism

At present, both behind-the-meter and renewable integration applications rely on single business models.  Many stakeholders feel that these applications are limited to a single business model due to the still high costs of storage.  The industry is now in a type of “chicken or egg” scenario in which many wonder which should come first, scaling-up of projects or cost reduction.

In fact, the issue does not lie with energy storage costs, but with the lack of a market mechanism.  Energy storage has many functions, yet without a fair market environment and price mechanism that compensates based on performance, there is no way to make use of the full scope of energy storage applications.  In the words of CNESA chairman Dr. Chen Haisheng, “it’s as if four or five workers are being paid the salary of just one.”

Without a proper mechanism, cost reduction is next to impossible.  Under current electricity prices, behind-the-meter project profits have become marginalized, with many even operating at a loss.

Yet simply reducing costs would mean that product quality could not be guaranteed, leading to the possibility of accidents which would have a negative impact on the industry.  Only when the market has reached a certain scale can companies have the competitive environment that will allow them to continue to lower prices and be on a path to positive development.

China’s ancillary service markets and spot markets are still in the early stages of construction, and energy storage has limited room to participate.  Only Shanxi, western Inner Mongolia, Guangdong, and the Beijing-Tianjin-Tangshan area have opened markets for frequency regulation provided by energy storage systems connected directly to thermal generators.  These markets still do not allow for energy storage to operate as independent market entities.

Whether energy storage can reach its full potential will depend on the depth of power market reforms.  If the next round of reforms is unable to create an effective mechanism for market allocation of resources, then energy storage will remain a niche market with limited ancillary service capabilities.

3.       The Problem of Grid Definitions and Attitudes

Despite being one of the leaders of industry growth in 2018, grid-side energy storage has been met with setbacks in 2019. On April 22, the release of the Transmission & Distribution Pricing Cost Supervision Methods (Draft for Comment) dashed grid company hopes of including energy storage in T&D resource pricing.

Following the release of the draft, Tsinghua University professor Xia Qing wrote a letter to the National Development and Reform Commission expressing his objection.  According to Xia Qing, policies should guide the grid to invest in energy storage.  Only when the grid harnesses energy storage can the technology truly have a future.

Supporters of the policy believe that it will allow the grid companies to focus more on the main purpose of the grid, allowing other services which have not been monopolized to be marketized, thereby bringing us further towards the creation of a market system.  Opponents believe that all grid planning has been designed based on the maximum load, and that energy storage’s greatest value is to serve as a substitute power source during peak periods.  If energy storage is not able to join as a T&D resource, then the only other option is to convince the grid to invest in more substations, resulting in wasted resources that will ultimately be paid by consumers.

Earlier this year, China State Grid announced that they would be postponing grid-side energy storage construction.  Many of the plans for further large-scale grid-side projects are now to be put on hold.

Many stakeholders believe that energy storage’s greatest value lies at the grid side. Though renewable energy and behind-the-meter load shifting can both make use of energy storage technology, only the grid can bring the system together.  This is especially true of large-scale energy storage stations because of their fast response, accurate control, and bidirectional regulation, which help play an important role in power grid safety.

Many stakeholders are in a sort of catch-22, worrying that the power grid will either not step up to the plate, or that if it does, that it will end up bringing disaster.  The value of energy storage must be recognized by the grid, but at the same time, we must not wish for excessive grid involvement.  2018 grid-side energy storage projects led by China State Grid were all almost entirely invested in and constructed by subsidiary companies.  Nevertheless, dispatch is controlled entirely by the power grid, causing other market players to worry about unfair competition.

Market data reveals that grid-side energy storage can delay the need for feeder line upgrade or expansion by three years.  In contrast to the construction of a new substation, investment and construction costs will be reduced by around 30%.

Grid loads have reached an all-time high in 2019. If low cost, high value, and high efficiency energy storage is used in place of traditional T&D network resources, how should this value be determined?  If the investment is made through social capital, is the grid willing to pay?  How should costs be channeled?  All that is known for sure is that only by allowing energy storage to enter the power grid can its multi-faceted value be maximized. The power grid's movements will largely determine the future direction of the industry.

4.       The Problem of Safety and Standardization

Since 2018, the energy storage industry’s biggest focus has been on the numerous electric vehicle and energy storage station fires that have occurred around the world.  The series of fires at energy storage stations in South Korea have been alarming to many energy storage markets.

If energy storage is not safe, will it be impossible to develop?  As an early stage technology, both stakeholders and the public should allow for a period of trial and error.  With hundreds of thousands of researchers around the world studying lithium-ion batteries, technological improvements are inevitable, and safety concerns are certainly resolvable.

Given that energy storage stations operate in a much larger space than electric vehicle battery systems, there are more ways to solve safety issues.  As Yantai Chungway founder Zhang Lilei states, “Energy storage is not as sensitive to issues of weight or volume as electric vehicles are.  Energy storage stations can more easily install fire suppression systems and other safety measures at costs much less that of electric vehicles.”

In the views of Chungway, energy storage safety should put prevention first.  System design should set guaranteed safety as the goal.  Yet in practice, fire suppression systems still often have marginal status in an energy storage project.  To save costs, some systems integrators choose to skimp on safety measures.  Since fire safety systems are usually considered a supporting system, they are normally in the hands of a third party.  It is up to the developer to decide whether the system should be installed.

Looking broadly at the domestic and international fires that have occurred, this author believes there are three major issues that China’s energy storage industry must consider:

First, the government, industry associations, and standardization groups must create greater numbers of detailed standards and regulations for industry development.  These standards and measures must be used to raise the threshold for participation in the industry, barring those companies who do not meet reasonable standards from participating in the market.

Second, investigations into the cause of energy storage fires must be conducted by the state or independent industry, and the results must be made known to the entire industry.  Accidents should be utilized as an opportunity for thorough study and learning without the spread of misinformation.  They should also not be used as a chance for competitors or supporters of certain technologies to attack or place blame on fellow industry members.

Third, for many owners and investors, when faced with the current market in which quality can vary substantially, it is best to choose systems integrators with technical strength, particularly those who have been tested in the international market.

5.       The Problem of Financing and Other Non-Technical Costs

Much like solar PV, energy storage is still a grassroots driven industry.  Company capital reserves are weak, and most face capital pressure problems.

In comparison to wind and solar, energy storage does not have definite national policy support.  Banks have high credit requirements for developers who wish to finance energy storage projects.  Financial leasing has become one of the most popular and important methods for funding energy storage stations.

According to a source at CR Leasing, the primary business of financial leasing companies lies in the leasing of large-scale projects, though the majority of current commercialized projects are still small.  For projects with better profit prospects such as energy storage combined with thermal generators for frequency regulation, the annual interest rate of financial leasing is around 9%.

In comparison to thermal generator combined energy storage, the financing of behind-the-meter energy storage is much more difficult.  With industrial and commercial electricity prices continually dropping and systems integration capabilities uneven, many behind-the-meter project investments have generated lower than expected profits.  According to project evaluations released on the World Bank official website, early energy storage projects earned an average investment return of 5-7%.  In the current financial market, behind-the-meter energy storage projects are unlikely to receive a positive response from financing agencies.

In addition, land taxes, grid connection fees, grid linkage fees, and numerous other fees can cause energy storage investment costs to rise and swallow up expected profits. Although these non-technical costs have become a leading factor in restricting the development of the industry, energy storage companies have no say in lowering them.  They can only hope that national policies will be released that will help to modify and regulate these costs.

Author: Energy Storage 100
Translation: George Dudley

The Development of China's Solar-plus-storage Market: Solar-plus-storage Policies

In early 2019, the China Photovoltaic Industry Association met with the China Energy Storage Alliance to discuss CNESA’s “China Solar-plus-Storage Development Status” report, which was published in the CPIA’s 2018-2019 China Photovoltaic Industry Annual Report.  The report focused primarily on solar-plus-storage market development, solar-plus-storage policy updates, and current problems in solar-plus-storage applications, among other topics.  Below, we take a look at some of the polices discussed in the report that affect solar-plus-storage applications.

2018 Solar-plus-storage Policy Updates

Aside from the national-level “531 policy,” policies released between 2018 and early 2019 that have had significant effect on solar-plus-storage applications also include local-level policies in Xinjiang, Hefei, and the northwest China region.  The “531” policy helped to encourage the solar PV industry to focus more attention on combined solar and energy storage applications.  Regional policies have also focused on matching solar and storage, as well as solar-plus-storage subsidies and updates to the “two regulations” for grid operations and management.  These policies have helped implement a deeper, varied, and more focused approached to the use of solar PV with energy storage.

1.       The “531” Policy Brings New Attention to Solar-plus-storage

On May 31, 2018, the National Development and Reform Commission released “Notice on Matters Related to Solar PV Generation in 2018.”  The notice not only cut back solar PV subsidy standards and targets, it also clarified two main foundations for future solar PV development: grid parity and subsidy-free solar PV.  The notice also helps promote a shift in focus for the solar PV industry from the development of large-scale projects to the development of high-quality projects.  Despite the benefit that the policy has brought, the changes have been significant enough to create ripples through the industry.

Following the release of this policy, solar PV companies began turning their eyes toward storage, viewing solar-plus-storage as one of the future development paths for marketization of solar PV.  Many market players have already begun actively deploying solar-plus-storage projects, including GCL New Energy Holdings, Huaneng Group, Luneng Group, and Huanghe Hydropower Development Co.  However, from an economic standpoint, the costs of converting stored energy to electric power is still comparable to the grid purchase price of solar PV.  Without subsidies, it is quite difficult to rely solely on the sale of solar-generated stored energy to supplement the generation of a solar station and achieve profitability.  Therefore, the commercialization of solar-plus-storage applications can only occur under the condition that the power system continues to marketize, solving profitability issues through technological innovations, lowering production costs, and innovative business models.

2.       Xinjiang Develops Generation-side Energy Storage Demonstration Projects to Increase Energy Storage Integration with Renewables

As of late December 2018, the Xinjiang power grid maintained 85.535 GW of connected generation capacity.  Of this, solar PV made up 9.516 GW of capacity, of which on average 1337 hours are used annually, with a curtailment rate of 15.5%.  In southern Xinjiang’s Kizilsu prefecture, 2018’s curtailment rate reached 30.3%.

In order to increase peak shaving backup capacity and encourage the greater use of renewables in the Xinjiang power grid, the Xinjiang Development and Reform Commission released the “Notice on the Development of Generation-side Solar-plus-storage Projects” in February 2019. The policy is the first guiding policy in China that directly addresses generation-side energy storage.  The policy states that each energy storage station should be deployed at a capacity approximately 20% of that of the total capacity of the solar PV station it accompanies.

After deploying energy storage, solar PV stations can add 100 hours of additional planned power generation.  In theory, a 100MW solar PV station could gain millions of RMB in additional annual revenue.  Aside from increasing salable power, energy storage stations can also help solar PV stations avoid performance penalties.  With new regulations recently put in place for the performance assessment and compensation of power generators throughout northwest China, energy storage has become a valuable resource for lowering penalty fees and increasing profit.

3.       Hefei City Releases the First Distributed Solar PV Energy Storage Subsidy Policy with Support for Solar-plus-storage Applications

In September 2018, the Hefei city government released “Suggestions for Promoting the Healthy Development of the Solar PV Industry,” emphasizing the need for high-end, intelligent, environmentally friendly, and service-oriented manufacturing.  The “Suggestions” also give special support to solar-plus storage systems, including power charging subsidies for energy storage.

The “Suggestions” states that solar-plus-storage installations connected and operational after the release of the policy which use components, batteries, and/or inverters supplied by companies recommended by the Ministry of Industry & Information Technology or by the Hefei government’s official list of approved companies will receive, beginning in the second month after grid connection, a subsidy of 1 RMB per kWh of battery charging.  The total subsidy amount that can be received is capped at 1 million RMB per year per project.  The release of the “Suggestions” makes Hefei the first city in China to release a subsidy plan for distributed solar-plus-storage, providing a positive boost to distributed solar-plus-storage in the region.

4.       Renewable Energy Stations Face Growing Imbalance Between Penalty Fines and Compensation

At the end of 2018, the Northwest China Energy Regulatory Bureau released a new edition of the “Regulations for Operations and Management of Grid-Connected Power Stations in Northwest Regions” and “Regulations for Ancillary Services Management of Grid-Connected Power Stations” (hereafter referred to as the “Two Regulations”)

The new editions of the Two Regulations affect energy storage in three categories: peak shaving, AGC frequency regulation, and renewable integration.  In regard to peak shaving, although the compensation standards for each province vary, in the northwest region, energy storage that independently provides peak shaving services has a relatively long payback period. For AGC frequency regulation, conditions in the northwest China power grid have led to the current model in which AGC penalties and compensation are calculated based on integral power rather than using a model similar to the north China power grid’s kp value to calculate frequency regulation contributions.  Therefore, it is difficult for energy storage in the northwest region to achieve an acceptable investment payback period for peak shaving and/or frequency regulation.  In regard to renewable integration, dispatch and operations strategies must be improved in order to guarantee system safety and encourage increased consumption of renewables.  Appropriate compensation should also be given to renewable energy stations which contribute to the energy system.  In comparison to the 2015 draft of the Two Regulations, the recent update strengthens the assessment accuracy and strength of penalization for renewable energy stations, as well as increases the categories and standards for compensation.

To address the new assessment standards, renewable energy companies can not only increase the level of operations of their equipment, but also add storage to optimize the quality of operations of their stations, thereby not only reducing the frequency of penalization, but also increasing profitability.

Author: CNESA Research
Translation: George Dudley

CNESA Global Energy Storage Market Analysis – 2019.Q2 (Summary)

1.       The Global Market

 As of the end of June 2019, global operational electrochemical energy storage project capacity totaled 7427.5MW, or 4.1% of total energy storage capacity.

Graph 1: total global operational electrochemical energy storage capacity

In the first half of 2019, global newly operational electrochemical energy storage capacity totaled 802.1MW, a decrease of 38.9% in comparison to the first half of 2018.  Geographically, the United States saw the greatest increase in new operational capacity, at 24.6%, an increase of 106.6% in comparison to the first half of 2018.  In applications, generation-side energy storage saw the greatest increase in new operational capacity, at 26.0%.  In technologies, lithium-ion batteries saw the greatest increase in newly installed capacity, at 85.7%, a decrease of 46.8% in comparison to the first half of 2018.

 2.       The Chinese Market

 As of the end of June 2019, China’s operational electrochemical energy storage project capacity totaled 1189.6MW, or 3.8% of the country’s energy storage market.

Graph 2: China’s total operational electrochemical energy storage capacity

In the first half of 2019, China’s newly added electrochemical energy storage capacity totaled 116.9MW, a decrease of 4.2% in comparison to the first half of 2018. Geographically, Hunan province saw the greatest increase in new electrochemical energy storage capacity at 51.3%.  In applications, grid-side energy storage saw the greatest increase in new capacity at 56.0%, an increase of 189.9% in comparison to the first half of 2018.  In technologies, lithium-ion batteries saw the greatest increase in newly installed capacity at 95.8%, an increase of 9.6% in comparison to the first half of 2018.

 According to CNESA predictions, by the end of 2019, China’s operational electrochemical energy storage capacity will reach 1891.50MW.  By the end of 2020, capacity is predicted to reach 2833.70MW.

Graph 3: forecast for China’s electrochemical energy storage market capacity growth

3.       About this Report

 CNESA Research customers can access the full version of the CNESA Global Energy Storage Market Analysis – 2019.Q2 by visiting the ESResearch website.

The ES Research website launched in January 2018 to provide an online 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 at the email or phone number below.

Phone: 010-65667068-805

Email: esresearch@cnesa.org

A Look at Global Large-scale Solar-plus-storage Project Plans in 2019

After the 2017 launch of Tesla’s 100MW/129MWh battery energy storage project in Australia, the global energy storage market saw a new large-scale battery storage project appear nearly each month throughout 2018.  According to CNESA statistics, globally, there were 57 individual projects exceeding 50MW either newly operational, under construction, or planned in 2018.  These 57 projects equaled a total capacity of 7.6GW, or 58% of the global total of newly added energy storage capacity in 2018.  Geographically, these projects were largely concentrated in South Korea, the United States, Australia, and China.

In 2019, the “race” to deploy large-scale battery energy storage projects has continued.  Many of these projects have consisted of solar-plus-storage applications.  According to CNESA Global Energy Storage Database statistics, in the first half of 2019, there were 10 newly added solar-plus-storage projects (including operational, under construction, and planned) of size 50MW or greater globally. The capacity of these 10 projects totaled 2.3GW, equaling 83% of the newly added global solar-plus-storage capacity in the first half of 2019.

As of this writing, the Puerto Rico Electric Power Authority’s plan for 920MW of energy storage is the world’s largest solar-plus-storage plan in terms of power (MW), while the United States Bureau of Land Management’s 531MW/2125MWh solar-plus-storage project plan is the largest in terms of energy (MWh).  The majority of large-scale solar-plus-storage projects currently planned are set to be operational by 2021-2023.  Should all these projects be completed on schedule, the global energy storage market will be set for massive capacity growth over the next 2-5 years.

From January to June 2019, notable large new solar-plus-storage projects included the following:

Data source: CNESA Global Energy Storage Project Tracking Database, 2019.H1

In recent years, with the costs for solar-plus-storage project development dropping, many utility companies have begun to incorporate energy storage systems into their generation capacity.  Since 2012, battery energy storage costs have dropped 76%, increasing the feasibility of renewables-plus-storage, particularly solar-plus-storage.  The combination of battery storage with solar power or wind power can greatly increase the reliability and flexibility of the power source, even to the point in which they can begin to compete with traditional coal and natural gas generators.  One such example is the above FPL Manatee Energy Storage Center, which is intended to replace two aging gas-fired stations as part of a larger renewable energy development goal.

Solar-plus-storage projects have also caught the attention of countries and regions where natural disasters and/or weak power grids are a significant concern.  The above Puerto Rico Electric Power Authority solar-plus-storage plan is intended to be used not only to replace aging natural gas stations and diesel generators, but will also help lower mitigate the risk of power blackouts caused by tropical storms, improving the resilience and reliability of the power supply.

Author: CNESA Research
Translation: George Dudley

Assessing Development and Discussing Industry Design – Results from the 2019 Energy Storage Industry Leaders Forum

Industry leaders attend the ESIE 2019 China Energy Storage Leaders Closed-Door Seminar

On May 18, 2019, the China Energy Storage Alliance hosted the China Energy Storage Leaders Closed-Door Seminar at the 8th annual Energy Storage International Conference & Expo.  This year’s seminar featured representatives from the National Development and Reform Commission, the Ministry of Industry and Information Technology, the National Energy Administration, as well as leaders from the South, Northwest, and North China Energy Regulatory Bureaus.  Power grid representatives included those from, China State Grid, China Southern Grid, Inner Mongolia Power Group, and additional subordinate management departs and grid subsidiaries. Generation groups and energy storage system providers were also present.  These representatives of the government and private industry discussed the path for development of energy storage technologies and applications in China.  Below we explore the results of the seminar discussions.

1.      China’s Energy Storage Development is “Flourishing”

At present, China’s energy storage technology applications have achieved the beginnings of large-scale development.  According to data from the China Energy Storage Alliance, China’s operational energy storage capacity has reached a total of 31.3GW. Of this capacity, electrochemical energy storage has reached 1.07GW, marking 2019 as the beginning of the “gigawatt era” for energy storage.  In the past year, newly added electrochemical energy storage projects totaled 700MW, placing China among the top three countries in both new energy storage capacity and total energy storage capacity.  Following the release of the Guiding Opinions on Promoting Energy Storage Technology and Industry Development in 2017, the speed of development of energy storage in China has seen a massive increase.  Energy storage technology already possesses the foundation for widespread commercial applications, and is now awaiting policy support and a market mechanism that can take it further.  Despite the way in which energy storage is “flourishing,” these much-needed policies and market mechanism are not growing at the same rate as the industry itself.  Further planning and design is required before such measures will be able to support China’s healthy and structured energy storage growth.

2.      Conflicts Among Various Applications Have Become Apparent

In 2017, behind-the-meter storage saw rapid deployment in Jiangsu, Guangdong, and Beijing. By 2018 interest in behind-the-meter storage had not decreased, and large-scale deployments had not ceased.  However, falling electricity prices produced a chilling effect on behind-the-meter systems, raising concerns among technology operators and limiting investment opportunities.  Accidents at energy storage stations both domestic and international also brought forward safety concerns that could not be ignored, especially for large indoor I&C energy storage systems.  These challenges put a damper on the development of one of the industry’s most lively sectors.

Beginning in 2018, the power grid began actively promoting energy storage applications.  Both China State Grid and China Southern Grid released “Guiding Opinions” policies for the development of storage. The participation of the power grid provided a great boost to energy storage industry development while also opening a new door for grid-side energy storage applications.  Jiangsu, Henan, Beijing, and Zhejiang all initiated deployments of large-scale grid-side energy storage projects, raising the portion of grid-side energy storage in China’s total energy storage capacity from 3% to 21.4%.  In other countries where power markets are open, the handling of energy storage systems operations in the grid varies according to each regulatory agency.  In the United Kingdom, energy storage is classified as a generation resource, and policies have considered prohibiting grid operators from owning and operating energy storage systems.  In the United States, both the power grid and private industry are permitted to invest in energy storage projects, though grids are limited to project sizes which cannot exceed 50% of a total procurement goal.  At present, China lacks an evaluation system and incentive system for grid-side energy storage, yet large-scale grid-side projects are already actively participating in grid services. Grid company support of energy storage has also already begun to influence government bodies to implement policies that will support grid-side storage.  However, in a situation in which regulatory and market mechanisms are not satisfactory, we should not define energy storage as part of T&D costs, as has been done in the recently released T&D Power Price Supervision Methods policy.  At the current stage, grid-side energy storage’s value and revenue channels still cannot yet be determined, which creates uncertainty in how grid-side storage will develop.

Aside from behind-the-meter and grid-side applications, ancillary services and renewable energy integration applications also still face many market problems.  Current market rules do not reflect the full flexibility and functionality of such resources.  A long-term market mechanism awaits establishment, as current evaluation and stimulus mechanisms cannot drive the combined use of energy storage with renewables.

3.      Policies and a Market Mechanism are Slow to Form

Despite an undeveloped policy and market environment, China’s energy storage capacity still lies among the world’s top three countries.  With project scales ever increasing and policies and market conditions unable to keep up with industry development, there are three major issues that must be addressed:

1)      Safety management and environmental concerns must be planned and designed early

Safety is one of the leading concerns for energy storage systems, yet a unified and clear safety assessment model and grid-connection process still do not exist.  Among energy storage projects that are already operational, a unified fire safety management system is also lacking.  For large-scale energy storage systems, environmental assessment and system retirement requirements have not yet been defined.  Such safety and environmental issues cast doubts on the successful future development of energy storage.

2)      Energy storage systems lack a proper definition

The Guiding Opinions simplifies the process for energy storage to receive approval, yet many regional and local bureaus, such as those dealing with development and reform, fire safety, land use, the environment, transportation, and other areas do not have a clear definition of energy storage.  Energy storage is in desperate need of a clear identity.  Excluding a small number of provinces, many currently operational energy storage projects are in violation of local regulations, with some even considered as “illegal constructions.”  In addition, the process of connecting energy storage systems to the grid is fraught with obstacles, and current low-voltage connection designs are insufficient for the continued dispatch and use of energy storage resources into the future.

3)      Challenges in multiple energy storage applications await breakthroughs

Behind-the-meter energy storage in China is currently limited to one source of revenue--energy arbitrage--and investment risks are high.  Demand side management and other value-adding applications are unable to add a high level of additional value to energy storage.  The rationality of grid investment in energy storage requires correct assessment.  Grid-side energy storage development should not disrupt the principles of an open and fair market.  Proper regulatory strategies and incentive mechanisms should be put in place to recognize the investments that the grid has put into existing projects and planned projects.  The power market is China is still largely closed, but a transition from current ancillary services methods to a true ancillary services market will be key to establishing true business models.  As regulations are continually tweaked and modified, the ability of energy storage to support the use of renewable energy is challenged by uncertain investment conditions, and business models are unable to mature.

4.       Policy Suggestions

Energy storage is an important part of the energy system, with significance to the future development of China’s power structure, the creation of a low-carbon energy system, increasing the safety and efficiency of energy, and other benefits.  For a time, the issue of whether to provide energy storage with subsidies in the way of solar PV and electric vehicles was one of frequent debate, with many feeling that subsidies are not conducive to market development.  Yet in a power market that is not open, energy storage industry development and technology applications must have policy support.  Positive funding management strategies and subsidy distribution regulations can reduce many key issues.  However, industry development and technology applications require structured guidance, and projects that would receive subsidies need comprehensive regulation.  The current inability to regulate is one of the key elements holding back industry development.  Therefore, the industry should not rule out subsidies, yet at the same time should neither demand too much nor rely to greatly on the benefits they bring.  Industry growth cannot simply rely on technological maturity and dropping prices if the market is still not open, especially when price dropping is conditional on industry development, policies, and the market.  A complete reform of the power market is unlikely to occur in the short term.  Therefore, the industry must rely on a suitable policy and market environment, while a reasonable compensation mechanism can help to propel new advancements in technology.

In addition, with energy storage system accidents becoming an ever-pressing concern, the central government must put greater effort into finding ways to take preventative measures rather than wait for accidents to happen.  Safety responsibility should be a concern of all energy storage stakeholders.  As projects increase in scale, we must all take the necessary design and development measures to prevent accidents and limit environmental pollution.  The improvement of policies and development of a market mechanism for energy storage are both of major significance to China’s energy revolution.  Long-term policy and market planning will have an effect on more economic sectors than just the power sector, while the current development lags will in hindsight be seen as a natural phase of industry development.

In the short term, there are a few problems that we must solve:

First, to address the safety issues of energy storage, project management responsibilities must be clear and unified.  An evaluation system for energy storage systems must also be developed that can evaluate system safety at every stage of development and offer suitable responses to the results.  In addition, standards and regulations for storage systems should also be improved, thereby creating stronger market entry requirements for energy storage systems.

Second, regarding the issue of irregular or noncompliant energy storage systems, the national government must provide clear direction to the regulatory bodies and bureaus that oversee storage, including those that handle fire safety testing, environmental safety assessments, land use approval, project registration, and other aspects of the project development process.  Grid companies must also clarify the steps for grid connection for various energy storage applications and scenarios.  Most importantly, policies must create a clear identity for energy storage to ensure its compliance with the energy system.

Third, for those large-scale energy storage systems already in the power system, the recycling and second-life usages of electric vehicle batteries can be used as a reference for management of retired batteries.  The early establishment of a recycling and/or second-life usage mechanism will help to limit environmental pollution and provide a clear ending to the industry chain.

Fourth, more investment must be brought into grid-side energy storage systems by encouraging market-oriented development without interfering with market competition.  Grids should also not limit the services they use to those provided by their own invested projects, but also allow behind-the-meter, generation-side, and other application projects to participate in grid dispatch, making full use of the value of all resources. 

 Finally, when viewing the many issues that energy storage faces in commercialization, China must continue to push for market reforms, using market strategies to solve issues and creating rational market rules that are adapted to storage technologies and applications.  A full ancillary services and demand-side management market both wait to be established.  While a developed market will help increase the value of energy storage across multiple scenarios, early stage market development will also need a certain level of financial support.

At present, government bodies have been actively working to produce a greater number of energy storage policies, opening themselves to suggestions from technology providers, power companies, and power customers on what policies should be developed. CNESA will continue to strive for the development of policies that will support storage, providing platforms for discussion and research that will reflect the needs and opinions of stakeholders both upstream and downstream, and working towards a healthy energy storage industry with developed markets, standards, and policies.

Author: CNESA Research
Translation: George Dudley

Xinjiang Province Releases “Notice on the Development of Generation-side Solar-plus-storage Projects”

CNESA attends the solar-plus-storage seminar hosted by the Xinjiang Development and Reform Commission

Recently, the Xinjiang Development and Reform Commission and the Xinjiang Regulatory Office of the National Energy Administration released the “Notice on the Development of Generation-side Solar-plus-storage Projects.”  In early June 2019, CNESA was invited to a Xinjiang solar-plus-storage policy seminar hosted by the Xinjiang Development and Reform Commission, where suggestions were collected on energy storage applications, business models, and the safe construction and operation of energy storage systems.

The “Notice on the Development of Generation-side Solar-plus-storage Projects” highlights the use of energy storage in creating a modern energy system and transforming the way that energy is produced and used.  Key points of the “Notice” include:

1)      Solar-plus-storage demonstration projects will be developed in four regions of southern Xinjiang.  Kashi Prefecture will install no more than 15,000 kW of capacity, Hotan Prefecture will install no more than 10,000 kW of capacity, Kizilsu Prefecture will install no more than 5,000 kW of capacity, and Akesu Prefecture will install no more than 5,000 kW of capacity.

2)      This round of demonstration projects will focus only on generation-side solar and energy storage installations. Such demonstrations will have storage and solar PV operate concurrently (solar-plus-storage), receive optimized grid dispatch signals, performing output smoothing, and increasing energy consumption.  Energy storage system capacity must be no lower than 15% of the total capacity of the solar PV system, and the system must have a duration of no less than 2 hours.

3)      The demonstration projects are set to complete construction by October 31, 2019.  Beginning in 2020, the solar PV stations will add 100 hours of power generation each year for five years.

4)      Power prices for solar PV stations with paired energy storage are based on the current power price policies for solar PV stations.  Solar and energy storage stations operating in conjunction as one unit will also receive the same subsidies.

5)      Operational energy storage systems must include a battery protection system, automated fire alarm system, fire suppression system, and other preventative safety measures as they apply to each site.

6)      Private industry stakeholders are encouraged to invest in the project demonstrations using energy storage technologies and equipment that have potential commercial viability.  Energy storage technology R&D demonstrations are highly encouraged. The pilot projects are inclined to utilize equipment from companies that invest and manufacture in Xinjiang.

Author: CNESA Research
Translation: George Dudley

China Releases “2019-2020 Action Plan for the ‘Guiding Opinions on Promoting Energy Storage Technology and Industry Development’”

In 2017, China’s national government released the Guiding Opinions on Promoting Energy Storage Technology and Industry Development, the first national-level policy in support of energy storage.  Following the release of the Guiding Opinions, China’s energy storage industry made critical headways in technologies and applications.  In the past year, China ranked among the top three countries in the world in both new electrochemical energy storage capacity and accumulated energy storage capacity. As China’s energy storage industry enters the “post-Guiding Opinions” stage, suitable polices and a market mechanism become ever more necessary to contain moving forward.

To confront some of the key issues in the energy storage industry and better implement the strategies laid out in the Guiding Opinions, the National Development and Reform Commission, Ministry of Science & Technology, Ministry of Industry and Information Technology, and the National Energy Administration jointly released the “2019-2020 Action Plan for the ‘Guiding Opinions on Promoting Energy Storage Technology and Industry Development’” (NDRC [2019] NO. 725), which emphasizes a number of actions, including technological R&D and intelligent manufacturing, the creation of policies supporting technological and industrial development, further development of pumped hydro storage, support for new application demonstrations, the development of energy storage applications for electric vehicle batteries, standardization of energy storage project construction, and others. The action plan hopes to ease some of the local-level construction approval processes for energy storage technologies, allowing projects to become compliant with local regulations.  An additional action includes the provision of guidance and regulation for the development of grid-side storage, redesigning the current model which ties energy storage prices to T&D electricity costs.  The plan’s support of increased demonstration projects encourages large-scale development that prioritizes safe and stable operations in the power system while also exploring new and innovative technologies. Finally, the plan encourages the improvement of the energy storage standards system, supporting standardization that can develop in pace with innovations in technology. 

With the release of the action plan, specific work goals have been set for the Guiding Opinions. While the plan strives to realize all the goals for energy storage laid out in the 13th Five-year plan, an emphasis on safe and environmentally friendly systems remain two of the most prominent focuses for China’s energy storage industry development and technology applications.

The full version of the policy (in Chinese) can be viewed at: http://www.ndrc.gov.cn/zcfb/zcfbtz/201907/t20190701_940747.html

Author: CNESA Research
Translation: George Dudley

Xia Qing: What Kind of Policies Does Energy Storage Need?

At this year’s Energy Storage International Conference & Expo 2019, the hot topic was grid-side energy storage.  Much of the talk stemmed from the April 22 release of the “Transmission & Distribution Power Price Supervision Methods (Draft for Comment)” and its omission of energy storage as a T&D cost.

The cost of energy storage is currently one of the major factors slowing the pace of industry growth.  The inclusion of energy storage as a T&D cost would encourage grid companies to make rational investments in energy storage, providing guiding support for the industry.  Yet the draft version of this policy has clearly placed energy storage outside of the category of T&D costs.  During his speech at the ESIE 2019, Tsinghua University Department of Electrical Engineering professor Xia Qing shared his views on this policy.

Tsinghua University Department of Electrical Engineering professor Xia Qing Speaks at ESIE 2019

As Xia Qing states, the reason that energy storage facilities have not yet been included as a T&D cost can be summarized in three reasons:

1. Energy storage facilities are still considered “luxury items” with high costs.

2. Grid-side energy storage project construction is undertaken by grid company subsidiaries, creating unbalanced prices.

3. When energy storage is used as T&D infrastructure, investment returns are difficult to measure.

Energy storage’s most notable trait is that it can help increase the usage of grid resources.  If energy storage is used in place of traditional T&D resources to meet peak load demands, then the power grid will see a significantly greater return on investments.

Xia Qing stressed that energy storage possesses great value.  If we admit that energy storage is a segment of the power grid, then we must consider energy storage as a fixed cost to be included in T&D electricity prices. However, this would not be without certain conditions.  The power grid could take an integrated planning approach to energy storage construction, yet it should also make efforts to bring other resource providers into the mix.  While T&D prices should receive part of the benefit, energy storage should generate profit primarily from the competitive power market, particularly the power spot market, wherein energy storage would have a much better opportunity to exert its full value.

Energy storage is a new and rising industry with major significance to the energy revolution.  New forms of industry require systematic innovation, and only industry policies can help push grid-side energy storage technologies to greater quality, higher efficiency, and sustainable development.  Regarding the types of policies that are needed, Xia Qing raised five suggestions:

1.       An Open Investment Market

The creation of a “diversified investment, unified operations” business model will help attract an increasing number of resource providers to the energy storage industry under a unified grid dispatch system.  Grid-side energy storage possesses global benefits that should be shared with all society, and an open market helps ensure fair energy storage pricing.

2.        Create an Open and Stimulative T&D Power Price Mechanism

Energy storage must connect with the T&D power price mechanism to provide better T&D deferral services (while meeting relevant economic margins). System lease prices should be determined by market competition, with their costs included in T&D capital costs.

3.       Create a Marketized Payback Mechanism

Xia Qing stressed that energy storage cannot entrust all hope for development in T&D power pricing.  Energy storage must be an active participant in the power spot market.  Through a free and open power market, energy storage can compete with traditional energy resources.  The success of energy storage in such a market would be proof of its value.  Such a model is one that the industry can rely on for continued development.  Marketization must come before planning, and we must use the market to lead industry development.

4.       Promote and Improve the Construction of a Power Spot Market

Create market mechanisms and pricing mechanisms for energy storage and other flexible resources.

5.       Create Sufficient Management Mechanisms and Effective Monitoring Mechanisms

To bring investment to grid-side energy storage, we must improve methods of management.  The simpler the management techniques, the easier they will be to implement.  Proper management should focus on the investment of energy storage capital before a project is developed, as well as evaluating the project once it has begun operations.  Such management processes will be able to certify whether the industry is operating reasonably.

From Professor Xia Qing’s suggestions it is not hard to see that the inclusion of energy storage in T&D costs would establish a clear and prominent position for energy storage. However, the majority of the value and benefits of energy storage should be drawn from the power market.  Without the support of one or both of these conditions, it will be difficult for energy storage to develop in a healthy direction.

Through systematic innovations, the support of improved industry policies, the opening of an inclusive market environment, and the development of an ideal management system, energy storage will be allowed to serve as an application supporting the creation of efficient, smart grids.  Grid-side energy storage has the potential to carry the development of the energy storage industry, providing a new and exciting element to the grid energy revolution.

Author: Carrie, Beijixing Energy Storage News
Translation: George Dudley

ESIE 2019: A Look Back at this Year’s Opening Ceremony

On May 18th, the 8th Energy Storage International Conference & Expo (ESIE) opened at the China National Convention Center in Beijing.  The event was led by the China Energy Research Society and organized by the China Energy Storage Alliance and Chinese Academy of Sciences Institute of Engineering Thermophysics.  Government leaders, senior executives, academic researchers, and media representatives all gathered for one of the biggest energy storage events of the year, discussing the industry’s latest development trends and challenges while lending insight into the future of energy storage.

CNESA General Secretary Liu Wei Hosted the Opening Ceremony

The ESIE opening ceremony featured some of the leading representatives of China’s energy storage industry, including guests and leaders from the National Energy Administration, China Energy Research Society, Zhongguancun Management Committee, Chinese Academy of Sciences, and others.  China Energy Storage Alliance General Secretary Liu Wei served as host.

During his opening remarks, China Energy Research Society Vice Chairman and Former National Energy Administration Assistant Director Shi Yubo stressed the need for the energy storage industry to increase efforts in planning, technology innovations, and institutional reforms to overcome challenges in industry development. Shi Yubo highlighted three synchronous developments that the industry should strive for: first, a simultaneous focus on technological advancements with safe, reliable applications. Second, the construction of policy and market mechanisms with commercial development.  Third, the establishment of a recycling system in step with large-scale project development.  He expressed hope that industry stakeholders can do more to expand their modes of thinking, engage in deep discussion, and share valuable experiences, all of which will contribute to solving the major issues of the industry.

China Energy Research Society Vice Chairman and Former National Energy Administration Assistant Director Shi Yubo Delivers a Speech

Chinese Academy of Sciences International Cooperation Department Assistant Director Wang Zhenyu expressed congratulations on the successful opening of ESIE 2019.  He highlighted the use of energy storage in solving issues with large-scale renewable integration, expanding distributed energy storage resources, and creating smart grids, stressing energy storage as a core technology for the energy revolution. The Chinese Academy of Sciences has devoted significant resources to research in energy storage technologies, including the support of international collaborative projects and talent plans related to energy storage.  The Chinese Academy of Sciences will continue to strengthen its research in energy storage technologies as well as international collaboration through the International Energy Storage Alliance, founded by the Chinese Academy of Sciences Institute of Engineering Thermophysics last year.

Chinese Academy of Sciences International Cooperation Department Assistant Director Wang Zhenyu Delivers a Speech

Representing the conference organizer, China Energy Storage Alliance Chairman Chen Haisheng expressed that in 2019, “spring had now arrived” for energy storage in China.  In the past year, over 13 provinces and regions have released policies in relation to energy storage, providing a big boost to the market.  Yet a multitude of challenges still lie ahead: a compensation mechanism for energy storage has not yet appeared, storage technologies must improve, and costs and safety issues must be addressed.

China Energy Storage Alliance Chairman Chen Haisheng Delivers a Speech

In 2018, the value of grid-side energy storage began to become more apparent.  Tsinghua University Department of Electrical Engineering Professor Xia Qing shared how energy storage has brought new flexibility, smart solutions, and economic benefit to the grid.  Continued development in grid-side energy storage requires institutional innovations and policy support, much of which must come from changes in the practices of investment bodies, T&D pricing, remuneration, and management.

China Southern Grid is one of the world’s leading constructors of MW-level energy storage projects, developing the Baoqing energy storage station in Shenzhen in 2011 and continually expanding their range of applications.  They have also been active participants in the drafting of many domestic industry standards. According to China Southern Grid Science & Technology Department Assistant Director Zhen Yaodong, energy storage in China currently lacks a suitable commercial model.  Energy storage has now become an indispensable tool for grid frequency regulation, but determining who must foot the bill for storage must be settled before the technology’s range of use can be expanded.

China State Grid is the leader in domestic grid-side storage. As China State Grid Dispatch Center Assistant Chief Engineer Pei Zheyi expressed, electrochemical energy storage has already been implemented at all segments of the electrical system.  It is predicted that by 2035, as renewables energy capacity continues to expand, renewables will surpass coal power to become the primary energy source for the entire country.  Energy storage can help improve the effectiveness of renewables in the grid, providing frequency regulation services for thermal power plants, black start capabilities, and other important services.

The United States is one of the world’s largest energy storage markets, expected to surpass 1 billion USD in 2019.  As Energy Storage Association CEO Kelly Speakes-Backman stated, in 2018, the United States energy storage market saw a newly installed capacity of 777 MWh, an increase of 80% from the previous year.  Following the release of FERC Order 841, ten U.S. states passed stimulus bills for energy storage, giving the industry an additional boost.  By 2025, the total accumulated U.S. energy storage capacity is expected to reach 35 GW.

Energy Storage Association CEO Kelly Speakes-Backman Delivers a Speech

Speaking for one of the world’s leading energy storage systems integrators, Sungrow Power Vice President Cheng Cheng shared his company’s thoughts on energy storage applications.  Reflecting on 2018’s growth, Cheng Cheng stated that China’s massive breakthroughs in energy storage capacity are inseparable from recent technology innovations.  However, if we wish to see further developments in the future, we must devote our skills to improvements in safety, policy, costs, peripheral technologies, and other issues.  From an applications standpoint, we now see energy storage coupling with a variety of other industries and systems, necessitating efforts to develop new applications scenarios and models.  Further breakthroughs in “Energy Storage+” applications would be a great boon for the industry.

China Energy Storage Alliance Research Department Director Yue Fen presented on energy storage industry growth in the previous year, stating, “in 2018, the global energy storage industry experienced a giant leap in growth.  Global new operational electrochemical energy storage project capacity totaled 3698.8 MW, an increase of 304.6% in comparison to 2017.  Of this new capacity, China’s new operational electrochemical energy storage capacity totaled 682.9 MW, an increase of 464.4% in comparison to 2017.  China’s increase was second only to that of South Korea.”  With costs continuing to drop and application scenarios expanding, CNESA predicts that in five years’ time, China’s electrochemical energy storage market will see even larger growth.

China Energy Storage Alliance Research Department Director Yue Fen Presents on the CNESA Energy Storage White Paper 2019

As the opening ceremony wrapped, ESIE organizers invited representatives from the National Development and Reform Commission, Ministry of Industry & Information Technology, National Energy Administration, regional energy management bureaus, China State Grid and its subsidiaries, China Southern Grid and its subsidiaries, generation companies, private energy storage enterprises, and other industry experts together for a closed-door energy storage leaders meeting. Representatives discussed such themes as support methods for energy storage commercialization policies and market mechanisms, increasing energy storage application and technology requirements, ways of guaranteeing safe and reliable energy storage systems, and other pressing industry topics.

Johnson Yu: Energy Storage Technology Costs Have Reached a Turning Point

In 2018, the Chinese energy storage industry welcomed tremendous new growth.  According to China Energy Storage Alliance Global Energy Storage Database statistics, as of the end of 2018, China’s accumulated operational energy storage projects totaled 31.3GW.  Of this total, electrochemical energy storage projects accounted for 1072.7MW, 2.8 times that of the total accumulated operational capacity of 2017.  Newly added capacity totaled 682.9MW, an increase of 464.4% from the previous year.

The primary reason for such fast-paced industry growth has been the recent launch of grid-side energy storage projects which have come about in part due an increasingly supportive policy environment.  With the help of the Guiding Opinions on Promoting Energy Storage Technology and Industry Development, many new projects have been put into operation.  Industry reforms have brought about the first trial spot markets, and more than 13 provinces and regions have released policies addressing the construction of ancillary services markets, attracting the attention of many energy storage companies and bringing new excitement to the market.

At the same time, the industry has yet to fully move out of the demonstration stage and standards are only beginning to take shape. Industry competition has increased, and project profits have shrunk dramatically as safety concerns become more prominent.  The industry is now having difficulty keeping up with the pace of its own development and is in desperate need of improved systems solutions and standardization.

In 2018, China’s economy began to slow.  The combination of industry structural adjustment, financial deleveraging, and the U.S.-China trade war have all affected the industry, weakening confidence in long-term investment in technologies and the future market. Many energy storage companies felt pressure in the second half of 2018 due to a variety of factors, including financing difficulties, project delays, changes in ownership, and corporate restructuring.

Such difficulties also brought new opportunities.  After the massive changes to the solar industry brought about by the “531” policy, some advanced solar technology companies actually saw their business increase, and many solar PV projects have already begun delivering electricity without feed-in-tariffs.  Much like solar PV, the price of energy storage batteries is dropping 20-30% each year.  In theory, as of 2018, energy storage technology costs have already reached their turning point.

As an emerging industry, once such a turning point has been reached, development is likely to reach unpredictable speeds, bringing as many opportunities as it does risks and challenges.  The best method for meeting such opportunities and challenges lies among companies themselves to strengthen their operations abilities and the quality of their technologies.  Pioneering companies must emphasize technological improvements, innovations, and integration techniques, or risk becoming left in the dust as competitors pass them by.

With technology costs now closing in on an ideal target, three pathways are forming:

The EV battery path, which views the lowest possible technology price as the ultimate benchmark.  We have already surpassed the frequently mentioned 1.5RMB/Wh turning point, and even lower prices are now being discussed, with 0.5-0.7RMB/Wh cell manufacturing costs already appearing, and prices as low as 0.3RMB/Wh possibly emerging this year.

The non-lithium-ion path, focused on power and/or hybrid applications, which includes a variety of physical and electrochemical energy storage technologies that have already become frontrunners for new applications in many power markets.

The hydrogen energy storage path, which has already shown significant progress along a similar path of development as EV batteries.

The pace in which policies and a market mechanism are being developed lags significantly behind the industry’s speed of growth.  The lack of policies helping to lower costs and manage system safety has been a longtime concern, and has been particularly apparent in its effect on the behind-the-meter storage applications which have led the industry’s development.  It is our hope that relevant agencies and parties can address fire safety regulations with more urgency, and that local governments can give deeper consideration to the design of policies related to the energy storage industry in the future.

In contrast to other energy industry sectors in which energy storage frequently collaborates, energy storage is a small-scale industry with an equally small voice.  We hope that the industry can come together to create a true market and push for the release of meaningful policies.  Though current market conditions may be frustrating, we must not get discouraged.

Internationally, many emerging markets have shown impressive growth, though in Europe and Asia, there are still many regions that have remained untouched.  We hope that companies that are up to the challenge can cross international borders and participate in the international competitive market.

2019 is likely to be an inspiring year.  In technologies, we have seen many new breakthroughs, including solid-state electrolyte technologies which have upgraded traditional lithium-ion batteries, developments in a wide variety of sodium battery technologies, new breakthroughs in flow battery and Li-ion hybridization, the launch of a variety of physical energy storage projects, and the ever-increasing speed of hydrogen technology development.

Energy storage technologies have demonstrated versatility to support the electricity system, solar PV, and electric vehicles.  Energy storage will become a key technology for the future integration of transportation and energy, and ending reliance on traditional fuel sources such as coal and oil. Energy storage will become increasingly valuable in new application scenarios, and is destined to become a key component of China’s energy system.

In policies and regulations, we hope to see relevant government bodies coming to a greater understanding of the difficulties the industry has faced as it has developed, and will release supporting policies and regulations that will better reflect the current industry conditions.

We hope to have more opportunities in the future to work together with colleagues at all levels of the energy industry to discover more areas of collaboration, overcome challenges, and create a bright future for both energy storage and the entire energy industry.

Author: Johnson Yu, Vice Chairman, China Energy Storage Alliance.
Translation: George Dudley

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