First Flywheel Energy Storage System Group Standard Released in China

On April 10, 2020, the China Energy Storage Alliance released China’s first group standard for flywheel energy storage systems, T/CNESA 1202-2020 “General technical requirements for flywheel energy storage systems.” Development of the standard was led by Tsinghua University, Beijing Honghui Energy Co., and the Chinese Academy of Sciences Institute of Engineering Thermophysics, with participation from companies and organizations including Pinggao Group, Dunshi Magnetic Energy Technology Co., Shanghai Aerospace Control Technology Institute, the Chinese Academy of Sciences Institute of Electrical Engineering, State Grid Beijing Electric Power Research Institute, North China Electric Power University, Weikong Energy, BC New Energy, and others. Development of the standard took two years of research and discussion between the participants.

In August 2018, the China Energy Storage Alliance organized and hosted a seminar on flywheel energy storage system standardization at Tsinghua University. The seminar outlined the initial framework and scope for the flywheel energy storage standard. In December 2018, Beijing Honghui Energy Co. organized the second working group meeting to establish a plan for drafting the “General technical requirements for flywheel energy storage systems.” A first draft of the standard was completed at a working group meeting held in March 2019 at Tsinghua University, after which the Beijing Honghui Energy Co. submitted the CNESA standard for approval. The standard was officially approved by the Alliance Standards Committee on March 19. Following further working group discussions and revisions to the draft standard, CNESA solicited suggestions on the draft from September 6 to October 15, 2019. On November 29, 2019, CNESA held the last working group meeting at the Shanghai Aerospace Control Technology Institute, finalizing the technical content of the standard. In February 2020, a group composed of experts from Wuhan University, Beihang University, Beijing Sanyi Zhizao Technology Co., the China National Institute of Standardization, and other organizations reviewed the standard, determining that it remedied a large industry gap, providing realistic, scientific, and reasonable performance parameter indicators. The group agreed that the standard should be released as soon as possible, and recommended further improvements of standards to support flywheel energy storage systems. Following final approval by the Alliance Standards Committee, CNESA officially released the standard on April 10, 2020.

The cover of “General technical requirements for flywheel energy storage systems”

The “General technical requirements for flywheel energy storage systems” standard specifies the general requirements, performance requirements, and testing methods for flywheel energy storage systems. The standard is designed in accordance with domestic and international flywheel standard conventions, while also referencing related electrochemical energy storage system standards. The standard provides definitions for flywheel energy storage systems, related equipment, working statuses, and performance parameters, particularly as they related to storage capacity, standby power consumption, and storage efficiency. The standard has provided the flywheel energy storage industry with a clearer, more unified understanding of the necessary parameters for developing flywheel energy storage systems.

Current market trends have seen the application of flywheels in major industries such as the power grid, emergency power supplies, data centers, rail transportation, oil drilling, and other fields. Advantages of flywheels such as high frequency, high power, energy conservation, environmental friendliness, and long lifespan have caught the attention of many industries and experts. The release of the “General technical requirements for flywheel energy storage systems” will help to further promote growth of flywheel energy storage in a positive and safe direction.

Thank you to the following companies and organizations for supporting the development of this standard:

Amber Kinetics

Beihang University

Beijing Honghui Energy Co.

Beijing Sanyi Zhizao Technology Co.

BC New Energy

Dalian Hengli Technology Co.

Dunshi Magnetic Energy Technology Co.,

Erzhong Power Co.

State Grid Beijing Electric Power Research Institute

Huntsman Advanced Materials

North China Electric Power University

Pinggao Group

Tsinghua University

POWERCHINA Shanghai Electric Power Engineering Co.

Shanghai Aerospace Control Technology Institute

Shanghai CHN-ISR Investment & Development Co.

Weikong Energy

Phoenix Tree Capital Partners

Wuhan University

Bomay Electric Industries Co.

China National Institute of Standardization Ziyuan Branch

Chinese Academy of Sciences Institute of Electrical Engineering

Chinese Academy of Sciences Institute of Engineering Thermophysics

A Look at the Effects of the COVID-19 Epidemic on Energy Storage Industry Development and Related Policy Suggestions

The emergence of the COVID-19 epidemic at the beginning of 2020 has affected the production and operation of many companies and industries.  Like many industries, energy storage is now confronting challenges in manufacturing, promotion of projects, market development, and R&D.  Upstream and downstream sectors are both being tested. In general, because the energy storage industry is still in an early stage of rapid development, the epidemic is likely to have a limited impact on the overall market development for the year.  More important factors to energy storage development are the macro-level policies and market environment. However, there are many small and medium-sized companies in the middle and lower portions of the energy storage industry chain who focus on energy storage system integration, project development, and/or operation.  Many of these companies rely entirely on revenue from energy storage business, and are therefore the most vulnerable and likely to be severely affected in the short term.

Over the past ten years, energy storage has always been waiting for its spring to arrive.  Although the energy storage industry development path has always been unclear, industry stakeholders have still been determined to make progress, dedicating themselves to technological innovations and advancing the energy revolution.  Facing the new challenge brought on by the epidemic, CNESA member companies including CATL, CRRC, Sungrow, BYD, Narada, State Grid Investment Co., Huawei, ENN Group, VYCON, Sunwoda, Hyperstrong, Zephyr, Shanghai Electric, Risen Energy, Desay Battery, NIO, Yankai Energy, Hengtong Group, Chint Group, Chungway, EDF, and many others have donated funds, medical equipment, emergency power supplies, vehicles services, and other support to help those at the frontline of the epidemic.  As we wait for energy storage’s spring to arrive, we also share the concerns of others around the country and the globe as we all work together to get through this difficult time.

On February 5, CNESA began surveys of key member companies to understand their needs and concerns.  Their responses are summarized below.

Delays in Production and Business Recovery

Following the spring festival, resumption of work was managed by assessing how well the epidemic had been controlled and the needs of each individual company’s production and operation. Prior to February 14, only 60% of companies had returned to work. 35% of companies returned to work by the end of March, and the remaining 5% of companies are anticipated to return to work after March.  In addition, approximately 40% of companies plan to return to full pre-epidemic productivity within 2 months of returning to work. Affected by the current restrictions on mobility and isolation requirements across many regions, the production and operation of many companies has lagged significantly, and it will take at least 2 months to return to pre-holiday working status.

Delayed Launch of Established Projects

Large-scale energy storage projects set to go operational in the first half of 2020 now face the risk of delayed commissioning, and the total amount of installed domestic capacity in the first half of the year is likely to decline.  Bidding for some power grid and power generation company projects has been delayed, which will directly affect the development of these projects.  However, project delays should not affect the general yearly trend of energy storage applications.  2019 saw a number of large-scale projects put into reserve.  Most likely we will see a rebound of new project capacity through new projects launched in the second half of the year.  However, the original plan to accelerate the grid connection of solar PV and wind projects this year is likely to see such projects exceeding their deadlines for grid connection, which will also indirectly delay the launch of energy storage projects supporting renewables in many regions.

Difficulty in Developing New Projects Quickly

During the epidemic period, it has been difficult for companies to engage in business development activities due to changes in company operations and the inability to conduct business meetings.  Because energy storage project development is closely related to a customer’s electricity use load and power price sensitivity, customer companies that cannot operate normally or that are unable to return to work do not have any need to install energy storage projects. In addition, the government and the power grid have both released policies aimed at lowering the burden for companies, both by relaxing capacity changes and power tariffs, as well as implementing measures for periodic lowering of power costs.  In the first half of this year, the revenue for domestic energy storage projects (particularly behind-the-meter projects) has been impaired, and it will likely be difficult to launch new projects.

International Business May Also Suffer Short-term Constraints

During the PHEIC period, exchange between domestic and international markets has suffered from physical barriers and regulatory restrictions. International and domestic transportation has been reduced, while inspections and quarantines have lengthened market transaction times.  These measures have impacted the development and construction of energy storage projects in the international market, as well as the export of products at all levels of the value chain.  Problems such as delayed resumption of work, logistics challenges, and other issues signal that the export growth rate of the energy storage industry is likely to slow in the first half of the year.  However, some large companies maintain factories overseas that may be able to contain operations in areas that have not been significantly impacted by the epidemic, and can take on some of the burden of international business development and production.

Cost Reduction Rates Have Slowed

Over the past ten years, technological maturity and the increasingly large scale of the downstream applications market have driven the rapid decline of battery costs.  The future expansion of energy storage in the energy system is the key to accelerating the advancement of energy storage technology and reducing energy storage costs.  At present, the prices of upstream raw and auxiliary materials have risen, the prices for domestic and international logistics and transportation have risen, and the costs of labor have risen, leading to increased production and operating costs for companies.  In addition, expansion of the downstream applications market is unachievable in the short term, with electrical vehicle demand now limited and the decline of energy storage costs beginning to slow.  Investment returns on energy storage projects are also certain to be affected. Nearly 80% of companies surveyed are worried about reduced operating income and tightening of liquidity. More than 30% of companies expect that revenue in the first half of the year will decrease by more than 20% in comparison to the same period in 2019.

Related Policy Recommendations

Small and medium-sized energy storage companies have relatively weak capabilities to tolerate risk.  During the epidemic period, we hope the government will provide targeted support including tax relief and social insurance support, reducing business operating costs by exempting or reducing corporate tax rates and delaying social insurance payments.  To assist with the difficulty of project financing and fund repayment, we hope to see an increase in financial support from the government that will help reduce pressure on companies and projects.  Once it is certain that the epidemic has been contained, we hope to see a resumption and acceleration of the construction of large energy storage projects, paving the way for the smooth commissioning of projects in the second half of the year. We also hope that government investments in energy will increase in the energy storage category, and that preferential funding will be provided for such projects. At the same time, as we face both challenges and opportunities brought by the current environment, we hope that China’s energy storage product manufacturers can maintain their role in the global market, improve the value of core energy storage companies through international cooperation, and support energy storage technologies and industry as a quality growth point for China’s economy.  In the long term, as part of the development of the “Fourteenth Five-year Plan,” we hope that the development needs of energy storage can be considered as part of the development of the national economy, and that planning for the development of the energy sector, power sector, and renewable energy sector will all incorporate energy storage.  Special development planning should also be included for energy storage itself, guiding the industry’s development and applications, strengthening energy storage’s strategic role in the energy transition, and showcasing energy storage’s value in contributing to the social economy.  In addition, we must also see timely and substantial breakthroughs in the policy and market environment related to energy storage industry development and technological applications.  While ensuring China’s energy storage industry is both of high quality and technologically advanced, we must also work to stimulate a vibrant market, expand the scale of the market, and use the large domestic demand for storage which has driven industry development thus far to help drive global technological development and market compatibility.  We welcome energy storage industry colleagues to provide feedback on these ideas.  CNESA will communicate industry difficulties and private industry needs to government energy agencies, and make suggestions that will support positive industry growth.

Conclusion

Following the release of the “Guiding Opinions” policy in 2016, China’s energy storage technology and applications growth saw a gradual acceleration.  Energy storage in all of its applications saw the beginnings of commercialization, though a supporting policy structure and market environment has still yet to appear.  The COVID-19 epidemic is not likely to affect the overall trend of energy storage industry growth.  As our industry survey shows, 64% of companies strongly believe that new opportunities will emerge after the outbreak is contained, and will make such opportunities the focus of business development.  Most companies also believe that the energy storage market can still achieve its predicted growth rate in 2020.  We hope that the government and power companies will implement policies which will help to guide the energy storage industry forward.  We also hope that energy storage system suppliers and product manufacturers will remain devoted to technological innovation.  We look forward to a fully-realized commercial energy storage market and large-scale industry development in the post- “Guiding Opinions” period.  Finally, we look forward to energy storage becoming a major contributor to the construction of China’s future energy system and an industry which supports overall economic growth.

Author: Wang Si, China Energy Storage Alliance
Translation: George Dudley

Energy Storage in 2020: Continued Growth Should be the Year’s Trend

In 2019, energy storage continued to grow.  According to statistics from the China Energy Storage Alliance, by the third quarter of 2019, China’s operational energy storage capacity totaled 31.69GW, of which electrochemical energy storage capacity totaled 1.27GW.  Yet in the second half of the year, due to the influence of the “Measures for the Supervision of T&D Power Pricing Costs” and other policy and market factors, progress in energy storage exhibited a noticeable slowdown.  Under such conditions, how should the energy storage industry adjust its course and face its challenges?

Urgent Improvements Needed in Efficiency

In 2020, improvements must be made in the lifespan, efficiency, and safety of chemical energy storage technologies. New progress is expected in high-safety lithium battery, solid-state lithium battery, and high energy density flow battery technologies.  Further increases must also be made in the scale and efficiency of physical energy storage, while new progress is expected in key technologies such as 100MW advanced compressed air energy storage, high density composite heat storage, and 400kW high-speed flywheel energy storage.  In both electrochemical and physical energy storage technologies, further cost reductions are needed to promote commercialization.

In the past ten years, mainstream energy storage technology costs have dropped 10% - 20%.  Prices are expected to continue to decrease throughout 2020, but the costs of energy storage technologies will not decrease indefinitely. Once a certain scale is reached, the pace of cost reduction will slow until it finally stabilizes.  More importantly than costs, China must also work to master original technologies with independent intellectual property rights in order to achieve core competitiveness and establish a solid foundation for development.

To improve core competitiveness, the industry must make efforts in four areas:

• Electrochemical energy storage technologies, particularly those which develop quickly such as Li-ion batteries, must see improvements such as increased system safety, lifespan, environmental suitability, and reliability at the same time that performance of single cells is improved to meet customer needs.  Different battery products must also be developed to suit varied energy storage applications.  Finally, as the energy storage market continues to expand, a battery recycling industry chain is urgently needed and should be developed as soon as possible.

• Physical energy storage, including new model CAES technologies, cold storage, heat storage, flywheels, and other technologies should be the focus of a greater number of pilot projects and applications.

• Energy storage technology standards must be continuously improved. During the "Thirteenth Five-Year Plan" period, China established an initial energy storage technology standards system, but further improvements to the standards system are needed, particularly those related to energy storage system structure and system safety.

• Increased personnel training.  Energy storage is a multidisciplinary industry which combines physics, chemistry, and other subjects. However, at present, there are insufficient multidisciplinary talents in the industry.  The cultivation of such composite talents should be an area of greater focus.

“New Recruits” Still Need Support

After 2020, the renewable energy industry will fully enter the grid parity era.  The increase in the proportion of grid-connected renewable energy will help energy storage applications go from an “accessory” to an indispensable key supporting technology.  Therefore, we can expect energy storage to see much greater demand in the near future.

Though business opportunities are plentiful, we must also recognize that no matter whether we are speaking of solar, wind, or energy storage, we are dealing with a “new recruit” to the energy system, with great potential for development that cannot occur overnight.  During 2020 and the “Fourteenth Five-year Plan” period, the energy storage industry will still require the support of a mature market mechanism and continued policy improvement:

• First, it is necessary to strengthen top-level planning from the government, including the incorporation of energy storage into the national energy development plan, the implementation of special energy storage projects, comprehensive planning of the development of industry technologies and applications, the establishment and improvement of support polices, and effective promotion and implementation of various measures that will unite government, industry, education, and research together to further development.

• Second, peak and off-peak price differences must be guaranteed, the frequency regulation price mechanism must be improved, and capacity fees must not be charged for energy storage stations.  Additionally, policies must be advanced which promote the compensated participation of energy storage in market transactions, and a compensation mechanism for energy storage services must be developed that is compatible with market-oriented power services.  We must also promote pilot programs for an energy storage compensation mechanism, and establish a matching price mechanism for energy storage capacity.  We must also create a mechanism for supervision of compensation, and establish severe punishments for those that violate regulations.

• Third, we must accelerate the market-based applications for energy storage, and establish the “who benefits, who pays” mechanism for storage applications as soon as possible.  We must also accelerate the establishment of a marketized transaction mechanism and price formation mechanism for flexible resources such as energy storage, encourage energy storage to participate directly in market transactions, and utilize the market mechanism to generate profit and stimulate market vitality.

• Fourth, we must research a mechanism for recycling of battery energy storage systems and establish a waste battery disposal mechanism.  These actions will eliminate the possible environmental pollution caused by the energy storage battery industry chain, and ensure the green and sustainable development of the energy storage industry.

Risks and Opportunities During the COVID-19 Epidemic

At present, the COVID-19 epidemic has impacted nearly all of China’s industries to varying degrees. In comparison with those industries that have been directly affected by the outbreak, such as dining, entertainment, tourism, and exhibition, the impact to the energy storage industry has been more indirect.

The impact on energy storage companies has been felt in both production and operation.  Large-scale companies (such as state, party, and/or listed companies) have strong capabilities to combat risk, and the major impact has largely been in the ability to return to production and operation.  In areas hit hard by the epidemic, factories have been shut down, and employees living in such areas have had difficulty returning to work.

Yet at the same time, compared to traditional businesses, the impact of the epidemic on energy storage business has been relatively small.  This is due to the fact that energy storage often occupies only a small portion of the total business of these larger companies.  In addition, energy storage projects typically have a long development period, meaning that many companies have already accounted for long timelines.  Additionally, companies with factories outside of the major epidemic areas may be better able to manage production risks.  Nevertheless, at present, the epidemic’s international impact is extremely complicated, and it is not yet possible for companies to accurately estimate the damage done to the global energy storage industry.

In contrast to large companies, the impact to small and medium-size companies is substantial, primarily to business operations and business development.  Project delays cause cash flow problems and pressure on operations.  Potential business activities among energy storage customers and partners are likely to see cancellations or extensions.  Small and medium-sized companies are not as able to defend themselves against major risks.  These companies must hope that the epidemic will end as quickly as possible, and that they may see government support in the form of tax relief, financing, and or social insurance breaks.

We expect that the overall impact of the epidemic on the domestic energy storage industry will mainly be felt in the first quarter. Short-term impacts on cash flow will be relatively large, but impact to the entire year will be limited.  We should remain optimistic about the development of energy storage in 2020.  Recent CNESA surveys as well as inevitable government policy stimulus to the economy once the epidemic is contained both suggest that the energy storage market will continue to grow steadily in 2020, with high probability of better overall performance than 2019.

Authors: Chen Haisheng, Chairman, China Energy Storage Alliance, and Liu Wei, Secretary General, China Energy Storage Alliance
Translation: George Dudley

Thoughts on Grid Safety and Emergency Response During the COVID-19 Epidemic

The construction of a power grid emergency response system refers to the improvement of rapid grid response and management of events such as typhoons, floods, fires, ice storms, lightning strikes, earthquakes, war, geological disasters, network attacks, chain reaction accidents, and other catastrophes.  Such events require rapid and careful response to minimize impact and loss, provide adequate dispatch, quickly restore power supply to key infrastructure, and repair grid networks quickly.

Below, we identify some key factors related to grid emergency response, and suggestions for improvement:

1.       Include “solar+storage” and other new energy technologies as part of the grid’s emergency response infrastructure

“Solar+storage” can help stabilize the intermittency and fluctuation of solar generation during normal operation of the power grid.  In the event of a grid accident, “solar+storage” systems can help restore grid operations within a certain range.  When necessary, such installations can also provide blackstart services.  Grid-connected intelligent microgrids, energy storage, and mobile power generation should also be included in grid emergency system infrastructure. In the event of a power grid security emergency, it is necessary to ensure that emergency power sources for government, emergency command, communications, hospitals, television stations, and other key infrastructure are fully available, and that technologies such as mobile generator vehicles and emergency repair teams are in place in a timely manner.

2.       Reduce the burden on smaller power generation companies and improve emergency response capabilities

We recommend reducing the burden on smaller power generation companies caused by excessive reports, price competition, inspection, evaluations, approvals, index ratings, and other requirements.  Grid experts, engineers, and other personnel should be encouraged to speak the truth, suggest rational solutions, respond to problems as soon as they are discovered, and report equipment defects in a timely manner, thereby minimizing the risk of accidents.

In the event of a power grid emergency, dispatch orders must be strictly followed.  Workers and responsible entities must respond quickly, flexibility, and efficiently according to voltage level, territorial scope, dispatching area, grid dispatching regulations, safety regulations, field operation regulations, accident recovery procedures, and accident analysis procedures.  The grid should not risk the possibility of a large-scale power outage due to excessive red tape, delays in the chain of command, step-by-step reporting requirements, or similar regulations.

In order to improve emergency response capabilities, emergency repair materials and equipment should be set aside in advance. A suitable amount of urgent maintenance materials should be prepared and properly distributed to ensure that they can be delivered to repair sites in the shortest possible time. Such materials include distribution transformers, switch cabinets, ring network cabinets, wires, cables, complete sets of hardware, protective masks, and other key components.

3.       Prepare accident response drills and grid emergency drills in accordance with regional conditions 

A power grid emergency response system should be based on the principles of early prevention and early warning.  A variety of accident preparedness plans should be in place before an accident happens, and grids should always be prepared for the worst. In normal times, frequent drills should be conducted. When an accident does occur, departments including those responsible for dispatch, safety supervision, equipment, vehicles, administration, and medical services should respond quickly, maintain smooth communication channels (especially wireless communication), and coordinate together to provide a meaningful response.

Emergency drills should be adaptable to a variety of situations rather than repeated blindly.  Emergency drills for large-scale power outages should be conducted at the prefectural level.  Such drills include grid blackstart emergency response drills, substation shutdown response drills, flood response joint drills, large-scale power outage joint drills, and others.  These prefecture-level drills should be conducted in close contact with provincial and municipal governments, related departments, as well as key infrastructure.  A national power emergency response training base should be established, as well as a national power emergency repair and rescue team.  When necessary, an appropriate team should be dispatched to handle emergency repairs.

4.       Strengthen weather monitoring to anticipate ice storms and prevent conductor gallop

At present, we are currently in a transition from winter to spring, a time in which grid infrastructure in regions such as Hubei, Hunan, Anhui, Jiangxi, and other provinces is prone to ice storm disasters and conductor gallop.  Under certain weather conditions, transmission lines may form ice, which when combined with sufficient windflow, can cause the power lines to oscillate, a phenomenon known as conductor gallop.  If severe, conductor gallop may cause trips, disconnections, metal fatigue, and even tower collapse, leading to widespread power outages.

Power companies in Hubei, Hunan, Anhui, Jiangxi, and other regions prone to these type of weather conditions must pay close attention to meteorological forecasting, strengthen monitoring of ice conditions and conductor gallop, provide timely warnings on cold weather conditions, increase special patrol and special protection of power lines, develop emergency repair plans, and develop additional accident preparedness and deicing strategies to respond to conductor gallop.  With the center of the outbreak located in Wuhan, it is a reminder of how important it is for the grid to ensure emergency hospitals in Hubei and other severely affected regions supplied with stable power.

Thoughts and suggestions

Although the outbreak of the COVID-19 epidemic may be thought of as an emergency in the field of public health, it also provides an opportunity for those in the energy sector to consider the safety and emergency preparedness of the power grid.

The sudden outbreak of the COVID-19 epidemic has exposed problems such as untimeliness in warning systems, response, and decision-making, as well as improperly enacted control measures, and inadequate implementation.  This is especially true in the lack of respect that was given to professionals in the medical industry.  The mistake of labeling eight doctors who dared to bring the true situation to light as “rumor makers,” failure to act within the ideal time frame, and failure to contain the epidemic in its nascent stages all failed to embody the principle of early and responsible action.

Thoughts for the power grid’s emergency response system:

1.       Establish and improve an early warning system for emergencies according to the law

The “Emergency Response Law of the People’s Republic of China” stipulates, “When a natural disaster, calamitous accident or public health incident that can be forewarned is imminent or the possibility of its occurrence increases, the local people’s government at or above the county level shall, within the limits of its power and in compliance with the procedures, as prescribed by relevant laws and administrative regulations and by the State Council, give an alarm of the appropriate grade, decide and declare that the areas concerned enter a period of early warning and, at the same time, report the matter to the people’s government at the next higher level and, when necessary, it may do so by bypassing the government at the next higher level.”

“The early warnings about natural disasters, calamitous accidents and public health incidents that may be forewarned shall be classified in four grades: Grade 1, Grade 2, Grade 3 and Grade 4, which shall be indicated respectively in red, orange, yellow and blue, Grade 1 being the highest one.”

2.       Establish a specialized power grid emergency response mechanism and emergency response team

Establish mechanisms for emergency plans, emergency response, emergency decisionmaking, emergency command, emergency notification, and emergency operations. Create a specialized, rapid-response power grid security emergency team that can be on standby at any time. A diverse team of specialists will help ensure the grid remains stable and that emergencies can be dealt with quickly.

3.       Establish a mechanism for raising suggestions and fostering communication

We must respect industry experts who are willing to provide rational and valuable suggestions, and not punish or ignore those who maintain different opinions.  Expert opinions should be treated as beneficial to the grid and grid security, and never as malicious.  In any system, if no one discovers problems, no one raises questions, and no one is willing to speak up or go against the grain, then the whole system is at risk.  This is no different in the context of the power grid and grid security.

Specific methods:

1.       Utilize internet technologies to establish a platform for specialists, engineers, and even junior staff to provide suggestions and establish communication.  Such a platform will allow concerns about grid safety and operations to be heard clearly and proper solutions implemented quickly. A national database of experts should also be created that can respond quickly to safety concerns.

2.        Utilize big data analysis to proactively find faults and hidden dangers in the grid and conduct proper repair measures before accidents occur. Smart apps, intelligent robots, remote monitoring, remote maintenance and operations, fault location, fault inspection, and other advanced methods can be used to quickly handle defects and remove hidden dangers before they become a problem.

3.       Establish a remote office system, remote conferencing system, cultivate remote management talents, and build grid companies’ own remote emergency response team.  Develop remote software that can be used for emergency response inside grid companies.

Final Thoughts

During the COVID-19 outbreak, the power grid is tasked with focusing on its own epidemic prevention and control, ensuring safe operations of the grid, resuming production, and continuing power supply marketing.  The grid must particularly take care of personnel and their families to ensure that they are not put at risk of infection.  The grid must also ensure that dispatchers, substation operations managers, and emergency repair personnel at all levels can quickly respond to national grid security emergencies and restore power to key infrastructure. If the epidemic experience tells us anything, it is that grid personnel should not be afraid to speak up should safety issues be found, nor should they risk reprisal for doing so.  We must also be sure to avoid unnecessary bureaucracy and strict adherence to the chain of command when such practices may cause delays that would prevent action from being taken before it is too late.  When disaster strikes, we must make every effort to act as quickly and decisively as possible.

Originally Published in China Energy News
Author: Feng Qingdong
Translation: George Dudley

2019 China Energy Storage Industry Roundup - Moving Forward While Adapting

According to statistics from the CNESA global energy storage project database, by the end of 2019, accumulated operational electrical energy storage project capacity (including physical energy storage, electrochemical energy storage, and molten salt thermal storage) in China totaled 32.3 GW. Of this total, new operational capacity exceeded 1 GW. New operational electrochemical energy storage capacity totaled 519.6 MW/855.0 MWh (note: final data to be released in the CNESA 2020 Energy Storage Industry White Paper). In 2019, overall growth in the development of electrical energy storage projects slowed, as the industry entered a period of rational adjustment. As we enter 2020, how do those in the industry view and understand the future development path for energy storage? To answer this question, CNESA surveyed energy storage experts and industry leaders to provide readers with an understanding of the current state of energy storage in China, and where the industry is headed in the future.

 Chen Haisheng, Chairman of the China Energy Storage Alliance:  

When judging the progress of an industry, we must take a rational view that considers the overall situation, development, and long-term perspective. In regard to the overall situation, the development of energy storage in China is still proceeding at a fast pace. Although the capacity of energy storage installed in China decreased in 2019, we continue to see steady growth. The installation of electrochemical energy storage in China saw a steep increase in 2018, with an annual growth rate of 464.4% for new capacity, an amount of growth that is rare to see. Subsequently, the lowering of electrochemical energy storage growth in China in 2019 compared to 2018 should be viewed rationally.

From the perspective of development, the sustained driving power for rapid development within the energy storage industry has not changed. First, the development needs of the energy revolution, especially the huge demand for energy storage caused by the large-scale growth of renewable and distributed energy have not changed. Second, the early accumulation of energy storage technology and industry already has established a tenacious vitality and basis for rapid development which has not changed. Third, the direction of reforms of the national power system and power markets have not changed, and the benefits brought by these policies have continued to increase. Positive factors in the development of the current energy storage industry still dominate.

From the long-term perspective, we should maintain strategic focus, retain a rational view of the development process of the energy storage industry, and ensure correct judgment. The development of any industry is a process, one in which there will be several ups and downs, all of which are normal. In many ways, the necessary adjustment of an industry once it has reached a certain stage is more conducive to the long-term development of the industry than if no such adjustment were to occur.

A message to energy storage colleagues: sometimes, to slow one’s pace is to allow one’s steps to move steadier and travel farther.

Xia Qing, Professor of Electrical Engineering, Tsinghua University:

The takeoff of grid-side energy storage in 2018 injected new vitality into the whole market, not only bringing new points of growth, but also driving a reduction of costs for energy storage technologies and guiding technologies towards a direction more suited to the power system. However, in 2019, the development of grid-side energy storage began to suffer due to policy restraints.

Whether energy storage can be used as a grid asset depends on multiple factors: is the market for grid-side energy storage an open one? Can fair prices be formed through a market mechanism? Can a mechanism be formed which promotes rational investment in the grid? I believe that a mechanism which solves these problems is not far away! However, the proper index for new investment in energy storage at the grid side is the cost of power supply per unit. Only when the relative history of this index does not increase will it be proven that investment in grid-side energy storage really holds value and can effectively reduce the cost of transmission and distribution. Such are the basic conditions for energy storage to be included in the cost of transmission and distribution of electricity.

Energy storage is of vital importance to the energy transition. The opening of the power market can help elevate energy storage to become a natural core part of the power market. At the same time, it can also reflect the functional value of energy storage as a flexible resource. A market in which the beneficiary is the one to pay the cost for services is also key to promoting the commercialization of energy storage.

A message to energy storage colleagues: only those companies who fight during these tough times, make efforts to innovate, and lower their costs can achieve success in the energy storage industry of the future!

Lai Xiaokang, Chief Expert, Institute of Electrical Engineering, China Electric Power Research Institute:

The energy storage industry has experienced many ups and downs over the past decade. The problems the industry has faced have changed as it has moved through different stages of development. One of the first challenges was that of energy storage technology itself: whether storage technology functions could be realized in the power system. Application conditions had to be verified through development of energy storage demonstration projects. Focus later turned to the high costs of energy storage, the progress still needed to develop large-scale applications, the immaturity of the upstream and downstream value chain, and other issues. What we are facing at the current stage is a deeper problem, that is, how the multiple values of energy storage can be brought to the power system, how they can be quantified, and how business models can be designed. For example, how can we calculate the value of energy storage as a substitutive technology for reducing investments needed for electricity transmission and distribution? Such a question is a challenging emerging research direction.

Facing changes at the generation side, the power system needs flexible resources. The question of which technologies should be combined with which kind of power supply, especially for long duration energy storage demands, needs to be carefully considered, researched, and relevant solutions put into practice. We hope energy storage practitioners will lay a solid foundation in basic research, key technologies, equipment manufacturing, raw materials, and operation and maintenance.

The energy storage industry is not one which can make fast money. Regardless of the type of market players considering long-term strategic involvement in energy storage, small steps are the right way to develop. In the future, as a greater proportion of renewable energy enters the grid, there will be a rigid demand for energy storage technology. As long as there is demand, the industry is bound to move forward healthily, continuously, and steadily. We should be willing to face the difficulties in the process of industry development, and solve these challenges through mechanism innovation, business model exploration, and the development of energy storage technologies which are suited to practical applications.

A message to energy storage colleagues: remember to look for the rainbow after the storm.

Li Hong, Researcher, Institute of Physics, Chinese Academy of Sciences:

In 2019, China's physical energy storage technology made important breakthroughs. The world’s first 10 MW advanced compressed air energy storage project passed acceptance by the Ministry of Science and Technology, and the world’s first 100 MW advanced compressed air energy storage project officially began construction in Zhangjiakou. Thermal storage technology also blossomed, with sensible heat storage technology seeing wide use, and phase change technology gradually becoming a research hot spot. Achievements in flywheel technologies saw a 2 MW flywheel energy storage used in the implementation of a rail transit project demonstration. A domestic 250 kW high-speed flywheel was applied in a UPS demonstration, and breakthroughs were made in key technologies for a single 400 kW high-speed motor.

In 2020, chemical energy storage technology needs to further improve lifespan, efficiency, and safety. New progress is expected in high-safety lithium ion batteries, solid-state lithium ion batteries, and a new generation of liquid flow battery technologies. Physical energy storage technologies need further improvements in scale, efficiency, and popularization, and substantial progress is expected in 100 MW advanced compressed air energy storage, high density composite heat storage, and 400 kW high speed flywheel energy storage key technologies.  Both physical and chemical energy storage need to further reduce costs to promote the commercialization of energy storage. The cost of mainstream energy storage technology has decreased by 10-20% per year over the last 10 years. This trend will continue in 2020, but the cost of energy storage technology cannot be infinitely reduced, and it is expected that costs will become stable after energy storage reaches a certain scale. More importantly, only by mastering original technologies with independent intellectual property rights can China's energy storage technology have core competitiveness and can China's energy storage industry development be said to have a solid foundation.

A message to energy storage colleagues: we must continue to work hard and forge ahead!

Tan Libin, CATL:

In 2019, the energy storage market saw frequent ups and downs. Events in South Korean have prompted prudence over the safety and reliability of energy storage products. The development of the front-of-meter energy storage market in the United States has allowed people to see the value of energy storage while pursuing large-scale clean energy.  In Japan, the growth of the household energy storage market has signified consumers’ increasing awareness of disaster recovery and their desire for reliable electricity security.

In 2019, CATL made breakthroughs in lithium compensation mass production technology and applied it to lithium iron phosphate batteries, achieving a unit cycle of 5400 times, capacity retention rate >92%, and a battery system energy conversion efficiency of 93%. This new technology was applied to the Fujian Mintou 108 MWh energy storage project. At the same time, CATL also explored new technological and commercial solutions in many energy storage applications such as renewable energy plus energy storage, peak shaving, industrial and commercial behind-the-meter energy storage, island microgrids, and more.

In 2020, the role of energy storage in the electricity market will continue to grow – energy storage will break through its limitations to developed countries and certain regions, and will contribute to the evolution of energy structures in developing countries and drive industrial development. The fundamental reasons for the development of the energy storage market are public demand for clean energy and their demand for improvement of environmental problems, the willingness of people to pursue cheap energy, the ability of the power system to connect large-scale renewable energy to the grid, and the “intelligentization” of electric power dispatch. The advancement of technology is not the fundamental factor in the emergence of the new market, but it can greatly promote the development and maturity of the emerging market.

A message to energy storage colleagues: in 2019, we learned and adapted. In 2020, let’s use our knowledge to make the energy storage market solid and robust.

Gu Yilei, Sungrow:

2018 can be said to be “year one” of energy storage in China, with the market showing signs of tremendous growth. 2019 was a somewhat confusing year for the energy storage industry, but Sungrow’s energy storage business has relied on long-term cultivation and market advancement overseas, and its number of global systems integration projects has exceeded 900. Sungrow has also launched many domestic large-scale benchmark projects in grid-side, generation-side, behind-the-meter, and other applications.

As early as 2010, Sungrow has raised its energy storage business to a strategic level as one of the company’s priorities for future development. In the past decade, although China's energy storage industry has been slow to usher in its “spring season,” Sungrow has remained engaged and enthusiastic in energy storage, and has continued to invest in technology research and development each year. The development of energy storage and the development of solar PV are in many ways analogous, but there are also many differences between the two, with the development of solar PV occurring gradually, whereas energy storage must go through a long period of accumulation before costs may become low enough for the industry to take off.

Overseas energy storage markets such as Europe, the United States, and Australia have developed in a healthy way. Compared with foreign markets, China's energy storage industry has seen neither subsidized support nor a market-oriented electricity price mechanism since its inception. We hope that China can borrow more from the advanced policy and market designs of other countries, thereby allowing energy storage enterprises in China freedom to do well what they are good at, innovate continuously, strive to reduce costs in each link of the value chain, improve safety and reliability, and make technologies which stand the test of application.

A message to energy storage colleagues: only through continued internal practice and making sufficient preparations in technology, products, markets, and customers can we have the ability to embrace the “spring” of energy storage.

Chen Shengjun, CRRC New Energy Technology:

2019 was a year of rapid development for the application of energy storage technology in the field of transportation. In the automotive field, we saw impressive expansion of NMG battery EVs, LiFePO battery EVs, PHEV models, and 48V hybrid models. Fuel cell passenger cars also provide much to look forward to. Subsidy policies have led to great developments in electric vehicles, and have also promoted the development of battery technologies, improving performance and safety, decreasing costs, and have also led to the electrification of ships. 2019 saw batch operations of renewable-energy-powered passenger and freight transport in the inland rivers and lakes of China, among which the largest renewable energy bulk carrier provided by EVE Energy can reach 5000 tons.

In the field of rail transit, supercapacitors, hybrid capacitors, and lithium titanate batteries have been used in tram and train drive power supplies. CRRC developed hybrid technology equipped with supercapacitors and lithium titanate batteries has brought a leap forward for internal combustion engine development. CRRC established a fuel cell industrialization base in Jiangsu in the last quarter of 2019, and also announced that traditional locomotives would move towards renewable energy sources. At the same time, supercapacitor brake energy recovery systems at the station level have also begun to be applied at a large scale in China.

The development of energy storage technologies in the field of transportation demonstrates the trend toward application diversity, power and energy balance, long life, high safety, and low cost.

A message to energy storage colleagues: in 2020, with the further development of market-oriented applications, the single policy-driven market is developing towards a benign one. We have reason to believe that in the field of transportation, energy storage technology will have a bright future.

Shicheng Wang, Soaring Electric:

In 2019, Soaring Electric’s energy storage business made new achievements in its ten years of practice. Total new energy storage project capacity surpassed 100 MW, the new generation of three-level 630 kW PCS once again became the most efficient and rapid energy storage converter in the industry, and the large-capacity mobile energy storage vehicle was officially launched and put into use as an important power supply facility for the parade celebrating the 70th anniversary establishment of the Navy. Even during the industry’s adjustment period, Soaring Electric has made significant progress and gains in business expansion and technological innovations.

The value of energy storage for power systems and the energy revolution is beyond question. We believe that the government can view the huge technological and commercial value of energy storage from the strategic perspective of the energy revolution, and promote the healthy and positive development of the industry. The government can provide positive industrial policy support and guidance, consolidate the industry’s advantages, and create a business cluster effect, allowing China to become a global leader in this major future market.

In this new year, Soaring will strengthen its potential, develop its internal practice, and continue to promote the improvement of enterprises in products and services, working together with industry colleagues to promote the healthy and positive development of the energy storage industry.

A message to energy storage colleagues: the energy storage trend is irreversible. We are Soaring. In the new year, may Soaring and our colleagues in energy storage work hard to create a better energy storage future.

Wu Xianzhang, Narada Power:

Narada Power is one of the first enterprises in China to expand the C&I applications of energy storage, which is the leading application in installed capacity size and the number of projects.

At the beginning of 2019, Narada actively responded to market changes, strategically adapted its energy storage business sector, and shifted from an investment and operations model to power station sales, BOT model, and systems integration. Through the upgrading of equipment technology and enrichment of the product line structure, Narada actively expanded into new applications, new models, and new areas. By the end of 2019, energy storage projects with a cumulative size of more than 200MW had been put into operation in applications such as peak shaving and frequency regulation, renewable energy integration, generation-side thermal storage combined frequency regulation, and overseas energy storage markets.

However, due to the external economic environment and the instability of the company's own operating conditions, insufficient consumption, and a single user-side energy storage profit model, the commercialization of behind-the-meter energy storage has become passive. Following the global trend of energy restructuring, Narada Power recommends the following:

In the portions of the 14th Five-Year Plan related to renewable energy and electricity, energy storage should be included in the top-level design of the energy plan, and the technical route, standards system, operations management, and price mechanism of energy storage should be clarified in order to promote the large-scale application of energy storage in the energy industry.

• Speed up the construction of the power market, give energy storage power stations independent identities, and establish an energy storage price formation mechanism within the electric power spot market.

• Actively carry out pilot experiments on energy storage innovation and application policies, and remove policy barriers such as equipment access, subject identity, data interaction, and transaction mechanisms.

• Research and formulate relevant policies and regulations on finance, taxation, insurance, etc. that are suitable for the development of new energy storage models.

With the accelerated growth and development of the energy storage market, in 2020, Narada Power will continue the strategic planning of its energy storage business. In terms of technology, it will lead through a dual engine of lead-carbon/lithium battery technology, increase research and development reserves, and upgrade its energy storage equipment manufacturing. Narada plans to create a safe, efficient, and stable core product competitiveness, develop industrial-scale applications, and transform into an industry unicorn!

A message to energy storage colleagues: remember that success comes to those who strive through tough times. We hope that the energy storage industry will continue to become better and better!

Cao Hongbin, ZTT:

In 2019, ZTT continued to power the energy storage market, participating in the construction of the Changsha Furong 52 MWh energy storage station, Pinggao Group 52.4 MWh energy storage station, and other projects, as well as providing a comprehensive series of energy storage applications such as energy storage for AGC, primary frequency regulation, AVC, “source-grid-load,” and other functions. ZTT raised 1.577 billion RMB in 2019 to invest in 950 MWh of distributed energy storage power station projects and launched a safe and intelligent behind-the-meter energy storage system. Whether behind-the-meter energy storage can become popularized in large-scale applications is an important indicator for real energy storage growth. Currently, commercialization is still the most difficult problem for the development of behind-the-meter energy storage. ZTT’s efforts hope to accelerate the commercialization of behind-the-meter storage.

Participation in the whole value chain is one of the three core values of ZTT. This participation brings advantages such as supply speed, equipment compatibility, quality control, and price. ZTT has been involved in the complete value chain of energy storage, including core components such as battery positive and negative electrode materials, copper foil, structural parts, lithium batteries, PCS, EMS, energy storage containers, and other components. ZTT will focus on technology innovation and other means to achieve substantial reduction in energy storage costs, improve investment yields, and boost the commercialization of behind-the-meter energy storage. At the same time, ZTT plans to bring large energy storage systems and small household energy storage systems to overseas energy storage markets.

A message to energy storage colleagues: "Energy storage+solar " is the ultimate energy solution of the future, and also the most affordable energy source of the future. We sincerely hope that our fellow colleagues who love energy storage will invest their enthusiasm and dedication to the cause of breaking down technical barriers and creating innovative business models for energy storage in China!

2019 China Solid State Battery Project Review

Solid-state batteries have seen recent breakthroughs in basic research and development.  Solid-state batteries have remarkable energy density and safety performance, but many industry insiders believe that solid-state battery technology barriers are high, and they will not see mass production in the short term. Yet the market is generally good for the future of solid-state batteries. Volkswagen has announced that it will build solid-state battery production facilities by 2025, and new Chinese vehicle manufacturers such as Weltmeister, Enovate, Nio, and others are also exploring the commercial use of solid-state batteries. The number of battery production projects announced to be built or newly built in China's EV battery market in 2019 is still considerable even during the industry’s current so-called "darkest moments", with new production capacity exceeding 400GWh. This capacity includes the investment and construction of new battery technologies such as solid-state batteries. With the launch of domestic solid-state battery projects, China's solid-state battery production rhythm is expected to accelerate.

1. Fujian Super Power New Energy Co. begins construction of its 1 billion Ah annual production capacity solid-state polymer EV lithium battery project

On February 18th, construction began on Fujian Super Power New Energy’s large capacity solid-state polymer EV lithium battery project in Xuzhou.  The project will have an annual production capacity of 1 billion Ah and has been developed with an investment of 3 billion RMB. The first phase will produce 500Ah ultra-large single capacity lithium batteries at an annual production capacity of 400 million Ah. Annual output value of the project will be 7.5 billion RMB following its full completion.

2. Ganfeng Lithium begins construction of its solid-state battery production line

On March 4, Ganfeng Lithium held a ceremony marking the start of construction for its solid-state battery production line. Project construction is planned to take 2 years, at an investment cost of 250 million RMB. The project plans to establish a first-generation solid-state lithium battery R&D pilot production line.

3. Weilan New Energy launches 100 MWh solid state battery project

On March 29, Jiangsu Weilan New Energy Battery Co., Ltd. held a foundation laying ceremony for phase one of its solid-state battery project in Liyang, Changzhou. Project investment totals 500 million RMB, of which the first phase of the project will utilize 180 million RMB.  Production is scheduled to begin in March 2020, and is expected to produce an annual output of 100 million kWh of solid-state batteries when completed.

4. Qingtao New Energy signs off on 10GWh solid-state lithium battery project

On July 5, Qingtao New Energy held a signing ceremony for its 10GWh annual production capacity solid-state lithium battery project in Yichun. The project is divided into two phases: the first phase of the project uses a 550 million RMB investment to build a solid-state lithium battery project with annual production capacity of 1GWh. The second phase of the project will utilize an investment of 4.95 billion RMB and will begin construction before June 30, 2020, with expected completion and production launch within two years.  Phase two will have an annual production capacity of 9GWh.

5. Shenzhou Judian 10GWh project lands in Chaoyang, Liaoning

On December 6, Chaoyang City, Liaoning Province, and Beijing Shenzhou Judian Technology Co., Ltd. signed a deal for a 10GWh annual output large-capacity, solid-state polymer-powered lithium battery project. Project investment totals 6 billion RMB, with completion to be divided in two phases.

Judging from the construction of solid-state battery projects in 2019, solid-state batteries are still “testing the waters,” especially EV solid-state batteries, which have yet to truly enter a commercial stage. According to industry analysts, the development of solid-state batteries for vehicles is likely to go through a "first generation,” “second generation,” “third generation,” and so on. The first generation might consist of semi-solid batteries, with fully solid-state batteries appearing by the third generation. Many in the industry predict that solid-state batteries may see small-scale commercial viability after 2025.

Currently, China, Japan, South Korea, Europe, and North America are all working hard to develop solid-state battery technologies, each region hoping to be the leader in next-generation battery technology. With continued technological development, the launch of pilot production lines, and the construction of related projects, solid-state battery technology will gradually mature, and future solid-state battery projects will continue to grow.

CNESA Global Energy Storage Market Analysis – 2019.Q4 (Summary)

1.       Market Size

In 2019, global operational energy storage project capacity (including physical energy storage, electrochemical energy storage, and molten salt thermal storage) totaled 183.1GW, an increase of 1.2% compared to the previous year.  China’s operational energy storage project capacity totaled 32.3GW, or 17.6% of the global total, an increase of 3.2% compared to the previous year.  Of this capacity, newly operational electrochemical energy storage comprised 519MW/855MWh. Overall, energy storage project capacity experienced a slowdown in growth in 2019 as the industry entered a rational adjustment period. Note:  the data in this report comprises rough statistics.  Final statistics will be released in CNESA’s Energy Storage Industry White Paper 2020 later this year.

Graph 1: global total operational energy storage project capacity (MW)

Graph 2: China’s total operational energy storage project capacity (MW)

2.       Market Developments

In the fourth quarter global market of 2019, “solar + storage” applications remained one of the leading trends.  Due to differences in resource conditions, energy structure, market environments, and other factors, the motivations for developing “solar + storage” projects have varied across countries, as have project characteristics.  In the second and third quarters of 2019, South Korea experienced five new fires at energy storage stations.  Investigations revealed the cause of the fire to be potential problems in battery cells.  These new accidents once again cast a shadow on the Korean energy storage industry. 2019 also saw an increase in energy storage financing, with total financial volume reaching 1.7 billion USD, an increase of 103% compared to the previous year.  However, fourth quarter 2019 saw a decrease in new funding, with a total financial volume of 126 million USD, a decrease of 39% compared to the third quarter.  European energy storage companies and project assets became a focus of investments in 2019.

Much like global trends, in China, “solar+storage” applications were among the most active.  Some project examples include multiple molten salt energy storage projects brought online at the years’ end, Xinjiang’s first operational grid-side solar+storage demonstration project, and the construction of multiple solar+storage+charging projects across the country.  In addition, China saw construction begin on the first grid-side energy storage project that is not only invested and constructed by independent market entities, but will also participate in market-oriented operations.  This project will explore a new model of operations for future grid-side energy storage projects.  China also saw the approval of the first domestic financial product which specifically supports energy storage.  The total funding amount of 750 million USD should help alleviate some of the financial difficulties within the industry and boost development.

3.       About this Report

CNESA Research customers can access the full version of the CNESA Global Energy Storage Market Analysis – 2019.Q4 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

How Can We Overcome an Industry Slowdown?

On November 22, China State Grid released the Notice on Increasing Stricter Control of Grid Investments (hereafter referred to as the “826 Document”).  The 826 Document states that for the foreseeable future, China State Grid “will not engage in investment, leasing, or energy management contracts for the development of grid-side electrochemical energy storage infrastructure, nor develop new pumped hydro storage projects.”  Industry media responded to the release of the notice with a mixture of both concern and hope.  Although it is undeniable that the 826 Document is yet another blow to the energy storage industry following the release of the Transmission & Distribution Pricing Cost Supervision Methods, a return to rationality has still been the main thrust of the development of the industry in 2019.  The future path of the energy storage industry should be viewed with a focus on long-term progress and stability.

In the midst of the debate over the 826 Document, the China Energy Storage Alliance and China Energy Research Society hosted the annual Energy Research Society Summit on December 5, 2019. The summit featured forum dedicated to energy storage titled “Constructing New Models for Efficient Development of Energy Storage.”  Leaders and experts from the National Energy Administration, China State Grid, Chinese Academy of Sciences, and top energy storage companies were invited to participate in the event for a discussion of recent industry developments.  The meeting featured a roundtable focused on the theme “Policy and Market Environments and their Influence on the Commercial Development Goals of China’s Energy Storage Industry.”  Discussion topics included such challenges as how to realize the Fourteenth Five-year Plan’s goals of bringing about large-scale commercialized development, how policy and market mechanisms that support the commercialization of storage can be developed, and pathways for technology development.  Below we take a look at some of the discussions and viewpoints presented during the session, with the hope that the thoughts presented can provide valuable knowledge to fellow industry members.

Firm Faith that Energy Storage Will Soon Break Out into a New Stage of Development

According to National Energy Administration Department of Science and Technology Assistant Director Liu Yafang, energy storage has strategic significance for China’s energy transition.  The full value of energy storage must be discovered through reform and innovation.  The National Energy Administration has always placed importance on energy storage development, actively supported marketization reforms, worked to improve current structures, and supported a positive environment for technology innovations and industry growth.   The combined efforts of government and industry are helping contribute to the steady development of energy storage technologies and industry. As an emerging industry, energy storage cannot be expected to forge ahead without challenges.  Problems of technology, safety, and structure must be evaluated objectively.  With the combined efforts of all stakeholders, energy storage is destined to experience a new stage of development.  The NEA is currently coordinating its departments to promote the launch of new energy storage policies, create implementation plans for energy storage standardization, and select new energy storage demonstration projects.  We hope that these efforts will create new benchmarks for energy storage, provide technology support for system safety and reliability, and boost confidence for future storage development.  Together, we can help promote the large-scale development of energy storage in the Fourteenth Five-year Plan period.

Lai Xiaokang of China Electric Power Research Institute expressed that energy storage has been recognized as a rising industry globally, bringing numerous undisputed benefits to the world’s energy system.  The 826 Document only reflects the current needs of the grid.  Although the notice will certainly influence energy storage in the short-term, from a long-term perspective, it will not affect the development of the energy storage industry.  In the future, as renewables dominate the power grid, energy storage will see extreme demand.  As long as demand is a driver, this industry will maintain a healthy, sustainable, and stable movement forward.  However, this process will not be without difficulties which must be overcome through structural innovations, a search for new business models, and the development of suitable technologies for every scenario.

Implement Current Policies Effectively and Create Business Models that Will Maximize the Full Value of Energy Storage

Pei Zheyi, Assistant Senior Engineer of the China State Grid Dispatch Control Center, reflected on the relationship between policy and business models, stating that policy can have a key role in the development of an industry due to the close relationship between policies and business models.  Although current domestic policies are quite thorough, they have not been effectively implemented, a process which must be given time.  Many policies require coordination between multiple national government departments, while others require additional support from local government regulations in order to be implemented. The proper implementation of these policies provides conditions suitable for the creation of business models.

At present, generation-side and behind-the-meter energy storage both display relatively developed business models.  A typical generation-side business model is the combination of energy storage with thermal generators to participate in frequency regulation, thereby reducing the risk of generator penalization.  Another generation-side model is the combination of energy storage with renewable energy stations to reduce curtailment.  Behind-the-meter energy storage models typically rely on peak and off-peak price arbitrage to generate profit.  In contrast, grid-side energy storage does not yet have a clear business model.  Energy storage can be used in the electricity system for peak shaving, frequency regulation, and backup power, as well as to defer new investments in T&D infrastructure and even generation equipment.  For example, a 2,000 MW energy storage project can not only add 4,000 MW of peak shaving capabilities, but in certain situations can also replace 2000 MW worth of investment in new thermal generation.  Energy storage can therefore bring major economic, societal, and environmental benefit.  The question of how to construct and innovate grid-side storage business models to harness the full value of storage is one that all stakeholders must contemplate.

Finding the Right Position for Professional People to do Professional Things

State Grid Henan Comprehensive Energy Services Co. Assistant General Manager Liu Hao expressed his thoughts on the development of grid-side energy storage.  The Henan Grid 100 MWh grid-side energy storage project was originally constructed in order to increase the safety of the country’s first UHV AC/DC Hybrid Power Grid in Henan and increase the consumption of renewables, not to generate a profit.  Similarly, in Jiangsu and Hunan, grid-side energy storage project investments did not come from grid companies.  Grid companies face many difficult to anticipate challenges when investing in energy storage projects, such as how to verify effective assets, how to verify effective capital, and others. This is because in the future, the central government will regulate T&D pricing with increased strictness.  Liu Hao suggested a new positioning for grid-side energy storage:

First, as an energy storage market stimulator: energy storage has transitioned from a frenzy of new growth in 2018 to a slowdown in 2019.  Grid companies have been viewed as the market stimulator that has affected the whole industry, bringing energy storage to a new stage of development that has attracted the interest of government and the market, and ignited greater contemplation on safety issues, technology roadmaps, policies, business models, and other issues.  In this regard, grid companies play an important role.

Second, as a resource aggregator: in the future, the development of energy storage at the generation-side, grid-side, and behind-the-meter will all require an aggregator which will consider factors such as large-scale grid safety, renewable energy consumption, fair transactions, and others.  The aggregator will aggregate, lead, and adjust. However, who this aggregator will be, and what industry or company it should serve the role is still a question for consideration.

Third, as a services executor: once the value and services of energy storage have been broadly recognized, government, grid companies, equipment providers, and third-party groups will all require a services executor.

Fourth, as the service buyer: in the future, once market stimulators, resource aggregators, and services executors have all been established, the grid company may serve as the service buyer, acting as a platform which brings together investors, constructors, service providers, operators, evaluators, and beneficiaries.  In this way, energy storage will have a significantly clearer development path in which the services beneficiary is the one to foot the bill.  In addition, grid companies will also serve as market organizers, relying on thorough market competition to guarantee that storage remains economical and preventing hostile bidding and low-quality competition.

Increase Government Supervision to Ensure Grid Investments in Energy Storage are Reasonable and Effective

In regards to the current policy environment and market mechanisms, Tsinghua University Assistant Professor Zhong Haiwang stated that in May of this year, the National Development and Reform Commission and National Energy Administration released the Transmission & Distribution Pricing Cost Supervision Methods, which prohibited power grids from including the costs of energy storage investments in T&D pricing.  The policy is a preventive measure taken due to government concerns over the possibility of disorderly investments turning into supervised assets and passed over to consumers to foot the bill.

Using the experiences of the United States as an example, regulators are also exploring models for supervising investments in grid-side energy storage. If the government can take an effective and scientific approach to supervision and can guarantee rational investments, then such an investment can reasonably be included in T&D costs.  For example, the government should verify the effectiveness of grid investments in grid energy storage.  If investment is excessive, proper measures should be taken to curb such impulsivity.  Resources which are truly effective at increasing consumption of renewables, can replace T&D resource investments, or provide T&D upgrade deferral should have their costs permitted for inclusion in T&D costs.  If such a scientific and effective supervision model can be realized, it will become easier to push the government to gradually release relevant policies in the future, providing greater potential benefit for the energy storage industry.

Promote the Establishment of an Electricity Market and Create an Improved Policy and Market Environment for Energy Storage Development

The development of energy storage is inseparable from the electricity market.  The question of how to nurture this market to create an environment which stimulates energy storage is one of the industry’s biggest challenges.  Although the process is difficult, the industry must work harder to overcome challenges within the current system.  At present, the peak-shaving ancillary services markets implemented in numerous regions and provinces in China are a transitional solution for increasing renewable energy consumption, but compensation payments are only a transfer of funds between power generation enterprises, and related costs have not been transmitted to the user side.  It is hoped that market construction efforts can reflect the value of storage and other new technologies.

Looking at the experiences of the international market, the most vital and competitive application for energy storage is in the provision of ancillary services.  When used as a fast response resource such as for frequency regulation, energy storage has already proven its value internationally.  Domestically, energy storage technologies have had proven success in frequency regulation applications, with optimistic investment returns in the early period, yet energy storage infrastructure has largely been required to be sited directly at power stations in order to provide ancillary services.  Energy storage’s value and identity as an independent entity has yet to be clarified or realized.

As power market reforms continue, our goal is to allow energy storage’s value to fully emerge and to develop a system in which the beneficiary pays the cost for energy storage, creating a positive cycle which will encourage continued growth of the entire energy storage industry.

Develop Energy Storage Technologies for Every Scenario to Better Harness Energy Storage’s Value

The current market scale suggests that true large-scale energy storage applications have yet to appear.  Many battery companies still use mobile batteries for energy storage applications, yet such battery types cannot fully satisfy all application scenarios for energy storage in the power system. Li Hong of the Institute of Physics, Chinese Academy of Sciences expressed during a presentation that the Ministry of Science and Technology’s special project on the 14th Five-Year Plan proposes seven requirements for energy storage technology: high safety, long life, high efficiency, low cost, large-scale, long duration, and sustainable development.

The market has already seen the appearance of energy storage batteries that are capable of 14,000 cycles.  Yet current energy battery applications such as solar-plus-storage applications only require one charge and discharge in a day.  Even with a goal of a 20-year lifespan, the battery will only experience 7000-8000 cycles.  A focus on developing longer lifespans does not have realistic economic value.  Instead, appropriate life cycles should be developed based according to each application scenario.  In addition, aside from Li-ion batteries, lead-acid batteries, flow batteries, and other electrochemical energy storage technologies, in the future the industry should put greater emphasis on compressed air energy storage, flywheels, and other physical energy storage technologies to make use of the characteristics of each technology that best suit every application.

In regard to the systems integration of energy storage technologies, at present, the AC output of systems still use the traditional 380 or 600-volt inverter architecture, making it difficult to meet the needs of large-scale power production.  For example, systems of 100MW capacity or higher require over 1000 converters working simultaneously to control and respond to signals from the power grid, creating challenges in terms of reliability, control synchronization, and system connection costs.  The energy storage industry should continue to focus on such challenges, and work to improve the application of storage for large-scale energy systems.  These efforts will be a significant contributor to industry development.

Summary

Many in the energy storage industry believe that as energy storage continues its path to commercialization, it is facing, or will face, a stage of developmental difficulty.  China Energy Storage Alliance Chairman Chen Haisheng believes that, at a certain level, any industry’s development will reach a certain stage where adjustment is necessary and beneficial for long-term growth.  Industry colleagues should take a holistic and long-term view of the energy storage industry’s development trends: the trend of fast-paced development has not changed, nor has continued motivation for sustainable growth.  A slowing in pace is necessary only to allow our steps to fall more steadily and to travel a greater distance.

If energy storage’s value is to be represented in the power market, then a complete market mechanism must be developed to provide support.  Technology innovations are also critically important to industry development, and industry members hope that technologies continue to mature and costs decline. Industry members also hope that market environments can match industry development, giving rise to the broad-scale use of energy storage in the power system, and ensuring storage technologies and applications are of a high quality and technical level.  Despite industry challenges, energy storage still has a very bright future ahead.

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