CNESA Global Energy Storage Market Analysis—2020.Q2 (Summary)

1. Market Size

As of the end of June 2020, global operational energy storage project capacity (including physical, electrochemical, and molten salt thermal energy storage) totaled 185.3GW, a growth of 1.9% compared to Q2 of 2019. Of this global capacity, China’s operational energy storage project capacity totaled 32.7GW, a growth of 4.1% compared to Q2 of 2019.

Global operational electrochemical energy storage project capacity totaled 10,112.3MW, surpassing a major milestone of 10GW, an increase of 36.1% compared to Q2 of 2019. Of this capacity, China’s operational electrochemical energy storage capacity totaled 1,831.0MW, an increase of 53.9% compared to Q2 of 2019. Both in the global and Chinese markets, electrochemical energy storage capacities showed growth compared to their respective Q2 period in 2019, at 1.4% and 1.8%, respectively.

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 first half of 2020, the influence of the COVID-19 pandemic caused global delays in the energy storage project development process, including project approval, procurement, equipment shipping, and construction. These challenges caused a decline in new operational project capacity compared to the same period in 2019, with newly operational capacity totaling 591.8MW, a 26.2% decrease in growth rate. Apart from energy storage project development, financing of energy storage projects (including venture capital, private equity, and other investments) also suffered from the pandemic. Investments in the first half of 2019 totaled 1.9 billion USD, dropping to 716 million USD during the same period in 2020.

Much like the global market, the Chinese energy storage market also suffered from the effects of the COVID-19 outbreak. These effects were primarily felt during the first quarter. As the epidemic gradually became under control in the second quarter, factories began returning to work, and energy storage projects slowly returned to construction. Such projects included the Fujian Jinjiang 100 MWh Li-ion battery energy storage station, a northwest China centralized solar-plus-storage station, a Guangdong AGC frequency regulation energy storage project paired with a thermal power plant, and other projects which completed construction and began operation. These projects helped China’s new operational energy storage capacity to achieve a moderately higher capacity growth compared to the same period in 2019, at 3.8%, or 121.4MW.

Without Effective Policies, How Can “Renewables + Storage” Overcome Development Obstacles?

The development of renewable energy is unquestionably a critical factor to the transformation of China’s energy structure towards a safe, low-carbon, and high efficiency modern energy system. As renewable energy moves towards greater large-scale development and deployment, it provides new opportunities for energy storage. In the future, energy storage and renewable energy generation will develop in tandem. Energy storage will soon become a prerequisite for large-scale renewable generation, a trend that will likely become mainstream in China as well as many other countries. The high-scale penetration of renewables in power grids will require continued integration of energy storage, while energy storage itself will prove its value through smoothing and stabilization of the power system.

With a Market Mechanism Still Absent, Energy Storage is Not Yet Ready to Support Large-scale Renewable Development

The pairing of energy storage with renewable generation cannot occur without thorough exploration of its economics, and the question of who should pay for energy storage when it is paired with renewable generation is of critical importance. In the current system in which a cost price transmission mechanism is still lacking, any current mechanism must be seen as part of an awkward yet unavoidable transmission period. Even more awkward is that while energy storage is the key to solving limitations on large-scale renewable generation expansion, many still do not see the point of constructing energy storage. Part of the issue is the debate over how much renewable energy can be curtailed. Without curtailment, there is no application for energy storage. Therefore, the acceptance of a certain amount of curtailment is a beneficial choice which can not only support the development of renewable generation at a large scale, but also support the pairing of energy storage applications with renewables.

In 2017, Qinghai province began requiring wind energy stations to install energy storage equivalent to 10% of station capacity. While energy storage providers were delighted, many others in the energy industry were left scratching their heads at the decision. With energy storage entering a new stage, some believed that it was still too early to require renewable generators to foot the bill for energy storage investment. In addition, without a clearly defined goal, energy storage could not be seen as the only possible solution. Yet even a switch from compulsory to noncompulsory deployment of storage has not affected the interest of renewable energy generators in exploring energy storage, with Qinghai remaining a key region for energy storage applications paired with centralized renewable generation. The root cause for the policy is that the value acquisition problem for new energy storage investment has not been solved. The relevant policy terms and market mechanism do not match, but the direction and ultimate goal of the policy have not deviated, and it has brought greater recognition of energy storage system applications to this field.

In 2019 and onward, policies similar to the above “10% mandate” have been released or been the subject of research. Yet few people have come out to criticize such policies, one reason being that these policies have not required completely mandatory deployment of storage for renewable generation, an approach which has inspired enthusiasm among energy storage investors and renewable energy station owners. Another reason is that these policies often carry some policy support for projects, including guaranteed increases in generation, supplementary peak shaving and other ancillary services, and guaranteed grid dispatch. With grid-side and behind-the-meter storage investments and applications declining, energy storage paired with centralized renewables will become a driving force for growth of new energy storage applications. Even so, integration of renewables and storage still carries many challenges:

• Current curtailment issues, which are the primary focus of energy storage, may not be a problem in the future, meaning that energy storage may not be guaranteed profit in the long term.

• It is difficult to provide a guaranteed amount of renewable energy dispatch, creating uncertainty in short-term profits.

• Ancillary services compensation lacks a long-term mechanism, and both “handshake promises” and policy guarantees are uncertain.

• Models requiring combined energy storage and renewables are still reliant on government subsidies, while project operations are affected by policy changes during the investment return period and fund recovery delays.

On the one hand, energy storage investors want more explicit points of policy support, going so far as to make unreasonable demands that push policy makers to provide explicit commitments. On the other hand, policy makers want to release policies which can be implemented quickly, but it is difficult for all parties to participate. While it is easy to encourage the deployment of storage, long-term management is a different matter, and such management challenges will need to be solved through the future energy market. It should be unanimously agreed that no market mechanism needs to be tilted solely for energy storage. Policies and market rules can solve the problem of identity for energy storage, and help solve operational difficulties for new technologies participating in energy storage applications. Only when the specific demand for energy storage is reflected under a fair and open market mechanism can its application value truly emerge.

At present, energy storage can solve the near-term problem of consumption of renewable energy. In the end, energy storage must follow the principle of “who benefits, who pays.” The main entities which pay for the large-scale development and utilization of renewable energy are not just renewable energy developers themselves. As the beneficiary of “green development,” all of society has responsibility in bearing the costs for renewable energy. When it comes to energy storage, electricity consumers and renewable energy companies which enjoy the smoothing and stabilization services provided by energy storage should be the ones to bear the costs. Only in a market with a basic economic logic can a long-term effective mechanism for energy storage paired with renewables be constructed. Additionally, in order to maintain safe and stable operation of a future grid with high penetration of renewables, the deployment of energy storage to counter intermittency and unpredictability should be one of the basic duties of generation companies. In the future, energy storage will not exist as simply a special tool for solving consumption problems that come with the expansion of large-scale renewable energy, but will be an essential service necessary to solve the operational risks that will exist in a new energy structure.

Awkward Setbacks to Energy Storage Development

The current simplistic manner in which energy storage is paired with renewables is one which creates setbacks for the development of energy storage technology applications. Characteristics of this current structure include:

• Energy storage may serve as a precondition to give priority to the construction of renewable energy projects, but allocation ratio and capacity requirements are not properly evaluated. Whether existing supporting projects can meet the actual needs of the power system and whether the energy storage projects can be fully utilized remains to be verified.

• Policies which support the development of combined energy storage and renewables are still lacking. Current policies in support of frequency regulation are unable to support the recovery of system investments, and maintain an interesting behind-the-scenes “dispatch logic” (namely, verbal guarantees of charge and discharge times and dispatch strategies). Therefore, the value of energy storage in improving the operation and regulation capability of the power system cannot be realized.

• The current practice of low-price bidding does not have guiding significance and does not represent progress in industry or technologies. Centralized renewables have become the only energy storage application sector which does not have any threshold requirements to entry. A summary of China’s energy storage development at the end of 2020 is likely to reveal a false sense of prosperity due to incremental new growth. Continued development in such a manner will cause energy storage systems to become completely unusable and unnecessary.

• Most seriously, the series of energy storage system accidents in South Korea and other regions provides a wealth of learning experience and has highlighted the importance of energy storage system safety. Issues must be handled preemptively, otherwise the industry will fall into stagnation. Without a proper regulatory body, energy storage in some regions has already been “orphaned,” left to develop independently. With this lack of requirements for energy storage system construction and operations, it can be predicted that large-scale expansion of energy storage will inevitably bring new safety risks.

A multi-stage release of effective supporting policies is imperative. The critical issue to the paired application of energy storage with renewables is still the question of “who foots the bill?” Although we now have a relatively clear picture of what an effective short-to-medium term mechanism should look like, a substantive policy has yet to materialize. In order to lower the risk of liability for electricity charging, energy storage has already become a special technology for balance between the government, grid, and generation companies.

First, we must engage in forward-thinking research in our planning, to avoid misuses of resources. Currently, many areas require the deployment of a certain proportion and duration of energy storage systems, but basic analysis of the energy storage requirements for a power system featuring a high proportion of renewable energy reveal that the allocation ratio and energy storage duration requirements are unreasonably designed. It is also necessary to provide clear guidance to each region to measure the energy storage demand under different renewable energy development situations, so as to ensure that the additional energy storage system will be fully utilized.

Second, we must set clear entry requirements for energy storage to ensure the quality of energy storage applications. Many regions have released policies directed at the deployment of storage with renewables, but have not provided specific standards for energy storage systems. Without such standards, there is a risk of deploying low-quality energy storage systems in order to prioritize construction and grid connection. Technological thresholds need to be established before a project is launched to ensure safe and reliable operations of energy storage applications.

Third, we must launch policies which support paired renewable and storage applications to support the development of a friendly renewable energy development model. By viewing renewable energy stations which support energy storage technology as “friendly” renewable energy stations, appropriate support can be given to supporting projects to increase power generation and reduce the risk of curtailment. It is also necessary to clarify the identity of the energy storage project and its participation in the power market as soon as possible, so that dispatched energy storage systems participating in peak shaving and ancillary services may receive appropriate compensation.

In the short term, with a current power market and price mechanism unable to reflect the value of energy storage to renewable energy, it is necessary to release transitional policies which will help support development of combined usages of renewable energy and energy storage, that is, to study the energy storage quota mechanism and improve the weight of “green power.” Combining green certificate transactions and renewable energy quota mechanisms, power generation companies, grid companies, and power users which deploy energy storage can increase the importance of green certificates, and allow green power certifications to be transacted. Market entities can also freely invest and construct or rent energy storage systems to earn their quotas, or purchase such quotas in the market, creating a pairing of renewable energy and energy storage under a new transaction mechanism.

Over the long term, generation prices for renewable energy and costs for deploying storage should be covered by the beneficiaries and customers. In the current situation in which kilowatt prices for renewable energy are higher than traditional generators, value compensation is still required to promote the paired development of renewables and storage. Therefore, a long-term mechanism must be established which can guide the cost reduction of green value. At present, the cost of solar storage and wind storage in some global regions can compete with traditional thermal generation. We must continue to promote renewable energy grid parity, reducing the dependence on renewable energy financial subsidies. We must also promote comprehensive marketization, allowing power prices to reflect the actual cost of energy provision. We must also work to develop a widespread awareness of the social responsibility for green development, including the responsibility of the cost of green energy development, helping to transition from a subsidized system to one where price reflects value. Yet with current progress in renewable energy development being inconsistent with price reforms, a price compensation mechanism is still necessary to promote renewable energy and energy storage development, and stimulate both industries to lower costs while increasing quality.

The pairing of renewable energy with storage is a trend that is not going to reverse, and we must take a forward-looking approach to resolving the technological and commercial obstacles facing energy storage as soon as possible. Although energy storage has yet to take on an irreplaceable role in the power system, its important value in promoting the large-scale development of renewable energy storage in China cannot be ignored.

Author: Wang Si
Translation: George Dudley

The National Development and Reform Commission (NDRC) Release Plans for 2020 Summer Energy Peaking, Seeks Increased Reforms of Energy Storage and Peak Shaving Mechanism

On July 9th, the National Development and Reform Commission (NDRC) held a national teleconference to discuss the deployment of energy for the 2020 summer peak period. The meeting undertook a comprehensive assessment and analysis of the current supply and demand situation of energy during summer peaking, focused on prominent challenges related to "reform, increased energy storage, and security,” and directed relevant departments to do their best to guarantee energy supply for the summer peak. Lian Weiliang, deputy director of the National Development and Reform Commission, attended the meeting and provided a speech. Liu Baohua, deputy director of the National Energy Administration, spoke on work requirements. The meeting was presided over by Zhao Chenxin, deputy secretary general of the National Development and Reform Commission. Representatives from the State Grid Corporation of China (SGCC) and deputy secretary generals from relevant provincial people's government liaison offices also made speeches addressing the topic of discussion.

Meeting participants recognized that the summer peak energy supply faces particular challenges this year due to the impact of factors such as changes in power demand due to the COVID-19 epidemic, a particularly strong rainy season leading to high levels of flooding, and significant fluctuations in international energy prices.

The meeting requested that all parties be attentive to the new situation and trends facing this summer’s peak energy supply, and focus on reform, security, and increased energy storage so as to ensure a stable energy supply.

The meeting emphasized three areas of focus for reform to strengthen the energy supply: electric power, natural gas, and coal.

To strengthen the electric power supply, it is first necessary to increase power trading reforms. Steps include promotion of mid- to long-term power contracts, acceleration of the trial operation and settlement of power spot transactions, promotion of peak and off-peak time-sharing transactions in a market-oriented manner, increasing the number of declared price segments in the spot market, and encouraging more ancillary services to be included in power trading.

Second is further reform of the electricity generation program. A plan must be studied and formulated which can connect priority power generation and priority purchase plans with market-oriented transactions, and pilot projects must be gradually developed in different provinces to promote orderly liberalization of the generation side.

Third is further reform of the incremental power distribution business. Extended services should be provided to users, new operations models of incremental power distribution enterprises explored, dispatch rules clarified, and orderly and safely operations ensured.

Fourth is further reform of energy storage and peak shaving mechanisms. Grid-side, generation-side, and behind-the-meter energy storage shared responsibility mechanisms must be clarified, pilot projects developed which combine power market reforms, and the cost of energy storage and peak shaving recovered through flexible marketized mechanism.

Fifth is further reform of clean energy utilization. A system of guaranteed consumption must be implemented, and improvements made to the consumption plan for projects both within and outside planning so as to guide the orderly development of clean energy.

To strengthen the supply of coal, the meeting emphasized it is first necessary to increase reform of the mid- to long-term coal contract system, increase the number of contracts signed, and make full use of credit means to strengthen contract performance supervision.

Second, reforms must be made to the coal reserve system. The coal reserve responsibilities should be combined with coal production, consumption, and imports, and strong effort made to increase coal reserve capacity.

Third, reform of the coal trading system is needed to effectively leverage the role of the National Coal Trading Center and promote the formation of a unified and standardized national coal trading market.

Fourth, it is necessary to strengthen coordinated supply guarantees in key regions, promote the establishment of a coordinated supply guarantee mechanism between major coal-producing provinces and major consumption regions, and form a long-term strategic cooperation relationship that guarantees supply and price stability across regions.

To guarantee the supply of natural gas, the meeting emphasized that first, reform of the natural gas pipeline network system must be strengthened. According to the "X+1+X" reform plan and goals, the supply of upstream resources from multiple sources and channels should be strengthened, and the formation of a "national network" accelerated, creating a pattern of full competition in the downstream sales market.

Second, natural gas contracting must be further reformed. Local governments and relevant enterprises must be required to complete yearly and heating season contract signings in a speedy manner. Upstream gas supply enterprises should guarantee the gas volume of all local residents according to the benchmark prices, and fully guarantee the supply of natural gas to residents who have engaged in "coal-to-gas" projects.

Third, the construction of gas storage facilities must be accelerated. Local governments and relevant enterprises should attach greater importance to such construction, strengthen overall planning and layout, accelerate the construction of gas storage facilities, and ensure the completion of expected targets and tasks.

In addition to discussions on electric power, natural gas, and coal, meeting participants also made arrangements for safe production and risk screening during the summer energy peak.

Heads of relevant departments and bureaus of the National Development and Reform Commission and the National Energy Administration, as well as leaders of relevant central enterprises, were in attendance at the main meeting. Deputy secretary generals of the relevant provincial (district or municipal) people's governments, and representatives from the regional Development and Reform Commission, Commission of Economy and Information Technology, Energy Administration, Transport Departments, Coal Departments (Bureaus) and Administrations of Coal Mine Safety, and the heads of related energy enterprises took part in the meeting at a sub-conference venue.

World’s First 100MW Advanced Compressed Air Energy Storage System Expander Completes Integration Test

On July 16, the Chinese Academy of Sciences Institute of Engineering Thermophysics achieved a new breakthrough in compressed air energy storage research and development with the successful integration test of the world’s first 100MW CAES expander.

Energy storage technologies have been viewed as a key supporting technology for the energy revolution and a national strategic emerging technology. Compressed air energy storage technology holds many advantages such as high capacity, low cost, high efficiency, and environmental friendliness. For these reasons, CAES is one of the most promising large-scale energy storage technologies. The Chinese Academy of Sciences Institute of Engineering Thermophysics is the first institution to carry out CAES research in China. Through 15 years of hard work, the institute has made successful breakthroughs in key technologies such as full-working system design and control, a multi-stage high-load compressor and expander, high-efficiency supercritical heat storage and heat exchange, and other critical components. In 2013 and 2016, respectively, the institute constructed the world’s first 1.5MW and 10MW advanced CAES systems. The institute has been the world’s first to carry out research and development of an 100MW advanced compressed air energy storage system, beginning the project in 2017.

The expander is the key core component of the compressed air energy storage system, and poses numerous technical challenges, such as high load, large flow, complex flow and heat transfer coupling, and varied working conditions. Following years of effort, the R&D team made successful advancements in areas such as the three-dimensional design of the multi-stage expander, a complex shaft structure, adjustment and control of variable working conditions, and other design features. These advancements led to the development of the world’s first 100MW advanced compressed air energy storage system multi-stage high-load expander. The expander has advantages such as a high level of integration, high efficiency, and long lifespan.

On June 30, 2020, The Chinese Academy of Sciences Institute of Engineering Thermophysics completed the processing, integration, and testing of the expander. All test results were successful, meeting or exceeding design indicators. The successful development of the 100MW expander is an important milestone in the field of compressed air energy storage in China, and has promoted China’s advances compressed air energy storage technology to a new level.

The above work has received the support of the National Natural Science Foundation of China, the Chinese Academy of Sciences Strategic Pilot Project (Class A), the Chinese Academy of Sciences' Frontier Science Key Research Project, the National Renewable Energy Demonstration Zone Industrial Innovation and Development Special Project, and the National Key R&D Program Project.

The world's first 100MW advanced compressed air energy storage system expander

Ten Years of the CNESA Energy Storage Industry White Paper

On May 20, the China Energy Storage Alliance hosted the “Assessing Energy Storage’s Development Trends and the Energy Storage Industry White Paper 2020” webinar, which featured support from Sungrow, CLOU, Higee, and Hyperstrong. During the webinar, CNESA Vice General Secretary and Research Director Yue Fen announced the official launch of CNESA’s Energy Storage Industry White Paper 2020.

This year marks the 10-year anniversary of the CNESA Energy Storage Industry White Paper. Over these past 10 years, the CNESA white paper has closely followed the development of China’s energy storage market, earning broad recognition and praise within the industry. The Energy Storage Industry White Paper 2020 provides summary and analysis of the 2019 energy storage market size, policies, projects, vendors, and standards from both the global and Chinese market perspectives, and provides predictions and outlook on future market development both in China and worldwide.

The webinar began with an opening address from China Energy Storage Alliance Chairman Chen Haisheng, followed by presentations on the development and outlook of energy storage from China State Grid Dispatch Center Professor-level Engineer Pei Zheyi and China Energy Research Society Renewable Energy Committee Director Li Junfeng. In discussing the growth of energy storage over the past ten years, CNESA Secretary General Liu Wei expressed warmly, “ten years of the Energy Storage Industry White Paper represents ten years of industry development, and ten years of CNESA growth from ‘zero to one.’” Over these past ten years, CNESA has earned support, care, and direction from many leading industry experts and companies. Over the next ten years, CNESA will continue to work together with our industry colleagues to support the continued growth of the energy storage industry.

1. Global Energy Storage Market Growth in 2019

According to statistics from the CNESA Global Energy Storage Projects Database, by the end of 2019, global operational energy storage project capacity totaled 184.6GW, an increase of 1.9% compared to the previous year. Pumped hydro energy storage comprised the largest portion of global capacity at 171.0 GW, a growth of 0.2% compared with 2018. Electrochemical energy storage followed with a total capacity of 9520.5MW. Among the variety of electrochemical energy storage technologies, lithium-ion batteries made up the largest portion of the capacity, at 8453.9MW.

Figure 1: accumulated global energy storage market capacity (2000-2019)

Figure 2: accumulated global electrochemical energy storage market capacity (2000-2019)

In 2019, new operational electrochemical energy storage projects were primarily distributed throughout 49 countries and regions. By scale of newly installed capacity, the top 10 countries were China, the United States, the United Kingdom, Germany, Australia, Japan, the United Arab Emirates, Canada, Italy, and Jordan, accounting for 91.6% of the globe’s new energy storage capacity in 2019.

In comparison to the 2018 rankings, China, the United States, Germany, Japan, and Canada each moved up one to two places respectively in ranking, with China jumping from second place in 2018 to first in 2019. Both the United Kingdom and Australia occupied the third and fifth spots in 2018 and 2019, respectively, while the United Arab Emirates, Italy, and Jordan were new entrants to the list. In terms of geographic distribution, the countries on the list are mainly located in the Asia-Pacific (3), Europe (3), North America (2) and the Middle East (2). In terms of installed capacity, the top seven countries all added over 100 megawatts of new project capacity, with new capacity in China and the United States each both exceeding 500MW.

2. Chinese Energy Storage Market Growth in 2019

According to statistics from the CNESA Global Energy Storage Project Database, by the end of 2019, operational energy storage project capacity in China totaled 32.4GW, accounting for 17.6% of total global capacity, a growth of 3.6% compared to 2018. Pumped hydro projects accounted for the largest portion of installed capacity, at 30.3GW, an increase of 1.0% compared with 2018. Electrochemical energy storage capacity ranked second, at 1709.6MW, a growth of 59.4% compared to 2018. Among the variety of electrochemical energy storage technologies, lithium-ion batteries made up the largest portion of installed capacity at 1378.3MW.

In recent years, electrochemical energy storage has maintained a steady upward trend, with a compound annual growth rate of 79.7% from 2015-2019. In contrast, physical energy storage growth has been much slower, though technologies such as compressed air energy storage and flywheels saw new application breakthroughs in 2019. More than 2.2GW of new CAES project capacity was announced or began construction in 2019, including the start of construction on the Gezhouba Shandong Feicheng 1.25GW/7.5GWh salt cave CAES project, the nation’s first GW-scale CAES energy storage project. New breakthroughs in flywheel technologies included the deployment of the Beijing Metro Guanyangcheng Station GTR 1MW flywheel system, a MW-level flywheel application and the first in the country to provide a solution for regenerative braking energy recovery in urban rail transit.

Figure 3：accumulated energy storage capacity in China (2000-2019)

Figure 4：accumulated electrochemical energy storage capacity in China (2000-2019)

In 2019, China’s new operational electrochemical energy storage capacity was distributed primarily in 28 provinces and cities (including Hong Kong, Macau, and Taiwan regions). The ten regions with the largest increases in new capacity were Guangdong, Jiangsu, Hunan, Xinjiang, Qinghai, Beijing, Anhui, Shanxi, Zhejiang, and Henan. New energy storage capacity in these regions accounted for 88.9% of China’s total new capacity in 2019.

3. Chinese Energy Storage Market Development Outlook

Since 2014, the CNESA research department has been forecasting the scale of China's energy storage market with the support of industry experts and energy storage companies. The Energy Storage Industry White Paper 2020 provides a forecast for the scale and development trends of China's energy storage market from 2020-2024.

To provide a more comprehensive understanding of the future development of electrochemical energy storage, the CNESA research department has divided its 2020-2024 forecast into a conservative scenario and ideal scenario. These predictions are as follows:

Conservative Scenario: In 2020, the electrochemical energy storage market will continue to develop steadily, and the total operational installed capacity will reach 2726.7MW. During the "14th Five-year Plan" period, as more favorable policies are issued, support for electrochemical energy storage applications will gradually increase and the market scale will continue to expand. The annual compound growth rate (2020-2024) will remain around 55%. By the end of 2024, the market scale of operational electrochemical energy storage is expected to exceed 15GW.

Figure 5：forecast for growth in total operational electrochemical energy storage capacity in China (conservative scenario, 2020-2024）

Ideal Scenario: In 2020, as electrochemical energy storage continues to develop steadily, some pipeline projects that were planned for 2019 but not constructed due to policy influences will be restarted. Thus, the total operational capacity will reach 3092.2MW. During the "14th Five-year Plan" period, taking into account the support of various direct and indirect policies, the annual compound growth rate for 2020-2024 is expected to exceed 65%. By the end of 2024, the total installed scale of electrochemical energy storage is expected to be near to 24GW.

Figure 6：forecast for growth in total operational electrochemical energy storage capacity in China (ideal scenario, 2020-2024)

Whether it is the conservative or the ideal scenario which will play out, the rapid development of the energy storage industry is irreversible. The early growth of energy storage technology and industry has laid a solid foundation for vitality and sustainable development. The development demands of the energy revolution, especially the large-scale utilization of renewable energy and distributed energy, has created a huge demand for energy storage. The gradual deepening of power market reforms also paves the way for energy storage to participate in market-oriented power grid operations. Positive factors continue to play a guiding role for the development of the energy storage industry. Over the next five years, the development of the energy storage industry remains promising. CNESA looks forward to accompanying our industry partners as we strive for the advancement of a bigger and better energy storage industry.

Author: CNESA Research
Translation: George Dudley

2019 Top Chinese Energy Storage Companies Rankings List

On May 20, the China Energy Storage Alliance hosted the “Assessing Energy Storage’s Development Trends and the Energy Storage Industry White Paper 2020” webinar, with the support of Sungrow, CLOU, Higee, and Hyperstrong.

During the webinar, CNESA Vice General Secretary and Research Director Yue Fen announced the official launch of CNESA’s Energy Storage Industry White Paper 2020. The white paper includes the official launch of the 2019 energy storage technology provider rankings, energy storage inverter provider rankings, and the energy storage system integrator rankings. Among these lists, Sungrow placed first in both system integrator rankings and inverter provider rankings, while CATL ranked first among energy storage technology providers. Detailed results of the rankings are below:

1. Energy Storage Technology Provider Rankings

In 2019, among new operational electrochemical energy storage projects in China, the top 10 providers in terms of installed capacity were CATL, Higee Energy, Guoxuan High-Tech, EVE Energy, Dynavolt Tech, Narada, ZTT, Lishen, Sacred Sun, and China BAK.

Note: a “technology provider” here refers to a company which manufactures and sells battery technologies, including battery cells, modules, and packs.

Figure 1：ranking of energy storage technology providers in China, 2019

2. Energy Storage Inverter Provider Rankings

In 2019, among new operational electrochemical energy storage projects in China, the top 10 energy storage inverter providers in terms of installed capacity were Sungrow, Kelong, NR Electric, Sinexcel, CLOU Electronics, Soaring, KLNE, Sineng, XJ Group Corporation, and Zhiguang Energy Storage.

Figure 2: ranking of energy storage inverter providers in China, 2019

3. Energy Storage System Integrator Rankings

In 2019, among new operational electrochemical energy storage projects in China, the top 10 energy storage system integrators in in terms of installed capacity were Sungrow, CLOU Electronics, Hyperstrong, CUBENERGY, Dynavolt Tech, Narada, Shanghai Electric Guoxuan, Ray Power, Zhiguang Energy Storage, and NR Electric. 

Note: an energy storage system integrator refers to a company which engages in the integration of energy storage systems, providing customers with a product that is a complete energy storage system. A complete system includes the energy storage technology, a BMS, inverter, EMS, and other components that create a specific system to meet client specifications.

Figure 3: ranking of energy storage system integrators in China, 2019

Ranking Method: company rankings are based on the CNESA “Global Energy Storage Database,” which collects project data from publicly available sources as well as voluntarily submitted data from energy storage companies. Companies are sorted into the category of technology provider, inverter provider, or system integrator, and ranked according to their new deployment capacity in the Chinese market in 2019.

About the Energy Storage Company Rankings: CNESA began its yearly “Energy Storage Company New Capacity Rankings” in 2015. Over the past five years, the rankings have received widespread attention and recognition within the energy storage industry. In order to guarantee the quality and comprehensiveness of the energy storage project data, provide objective analysis, and track future energy storage trends, CNESA collects voluntary data from its members and other willing energy storage industry companies. This data collection provides an important basis for the development of the “Energy Storage Company Capacity Rankings,” assists in project declaration, and helps government bodies, generation groups, grid companies, and energy storage companies discover the latest industry developments so that they may have a basis for strategic planning.

Author: CNESA Research
Translation: George Dudley

Four Areas of Focus for the Energy Storage Industry

Author’s note: 2020 is the final year of the “Thirteenth Five-year Plan,” and the launch year for the “Fourteenth Five-year Plan.” With the energy storage industry having experienced a period of slowdown and adjustment throughout 2019, many industry stakeholders looked forward to a 2020 which would bring a chance for new developments. Instead, the spread of COVID-19 throughout the globe brought an even bigger shakeup, affecting every sector of the energy storage market both domestic and foreign. But as we look toward the “Fourteenth Five-year Plan” period, it is clear that the current challenges are not enough to rattle the long-term prospects for energy storage. Energy storage in China has gone through many changes over the past ten years, with application trends shifting from a focus on behind-the-meter, to grid-side, and now generation-side applications. Energy storage has always been dependent on its environment and has yet to achieve the status of “independent entity.” Industry members have suffered many setbacks, yet they still persist in the hope that better days lie ahead. While the past ten years belong to history, as members of the industry, we must consider what we can do to achieve continued industry growth and progress.

Price is Not the Deciding Factor for Energy Storage Industry Development

In the energy storage development process, many stakeholders place their hopes in the continued decrease in energy storage system costs, believing that cost is the critical influencing factor in energy storage industry development. While system cost reductions are certainly beneficial to industry growth, they are not the core factor to development. If we take lithium-ion batteries as an example, over the past few years, system hardware costs have decreased rapidly. Even as recently as the first half of this year, bids for energy storage systems paired with wind power fell from 2.15RMB/Wh (PC price) to 1.699 RMB/Wh (EPC price) in just a few months’ time. Such a rapid drop in price was a surprise to many in the industry. While the influence of the COVID-19 epidemic cannot be ruled out as a factor which has caused companies to abandon profit in favor of cash flow, the overall price decrease trend across the entire industry is still obvious.

The components which make up today’s energy storage systems are nearly all mature industrial products. A mature market leaves little room for profiteering. If prices continue to rapidly fall, then it is very possible that product quality and/or guarantees must be sacrificed. If whether prices can continue to decrease rapidly is the critical determining factor for energy storage industry development, then shouldn’t current system prices have already brought us to the eve of a massive burst in industry development? This author believes that product prices are simply a guide for product value. Without a reasonable method for assessing value, blind reduction of costs to stimulate market growth is a fruitless approach.

But from the perspective of investors, are energy storage system prices in fact the critical deciding factor for whether a system will be developed? Most investors are aware of the four major factors affecting investment returns on an energy storage project: initial outlay, cost of capital (interest rate), grid electricity price, and amount of grid-connected electricity. A sensitivity analysis can be used to explore which of these factors will have the greatest impact on investment returns. A sensitivity analysis is an uncertainty analysis method for risk tolerance that determines which out of many uncertain factors will have the greatest impact on the economic benefit indicators of an investment project, then analyzes and measures the degree of impact of these factors to the economic benefit indicators, and finally assesses the project’s ability to take on risk. If we take as an example an energy storage project with initial outlay, cost of capital (interest rate), grid electricity price, and amount of grid-connected electricity at a market average price all of ±10%, the sensitivity analysis results (without describing the process in detail) would be as follows: grid electricity price and amount of grid-connected electricity are equally important, with minor fluctuations in either factor having a major impact on project rate of return. Initial outlay and cost of capital also have influence on rate of return, yet do not have as high of a sensitivity coefficient as grid electricity price and the amount of grid-connected electricity. Therefore, the energy storage system should be developed with the most priority given to producing the greatest amount of grid-connected electricity. These results highlight how in order to achieve maximum profits, the quality and lifespan of energy storage products that can provide profitable grid-connected electricity, as well as grid electricity prices are the most critical factors that affect revenue.

Four Areas of Focus for Energy Storage Industry Development

To promote long-term, sustainable industry development, this author believes that the following four areas should be emphasized: creation of a market mechanism, discovery of new applications, raising of capital, and development of new technologies.

Creation of a Market Mechanism: over these past few years of energy storage development, there has been no lack of polices in support of the energy storage industry. But a careful look at many of these policies reveals that many are simply guidelines, and few offer concrete action. The primary reason for this is that there is still no mechanism in place to determine the reasonable economic value of energy storage’s services. Energy arbitrage, frequency regulation, grid-side energy storage, and renewable integration applications are all major energy storage functions, yet still have yet to see the creation of stable earnings mechanisms. Additionally, some of the more specific policies which provide “one size fits all” solutions can be questionable, such as the many policies released this year which require renewable energy stations to deploy energy storage. Some provinces have required deployment of storage systems with capacity equal to 20% of a station’s power generation and with a duration of 2 hours. Other provinces have required storage system capacity to be at least 5% of a station’s power generation and with a duration of 1 hour. Perhaps a more suitable policy would focus on the index for assessing the effectiveness of an energy storage system’s adjustment capabilities rather than capacity ratios. Navigating through the “minefield” of a policy-oriented market is a necessary process for energy storage’s development.

Discovery of New Applications: The many varieties of energy storage services, such as peak shaving, frequency regulation, voltage regulation, demand response, black start, and many more allow energy storage to have value across a wide range of scenarios. But as industry stakeholders, we must make an effort to continue expanding the range of settings in which energy storage is used, keeping our eyes peeled for new opportunities in which our industry can link with specific application markets to solve customer issues, and transform energy storage from an “accessory” to the perfect solution for a variety of different scenarios.

Raising of Capital: the importance of capital to industry development in its early stages goes without saying. For the energy storage industry, we must try harder to obtain new sources of capital while lowering capital costs. Of course, when it comes to industry development, an industry which can bring its customers and investors sustainable and predictable incremental value is a good industry. Industry stakeholders must respect capital owners, and make a sincere effort to use capital to promote industry development.

Development of New Technologies: technology innovation is the foundation for furthering industry development. As discussed above, the amount of electricity which a system connects to the grid has a major influence on investment return. This ability is closely linked to the lifespan of a system—how much energy it can charge and discharge. Among current mature market technologies, we still have yet to see a perfect solution. Increasing energy storage system safety and efficiency, lengthening lifespans, lowering operations and maintenance costs, and increasing environmental friendliness are all challenges which must be resolved through the continued efforts of technology researchers and developers.

Conclusion

Energy storage is a technology which can change the time and space in which we use our energy, and stands at the intersection between the historical background of the energy revolution and the new era of energy system reforms. Energy storage industry stakeholders must brace themselves for the challenge, and work to move away from the trap of low-price competition by focusing on the value of energy storage functions, searching for new technology innovations, and reducing costs by extending lifespans and improving quality. These efforts will ensure long-term, sustainable development. System costs are not the critical factor to industry development, rather, market demands are the core driver to industry development. Technologies and market are at opposite ends of supply and demand, and policy mechanisms and capital are the intermediate bridge between supply and demand. Though there are still many challenges ahead of us, this author is confident that the persistence and dedication of industry stakeholders both new and experienced will bring brighter days ahead!

Author: Peng Kuankuan Wanke Energy Technology Co.,LTD
The views and opinions expressed in this article are the author’s and do not necessarily reflect those of Wanke Energy Technology or China Energy Storage Alliance.

Development Outlook for Energy Storage in China’s “Fourteenth Five-year Plan” Period

2020 is the final year of the “Thirteenth Five-year Plan” and the planned launch year for the “Fourteenth Five-year Plan.” After the slowdown and adjustment of the energy storage industry in 2019, stakeholders have strong hopes for industry development in 2020. Yet the global outbreak of COVID-19 has had deep impact on the industry, disrupting the rhythm of development for both domestic and international energy storage. Yet if we look toward the “Fourteenth Five-year Plan,” we can see that the current challenges are not enough to derail the continued growth of energy storage. The energy storage industry, which is forging ahead despite the crisis, is set to welcome a new, broader space for development.

According to statistics from the China Energy Storage Alliance Global Energy Storage Project Database, as of the 2019 year’s end, China’s operational energy storage capacity totaled 32.4GW (including physical, electrochemical, and thermal energy storage), an increase of 3.6% from 2018. Of this capacity, electrochemical energy storage projects totaled 1709.6MW, an increase of 59.4% compared to 2018, a significant slowdown compared to the 175.2% growth rate of 2018. Nevertheless, the 636.9MW of increased capacity in 2019 suggests that China’s energy storage market continues to grow steadily.

A Review of Energy Storage Growth During the “Thirteenth Five-year Plan” Period

During the “Thirteenth Five-year Plan” period, China’s energy storage industry began to develop rapidly. According to statistics from the CNESA Global Energy Storage Project Database, by the end of 2016, China’s operational energy storage capacity totaled 24.3GW (including physical, electrochemical, and thermal energy storage), of which electrochemical energy storage totaled 243MW. In comparison, by the end of 2019, China’s total operational energy storage projects (including physical, electrochemical, and thermal energy storage) increased by 32%, with electrochemical energy storage project capacity increasing more than seven times. The cause of this rapid growth was not just a small base in the initial development stages, but the creation of conditions conducive to industry development.

The first condition is the rapidly declining costs of energy storage, providing a foundation for commercial energy storage applications. In 2020, a CNESA survey of major manufacturers revealed that Li-ion battery system costs (excluding PCS) have dropped 1,000-1,500 RMB/kWh, bringing applications to a point of “breaking even,” helping to provide a foundation for further commercial development of energy storage.

The second condition is the release of government policies which have directly supported the development of energy storage. In 2017, the Chinese government released the Guiding Opinions on Energy Storage Technology and Industry Development, the first comprehensive national energy storage policy in China, providing support for a “clean, low-carbon, safe, and efficient” modern energy system guided by energy storage. The refinement of policy related to ancillary services, energy storage’s primary application, as well as policy developments in regions including Qinghai, Guangdong, Jiangsu, Inner Mongolia, and Xinjiang, have created a wave of energy storage construction and development.

The third condition is the deployment and operation of large-scale energy storage projects, which have proven the effectiveness and value of energy storage in its primary application area. According to CNESA global energy storage database statistics, as of the end of 2019, global electrochemical energy storage projects totaled approximately 800. The deployment of these projects has demonstrated how storage can improve the stability and flexibility of energy systems, increase operational efficiency, balance power output and demand, and other functions which help solve some of the current structural challenge of the energy system.

The fourth condition is that China’s energy storage value chain has developed market players with international competitiveness. The current energy storage industry in China has developed a relatively complete domestic value chain, from material production, component manufacture, systems integration, and materials recycle. Although there is still some reliance on foreign technologies, China has developed many of its own mainstream and frontier energy storage technologies. Examples of leading energy storage vendors which have been nurtured by the value chain include CATL, BYD, Rongke Power, CRRC, and other companies which have created a foundation for China’s large-scale energy storage development.

Now in 2020 as we reach the end of the “Thirteenth Five-year Plan” period, we can summarize how energy storage has achieved rich results over the past five years, achieved the goals of the Guiding Opinions, and entered the early stages of commercialization. The critical value of energy storage to the energy system transition has now been demonstrated and verified.

Exploring the Development Direction of the Energy Storage Industry in the “Fourteenth Five-year Plan” Period

2020 is the year in which the “Fourteenth Five-year Plan” will be published. The energy storage industry is hopeful that this national-level development policy will help create a market environment which will support energy storage. According to CNESA’s current information on the policy, the “Fourteenth Five-year Plan for Energy Development,” “Fourteenth Five-year Plan for Electric Power,” “Fourteenth Five-year Plan for Energy Technology Innovations,” and the “Fourteenth Five-year Plan for Renewable Energy” have all included energy storage in their planning, with some directly citing energy storage topics as subject for research. CNESA has had the privilege of participating in the drafting of these plans. Below, we examine some of the themes of the “Fourteenth Five-year Plan” as they relate to energy storage.

With focus on energy storage applications, overcome current technology development bottlenecks. High safety, long lifespans, high efficiencies, low costs, large-scales, and sustainable development are the prime dimensions of focus for frontier energy storage technologies. As Li Hong of the Chinese Academy of Sciences Institute of Physics stated at the annual meeting of the China Energy Research Committee, during the “Fourteenth Five-year Plan” period, the goals of large-scale energy storage technologies will be development of long duration, short-to-medium duration, and high efficiency energy storage technologies, decreasing prices to 0.2RMB/kWh or lower, increasing energy storage equipment lifespans to 15-30 years, development of modularization, standardization, and intelligentization of critical technologies, development of second-life applications, whole life cycles, and sustainable critical technologies, and the development of highly safe, reliable, and advanced large-scale critical technologies.

On February 11, the Ministry of Education, National Development and Reform Commission, and the National Energy Administration jointly released the “Action Plan for Development of Energy Storage Disciplines (2020-2024),” which called for increasing the cultivation of talents in the field of energy storage, strengthening independent innovation abilities in core critical technologies, promoting development of the energy storage industry through the integration of industry and education, and promoting the development of critical technology research so as to reach a level of international competitiveness. The release of this document has helped to provide sustainable support for continued energy storage technology innovations.

Integration of energy storage with renewables will become a leading trend. During the “Fourteenth Five-year Plan” period, as the installed capacity of renewable energy continues to increase, so too will peak shaving demands, providing new opportunities for energy storage to become a main method of regulation. Currently, Tibet, Xinjiang, Qinghai, Inner Mongolia, Jiangsu, Anhui, Zhejiang, Hunan, and Shandong have released policies which provide grid connection priority to renewable energy stations which are paired with storage, provide increased hours of generation, and other incentive policies. CATL has focused on this market, forming a joint venture company with State Grid Integrated Energy Service Group to advance the investment, construction, and operations of energy storage in the renewable energy sector in Xinjiang.

Direct policy promotion is certainly beneficial, yet more consideration must be given to critical challenges in order to ensure long-term development. First is determining whether the amount of storage deployed is appropriate and the most optimal for the system it is deployed to. Second is determining how obstructions to energy storage investment costs can be removed, and how investment can be combined with the construction of the electricity market to achieve a reasonable market return before solar/wind+storage systems achieve grid parity. Third is to consider how to prevent unreliable entities from expelling or occupying the market space of reliable ones, prevent the use of low-quality energy storage systems, and prevent the inefficient use of energy storage resources.

Grid-side energy storage may see a resurgence in the next regulatory cycle. Following the recent government policy announcement preventing energy storage investment costs from being included in T&D power costs, grid-side energy storage, a recent area of major growth, experienced a virtual stop in new project development. Yet the completion and commissioning of grid-side energy storage projects in Jiangsu, Henan, and Hunan in 2019 helped prove the benefits of grid-side storage for peak shaving, frequency regulation, load shifting, demand response and other applications, as well as increasing system safety and stability of operations. In 2020, China State Grid’s new chairman Mao Weiming stated, “we must actively research and explore development paths and models for energy storage, match UHV construction with renewable energy consumption demand, and form a set of mature technologies and business models to achieve balanced development between energy storage and the power grid of the future.” The “Fourteenth Five-year Plan” period will provide a new regulatory period for T&D pricing. Many are watching closely to see if the new cycle of regulations will help provide new development opportunities for grid-side energy storage.

A reasonable price transmission mechanism is needed to further ancillary services market reforms. Ancillary services (primarily frequency regulation) is currently the energy storage application in China with the most developed commercial value. According to CNESA Global Energy Storage Database Statistics, China’s electrochemical energy storage capacity in ancillary services applications totaled 270.3MW, or 15.8% of the total energy storage market. In recent years, as ancillary services markets have begun to take shape across different regions, energy storage projects have developed rapidly. Yet payments for ancillary services are still quite limited within the on-grid electricity prices in China. With renewable energy capacity continually rising within the grid, peak shaving and frequency regulation demands also rise, and in turn, so do costs. Current ancillary services markets are constructed as a “zero-sum game” between generation companies. If a mechanism is not established which can reasonably transfer the costs to power customers, the ability to regulate resources within the power grid will be limited, and renewable energy resources will be unable to develop within the grid on a large scale.

Of course, with electricity prices in China’s economy continuing to fall, it is difficult to launch a policy in which the costs of ancillary services are passed directly on to customers. Yet as power industry reforms progress, we may be able to optimize the market mechanism in stages between regions which already maintain spot markets and those which do not yet have spot markets, and create a reasonable mechanism in which the beneficiary is the one who foots the bill for services.

New infrastructure, new applications, new markets.  On March 4, the Politburo Standing Committee held a meeting in which General Secretary Xi Jinping stressed the need to increase public sanitation services, increase investment in emergency supplies, and increase development of new data infrastructure such as 5G networks and data centers. 5G infrastructure will require significant new energy consumption which must be supported by small-scale, high-density energy storage systems, which is why lithium-ion batteries have become the primary choice for 5G telecom station backup power. So far in 2020, China Tower has released 24 invitations for bids for projects in 20 provinces. The total estimated budget for these projects exceeds 89,450,000 RMB, with most of the invitations calling for the use of LiFePO Li-ion batteries. In early March, China Mobile also released a purchase order for 1.95GWh of LiFePO Li-ion batteries. In the view of industry insiders, the telecom industry has now reached a turning point in which lead-acid batteries are being replaced by Li-ion. Installation of Li-ion battery systems can also provide peak shaving and TOU energy management, avoiding the need for capacity expansion and lowering network construction and operations costs. Reports have shown that the use of energy storage in China Telecom Qingdao’s telecom stations can save an annual 13,800 RMB per station.

At the same time, we must also consider the influence of the COVID-19 epidemic on energy storage. During a recent CNESA webinar, Liu Hao, Director of Operations at State Grid Henan Comprehensive Energy Services Co., provided an analysis of what trends may be seen in energy storage applications following containment of the epidemic. Liu Hao spoke confidently on the future development of storage, stating that coordination between energy storage and comprehensive energy services will provide “energy digitalization, streamlining, service orientation, diversification,” and other valuable benefits which will increase intelligent use of energy and make full use of energy storage’s value.

Summary: in December 2019, the National Development and Reform Commission Vice Director Lian Weiliang spoke at a symposium on energy storage, stating that energy storage will play a key component in future energy structure developments concerning the safe and stable operation of the power system, large-scale development of clean energy, and power system reforms.

As the “Fourteenth Five-year Plan” continues to be drafted and soon begins implementation, China’s energy storage industry will soon realize the development goals for the “Fourteenth Five-year Plan” put forth in the “Guiding Opinions,” including broadening of energy storage applications, mastering of internationally advanced critical technologies and equipment, development of a complete energy storage standards system, development of a mature energy storage market based on diverse business models, and the fostering of internationally competitive market entities. As the scale of the energy storage industry continues to grow, energy storage’s role in promoting energy reform and connecting the “energy internet” will become even more apparent.

Author: Li Zhen, Deputy Secretary General, China Energy Storage Alliance

Solar Grid Parity May Pave a New Path for “Solar-plus-storage” Market Development

In 2019, China’s solar industry transitioned from an era of subsidized solar to a new era without subsidies. Solar power has now reached a state of near grid parity, meaning that solar generation must now face direct competition with conventional fossil fuel generation. Those in the energy industry are aware of the challenges of solar generation, including instability and intermittency, sensitivity to weather changes, and the difficulty of the grid to consume solar generation on a large scale. These issues put solar power at a disadvantage when compare to conventional generation and pose a challenge to the entire energy system. Energy storage offers one method of confronting these challenges. Energy storage can stabilize generation, improve power quality, provide storage of excess generation, help increase the grid’s consumption of renewable generation, and increase the flexibility of grid dispatch. Through grid parity, solar power generation may now pave the way for development of the “solar-plus-storage” market.  

1.       China’s Solar-plus-storage Market Scale

According to CNESA Global Energy Storage Project Database statistics, as of the end of 2019, operational energy storage projects paired with solar generation (including molten salt thermal storage) totaled 800.1MW of capacity, an increase of 66.8% compared to the 2018 year’s end and comprising 2.5% of total energy storage capacity (including physical, electrochemical, and molten salt energy storage capacity). In 2019, newly operational solar-plus-storage capacity totaled 320.5MW, an increase of 16.2% compared to 2018. Numerous renewable energy companies have begun to understand and recognize energy storage and the value it can bring to solar generation.

Figure 1: total operational solar-plus-storage project capacity (2016-2019)

Data source: CNESA Global Energy Storage Project Database

I.       Centralized solar-plus-storage projects

According to CNESA database statistics, as of the end of 2019, China had deployed a total of 625.1MW of operational energy storage projects paired with centralized solar generators, equivalent to 78.1% of all solar-plus-storage capacity. Regionally, these projects were deployed primarily in China’s northern regions, among which Qinghai province featured the greatest proportion of capacity at 294.3MW, or 47.1%. In 2019, State Grid Qinghai Power Co. announced their innovative shared energy storage model, China’s first shared energy storage blockchain platform. The program’s transaction model combines negotiated service agreements, competitive market pricing, and grid dispatch to provide a new method for marketized transactions between energy storage stations and renewable energy generators, promoting the widespread application of energy storage for increasing grid consumption of renewables, and opening a new market for centralized solar-plus-storage. Qinghai province also saw two molten salt thermal storage projects go online in September 2019, each at a scale of 50MW.

Figure 2: Regional distribution of operational centralized solar-plus-storage projects (MW%)

Data source: CNESA Global Energy Storage Project Database

II.       Distributed solar-plus-storage projects

According to CNESA database statistics, as of the end of 2019, China had deployed a total of 175.0MW of operational energy storage projects paired with distributed solar generation, or 21.9% of total solar-plus-storage capacity. Distributed solar-plus-storage has a wide variety of applications, such as in rural areas with poor grid access, industrial solar-plus-storage projects, solar+storage+charging stations, island solar-plus-storage, military solar-plus-storage applications, and others. Of these applications, solar-plus-storage projects deployed in rural areas comprise the greatest portion of capacity, at 69.1MW, or 39.5% of total applications, a decrease of nearly 14% compared to the end of 2018. In contrast, industrial solar-plus-storage project capacity rose 8% over the same period, showing that an increasing number of industrial customers are using solar-plus-storage to lower the costs of their energy bills.

Figure 3: Distribution of operational distributed solar-plus-storage projects by application (MW%)

Data source: CNESA Global Energy Storage Project Database

2.  Chinese Solar-plus-storage Project Case Studies

I.       Qinghai Golmud DC-side Solar Generation Plant Energy Storage Project

The project is located in a solar industry park in Golmud city, Qinghai province. The project was developed by the Huaneng Group. Solar generation capacity totals 180MW, while energy storage capacity totals 1.5MW/3.5MWh. The energy storage project utilizes lead-carbon batteries and LiFePo lithium-ion batteries, and averages one daily charge-discharge cycle for storage of solar energy that would normally be curtailed. The project went operational in January 2018 and was developed at a total investment cost of 950,000 RMB.

The project relies on distributed DC-side solar PV and energy storage technologies to help solve the problem of pairing between solar generation and the energy storage system. In comparison to conventional AC-side solar PV and energy storage technologies, distributed DC-side solar PV energy storage technology not only reduces the power variation between the photovoltaic components and batteries, but also utilize the original photovoltaic inverter system’s inverter equipment, step up equipment, and circuitry, reducing the need to invest in additional equipment and saving physical space. In addition, the DC-side access does not affect the PV station’s original outgoing capacity, nor does it require approval for new grid-connected equipment. For older solar PV stations which produce high-cost electricity, the energy storage retrofit can significantly increase grid-connected power generation and economic benefit.

The solar PV station in the above case is one of relatively early construction, producing power at a cost of 1 RMB/kWh. If a 250kW/500kWh lead-carbon battery energy storage system was to be connected to this station, it could enjoy the same price rate for generation as the solar PV station. With an annual charge-discharge rate of 4000 cycles, the system would generate an additional 150,000kWh annually, providing 150,000 RMB of revenue at an ROI period of 6.96 years. At present, it is very economical to retrofit or add new energy storage systems to solar PV stations which are compensated at a rate of 0.9 RMB/kWh or higher. With the continuous decline in the cost of energy storage batteries, it may also be economical for PV stations which are compensated at 0.7 RMB/kWh to install new energy storage systems.

II.       BYD industrial park renewable energy microgrid project 

The project is located at the BYD plant in the Pingshan New District, Shenzhen, and was self-constructed by the BYD Electric Power Research Institute. Construction began in September 2013 and completed in July 2014. The project covers a total area of 1500 sq. meters, has a capacity of 20MW/40MWh, and was developed at a total investment cost of 148 million RMB. The station includes a medium voltage system, fire suppression system, ventilation system, energy conversion system, battery, and battery management system. Of these components, the energy conversion system, battery, and battery management system were researched and developed by BYD. The entire station is comprised of 59,000 220ah battery cells and 128 160kW PCS systems, with a design life of 20 years. The station’s primary purpose is smoothing of solar PV power generation, load shifting, and providing the industrial park with the ability to independently adjust its power consumption.

Figure 5: BYD Industrial Park renewable energy microgrid project

Source: BYD Electric Power Research Institute

According to station operation data, the system is combined with the park’s 12MW rooftop solar PV, storing off-peak electricity at night. The park’s real-time electricity consumption can be optimized based on external conditions, allowing the system to utilize a dynamic ratio of solar generation, energy storage, and grid energy. According to estimates, after taking into consideration the electricity cost savings for the park and the basic industrial electricity capacity costs, the project will achieve a return on investment in eight years. In areas where the peak and off-peak electricity price differences are high, this model shows early commercial value.

For distributed solar-plus-storage projects, the key factor to generating revenue is the price difference between peak and off-peak electricity at the customer side. Currently, as costs of energy storage continue to decrease, it will be economically viable to develop such projects in areas with a peak and off-peak price difference of 0.75 RMB/kWh or more.

3.       China’s Solar-plus-storage Policy Environment

In addition to the national “531 Policy” released in 2018, there have been many recent regional policies which have had major influence on solar-plus-storage, such as those in Anhui, Xinjiang, Tibet, Shandong, and Jiangsu provinces, as well as the northwest China region. A few of these polices are listed below:

On May 31, 2018, the National Development and Reform Commission issued the "Notice on Matters Related to Photovoltaic Power Generation in 2018" (the "531 Policy”), which tightened subsidies and indicators for solar generation and made clear that the future development of solar generation would be based on unsubsidized grid parity. In response, many solar PV companies set their sights on energy storage, viewing the combination of solar generation and energy storage as one way for the future solar PV market to develop.

In September 2018, the Hefei government released the first subsidy policy for distributed solar PV combined with energy storage, the “Suggestions for Promoting the Development of the Solar PV Industry,” encouraging the development of solar-plus-storage applications by providing a 1 RMB/kWh charging subsidy to energy storage systems.

At the end of 2018, the Northwest China Energy Regulatory Bureau released an updated edition of the “Two Regulations,” which strengthened the assessment accuracy and penalization of renewable energy stations, as well as increased the types and standards for compensation. Renewable energy companies can optimize the operations of their renewable energy generators by installing energy storage, minimizing the risk of penalization and increasing revenue.

In June 2019, the Xinjiang Development and Reform Commission released the “Notice on the Development of Generation-side Solar-plus-storage Projects,” which provides 100 hours of priority generation for a five-year period to solar PV stations that install new energy storage systems.   

In August 2019, the Shandong Energy Administration released the “Notice on Improving Grid Access for Grid Parity Projects in Shandong,” which encouraged large-scale centralized solar PV projects to install energy storage systems in order to reduce solar curtailment.

In December 2019, the Jiangsu Energy Regulatory Office released the "Notice on Further Promoting Grid Connection and Use of Renewable Energy” and “Distributed Generation Market Transaction Regulations for Jiangsu Province (Trial).” The policies encourage renewable energy generators to install a certain amount of generation-side energy storage, support energy storage project participation in the ancillary services market, and promote the combined operation of energy storage systems with renewable energy to increase system regulation abilities. The policies also encourage distributed generation projects to increase their power supply flexibility and stability through methods such as installing energy storage.

Although the Xinjiang policy provided centralized solar-plus-storage projects with 100 hours of priority generation, calculations from project operators revealed that investment returns would not be ideal. Even so, this type of project still has potential profit points. At present, ancillary services reforms in the five northwestern provinces of China, including the construction of power spot markets, are currently under way. In the future, solar-plus-storage projects are very likely to have the opportunity to provide ancillary services such as peak shaving and frequency regulation, as well as participate in renewable energy market transactions. In addition, at a time when the economy is not ideal, some enterprises still choose to build solar-plus-storage projects, in part to accumulate project experience and create opportunities for potential future profit points. The business models, ownership, capital schemes, role division, and cooperation models of such projects are all still being explored.

4.       Solar-plus-storage Market Development Trends

The development trends of solar-plus-storage in China are closely linked to the development trends of solar PV. In the beginning, solar-plus-storage relied primarily on solar PV subsidy policies and the solar-plus-storage subsidy policies of individual provinces and cities, saving money on electricity fees through energy arbitrage and preventing losses by improving reliability of the power supply and power quality. These models gradually shifted to supporting the self- generation and use of solar power and promotion of onsite consumption of solar generation. During this period, solar PV subsidies began to decline, and the early stage of marketization began to appear. In addition to increasing solar PV generation income, energy storage could also delay the need for new investment in distribution networks, increase the stability of the power supply, and provide value-added services for the distribution of electricity. In the future, users may harness solar-plus-storage applications to avoid high electricity prices while also participating in the ancillary services market to earn greater profits. In the future we may also expect a variety of business models to emerge, and solar-plus-storage will formally enter the full marketization stage.

As the global energy transformation continues, future power grids around the world will be dominated by a high proportion of renewable energy. In this energy structure, solar PV will account for the largest proportion of renewable energy. The International Renewable Energy Agency (IRENA) forecasts that by 2050, global installed solar PV capacity will reach 8,519GW, while the installed capacity of wind power will reach 6,014GW, which together will account for 72.5% of the global installed electric power capacity. The development of renewable energy requires the support of flexible resources such as energy storage. According to IRENA’s forecast on the global energy storage market, under the baseline scenario, global stationary energy storage station capacity will reach 100-167GWh by 2030. In an ideal scenario, this number will reach 181-421GWh. No matter which outcome, the highest portion of energy storage capacity will be dedicated to time shifting of solar PV generation.

Therefore, in the future, as the global energy structure shifts to a high proportion of renewables and the large-scale development of solar PV, the solar-plus-storage model will become one of the primary models for energy storage development in the future, ushering in a huge potential new market for energy storage.

Authors: Yu Zhenhua, Chairman, and Ning Na, Senior Research Manager, China Energy Storage Alliance
Translation: George Dudley

CNESA Global Energy Storage Market Analysis – 2020.Q1 (Summary)

1.       Market Size

As of the end of March 2020 (2020.Q1), global operational energy storage project capacity (including physical, electrochemical, and molten salt thermal energy storage) totaled 184.7GW, a growth of 1.9% in comparison to 2019.Q1. China’s operational energy storage project capacity totaled 32.5GW, a growth of 3.8% compared to 2019.Q1. Global operational electrochemical energy storage capacity totaled 9660.8MW, of which China’s operational electrochemical energy storage capacity comprised 1784.1MW.

In the first quarter of 2020, global new operational electrochemical energy storage project capacity totaled 140.3MW, a growth of -31.1% compared to the first quarter of 2019. Of this new capacity, China’s new operational electrochemical energy storage capacity totaled 74.5MW, a growth of 47.5% compared to the first quarter of 2019. Global new electrochemical energy storage projects either planned or under construction totaled 2.4GW of capacity, of which China’s planned/under construction projects totaled 609.5MW of capacity. Both globally and in China, the majority of these planned/under construction projects are being developed for grid integration of centralized renewable energy, at 40.9% and 76.4% of the total planned/under construction applications, respectively.

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 first quarter of 2020, the COVID-19 epidemic spread throughout the globe, not only threatening the health and safety of those around the world, but also affecting global industries. Some that were hit particularly hard include the restaurant, entertainment, travel, and exhibition industries. In the short term, energy storage has been affected by delays or cancellations in production, project commissioning and delivery, business discussions, and international market development. For some small- and medium-sized companies, the effects of the epidemic have brought great operating pressure.

In the global market, the outbreak of COVID-19 and the various control measures implemented by different countries have stimulated enthusiasm for installing solar-plus-storage systems that can provide flexible and self-generated electricity. Although the epidemic threatens the supply chain and has caused project delays, governments are still taking active measures to promote the application and development of solar-plus-storage. For example, the governments of California and Australia have listed solar PV combined with energy storage as a basic service for residents. In the domestic Chinese market, both the results of CNESA surveys and the government’s resolve to provide economic stimulus to support epidemic recovery indicate that the impact of the epidemic on 2020’s overall energy storage market is likely to be limited. The energy storage market should continue to grow steadily, and market growth is likely to be higher than that of 2019. In the first quarter of 2020, domestic front-of-the-meter projects (including renewable integration, frequency regulation ancillary services, and grid-side projects) saw continued growth, with three new projects put into operation, including a 30MW/108MWh energy storage project at Jinjiang Anhai Park, a 15MW/7.5MWh energy storage frequency regulation project at the Hengyun power plant, and an 18MW/9MWh energy storage frequency regulation project at the Heyuan power plant. These three projects accounted for 84.6% of the total scale of new operational projects in the first quarter. In addition, new front-of-the-meter projects either planned or under construction totaled 525.8MW, accounting for 86.3% of new planned/under construction project capacity in the first quarter.

3.       About this Report

CNESA Research customers can access the full version of the CNESA Global Energy Storage Market Analysis – 2020.Q1 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

Email: esresearch@cnesa.org

How Can Energy Storage Better Participate in China’s Ancillary Services Market?

As power market reforms continue to develop, the ancillary services market has become a major area of focus.  Energy storage serves as one strategy for ancillary services, capable of providing fast, precise response and flexible deployment.  Energy storage has already achieved commercial breakthroughs in ancillary services applications.  Yet in many facets, a market mechanism and policy environment that supports the efficient and rational application of energy storage is still lacking. As the amount of renewable generation in China increases, the power system requires greater integration of flexible resources for regulation.  In the low-carbon energy system of the future, energy storage will play a critical role in renewable integration and grid stability. Compared to many other regions, China’s ancillary services market is still in the infant stages of construction.  Reasonable market regulations require further exploration, and actions must be taken to ensure existing regulations are updated, thereby ensuring that the energy system moves in the direction which supports long-term development.

Marketization Progresses, Yet Many Problems Persist

Current problems and challenges to the participation of energy storage in the ancillary services market can be summarized as follows:

1.      Defining energy storage’s identity in the ancillary services market

Defining energy storage’s “identity,” in other word, determining how energy storage should enter the market, is an issue with challenges at two levels:

The first challenge is that while regulatory structures may allow energy storage to enter the market, in actual practice implementation may face difficulties. Regulations across many regions have already defined energy storage’s place in ancillary services markets, allowing energy storage to participate as both independent stations or when paired directly with thermal generation. Yet in actual practice, aside from energy storage systems which are tied directly to thermal generators, many energy storage systems are unable to enter the market because current transaction and dispatch methods are unable to support such systems’ provision of services. Other problems exist in land approval, grid connection, and other permissions. Looking forward, independent energy storage stations and aggregated behind-the-meter energy storage stations will be a driving force for the participation of energy storage in ancillary services markets, though additional technical support and policy developments are needed to make such models a reality.

The second challenge is of the “treatment” of energy storage in comparison to other participating entities, or the problem of “fairness.” Currently, there are many regions where redundant generators squeeze the market space from high-quality resources.  Ancillary services dispatch strategies are also simple, and there is no optimized scheduling mechanism for independent energy storage stations. These dispatch strategies will also be unable to meet future power spot market demands.  It is for these reasons that energy storage projects have tended to be bound with independent dispatching entities, as it is still difficult for independent storage stations to truly and fairly compete with other market entities.

2.      Energy storage investment returns are still difficult to guarantee

Though energy storage takes part in the ancillary services market, profits have still been difficult to guarantee. When the market first opened, energy storage could obtain high value returns primarily in areas where ancillary services would receive compensation according to effectiveness. However, rapidly changing policies have had a major influence on the investment returns for energy storage that participates in the ancillary services market.  In 2019, the North China Energy Regulatory Bureau modified the upper limit of the K value for the “two regulations”* in northern China, and amended the western Inner Mongolia calculation methods for both daily grid regulation and the daily contribution of electricity provided by AGC frequency regulation. These measures caused a noticeable decline in revenue for frequency regulation services.

3.      A long-term operations mechanism for an ancillary services market is still lacking

Generally speaking, China’s ancillary services market mechanism has yet to fully form. The costs and compensation for energy storage and other new grid regulation resources that provide frequency regulation do not completely reflect the needs of the power system, and the market has not transmitted the initial costs for such resources to the actual beneficiaries. This issue is part of a larger problem with ancillary services. Ancillary services are closely related to the construction of power markets, particularly spot markets. There is an urgent need to improve the ancillary services price mechanism through further power market reforms, and gradually link ancillary services market regulations with spot markets. These actions are necessary for new technologies and new market entities to freely participate in the market and obtain reasonable value returns.

How Regulations for Energy Storage Participation in Ancillary Services Markets are Designed in Foreign Countries

The United States was the first country to incorporate energy storage into its ancillary services network at a large scale. Numerous commercialized energy storage projects currently provide ancillary services to the US power grid. Energy storage has been able to successfully integrate into the US ancillary services system not only due to declining costs of storage, but also, and more importantly, due to actions by the Federal Energy Regulatory Commission (FERC) to define energy storage’s role within the ancillary services market. These actions include clarifying what kind of compensation energy storage should receive for its services, where ancillary services fees should come from, and other measures which have provide a legal and policy basis for supporting storage. Below, we examine some of the successful US experiences with energy storage.

1.      Defining energy storage’s identity within the ancillary services market

In the US electricity wholesale market, energy storage is viewed as a special type of power resource, defined as a non-generator resource (NGR). Unlike generators, an NGR can be flexibly dispatched to any level within their operating capacity range. NGRs have two major characteristics: first, NGR models are usually simpler than that of conventional generators; there is no cost for startup or shutdown, minimum load cost, or transition cost. Second, NGRs can provide energy services, capacity services, and a variety of ancillary services. There are only two price quotations for energy storage in the wholesale market, a charge quotation and a discharge quotation. To guarantee participation in the market, operations costs are kept low to guarantee a winning bid, and energy storage infrastructure is typically quoted at zero.

2.      Defining of the “pay-for-performance” mechanism

Based on the principle that energy storage is a resource able to provide high-quality electricity, it is provided status equal to that of conventional energy storage as a provider of ancillary services. The compensation mechanism used for ancillary services provided by conventional energy sources is also suitable for energy storage. Therefore, no matter the type of energy storage technology, it will receive reasonable compensation based on grid regulation ability.

On Dec 12, 2011 FERC released order no. 755, Frequency Regulation Compensation in the Organized Wholesale Power Markets. The order requires power markets to release compensation plans which pay according to performance. Frequency regulation resources are compensated according to their actual level of contribution. The order requires frequency regulation ancillary services markets to provide two forms of compensation for frequency regulation resources: 1) a capacity payment which includes the opportunity costs of marginal resources, and 2) a performance-based payment which reflects the quality of the frequency regulation service being provided (for example, according to the accuracy of response to the dispatch signal) and the amount contributed. In general, the greater the mileage of frequency regulation, the higher the frequency regulation performance index, and the greater the compensation will be. Under the new compensation plan, capacity payments are no longer a “fixed” amount. When the frequency regulation performance index is at zero, it is possible that the capacity payment may also be zero. Therefore, the service provider’s frequency regulation performance will influence the final amount of compensation it receives for frequency regulation services. These measures ensure that energy storage systems providing AGC frequency regulation receive suitable compensation for the services they provide.

3.      Optimizing the clearing process

The PJM market is an example of a mature power spot market that has successfully operated for many years. In the PJM market, ancillary services and the spot market are jointly optimized and cleared, ensuring that accuracy is maintained for price changes due to frequency regulation provision and the opportunity cost losses of providing backup services. In order to fully marketize ancillary services, the specific timing of the PJM market joint optimization and clearing is as follows:

In the day-ahead market, the ISO will jointly optimize clearing of energy, frequency regulation, and reserves, but does not settle the frequency regulation. In the hour-ahead market, the ISO will reoptimize clearing, and determines the generator group and capacity of the winning frequency regulation resource. Before entering the hour of operation, the generators must adjust their output level according to the frequency regulation order, in other words, complete its bid commitment. After entering the hour of operation, the ISO will engage in joint optimized clearing of energy, backup, and frequency regulation. Each dispatch hour is divided into 12 scheduling periods, and each scheduling period lasts five minutes. Energy clearing is carried out every five minutes for market settlement. Once the location marginal price (LMP), frequency regulation capacity price, and frequency regulation mileage price for each dispatch period are determined, the arithmetic mean of the 12 scheduling periods is calculated, and the energy, frequency regulation, and reserve price for the dispatch period is calculated, resulting in the final frequency regulation market price.

This type of long-term mechanism for ancillary services, that is, one in which the costs of ancillary services is shared by power customers, has been implemented in most mature power markets abroad.

Suggestions for Regulations Addressing the Participation of Energy Storage in the Chinese Ancillary Services Market

Ancillary services markets in the US and other international markets are based on mature power spot markets, and designed according to electricity pricing signals with different timing and location characteristics.

In China, power spot market trials have only just begun to take off. The completion of a modern power market system will still require a large amount of time and effort. For the short and medium-term future, the power spot markets will remain in the trial period. In these trial regions, ancillary services compensation mechanisms must be paired with the construction of power spot market transaction mechanisms in order for gradual marketization to occur. For energy storage, installations which have regulatory capabilities and can receive orders from dispatch can be viewed as ancillary services providers, and may have grid-dispatching regulations designed according to their performance. At the same time, a quantitative evaluation must be conducted for energy storage’s frequency regulation performance as a substitute for conventional generators, thereby optimizing frequency regulation capacity and allowing more high-quality resources to enter the market. At the operational level, optimized joint clearing of frequency regulation, reserve, and energy would help increase the level of market efficiency. In terms of price sharing, it is ideal for the customer side to bear the costs of ancillary services, and for customers to participate in spot market transactions on a single track (that is, without priority power purchase customers).

In those regions in which spot market trials have not yet been initiated, the “planned dispatch+direct transaction” model will continue to exist for a long period. In these regions, the ancillary services abilities of generators with the least efficient adjustment capacity can be used as the starting point for compensated ancillary services, reflecting the fairness with which ancillary services are provided. At the same time, the inclusion of reserve capacity ancillary services products allows generators providing reserve capacity to receive reasonable benefits. In regard to price sharing, following the release of the plan, customers participating in direct transactions should bear the cost of ancillary services according to their own usage, and gradually transition to a model in which all ancillary services are borne by users.

Payment for ancillary services by power customers is an inevitable step in the transition of the existing ancillary services market from a “zero-sum game” between generators to true marketization. As the cost of sending electricity to the grid gradually liberalizes, the theoretical basis for the generation-side to cover ancillary services costs (in other words, including the cost of ancillary services in the benchmark electricity price) no longer exists. In a true transaction, both sides engage in a “game” over electricity prices, and ancillary services are not discussed. Considering that ancillary services are an important part of energy production, when it comes to marketization, no matter what the cost of ancillary services, they must be paid for by the power customers. In addition, as renewables continue to penetrate the grid at increasingly high capacity, one way to view the principle of “the beneficiary pays” is that since consumers use a higher proportion of renewable energy, they therefore enjoy the environmental benefits brought by green energy, and should in turn pay the cost for these benefits. The fees should not only cover the cost of the renewable energy, but also include the costs of ancillary services required to support renewable energy.

There are still many difficult questions, such as how costs may be passed on to consumers if pay-for-performance may cause ancillary services fees to rise, as well as the influence of the government’s efforts to lower the cost of electricity consumption in the real economy. These questions are ones that regulators currently tackle with, and one of the major reasons that the development of an ancillary services mechanism has been so difficult. In regard to these questions, we offer a few thoughts:

1.       China’s overall ancillary services costs are relatively low compared to that of other countries with marketized energy systems, especially compared to countries with high levels of renewable energy, such as Germany and some northern European countries.

2.       Due to many years of rapid construction of the power generation sector combined with recent economic slowdown, China is currently experiencing a stage of excess power availability. As power transactions become increasingly marketized, many regions are seeing direct transaction price averages which are lower than that of state-approved electricity prices, with some customers already enjoying preferential prices. Under these condition, transferring the cost of ancillary services to power customers will allow customers to see the costs of ancillary services on their power bills, yet experience an overall lowering of their electricity costs.

3.       With the increased penetration of renewables in the grid, the need for ancillary services has also increased. As a high-quality regulatory resource, energy storage’s participation in the ancillary services market will help inhibit the rise of ancillary services costs.

The allocation of ancillary services costs to customers is the inevitable trend of the market. The pace at which this trend develops may be adjusted according to the pace of construction of the electric power spot market, but should not be implemented too late in the process. If we wait until the proportion of renewable energy in the power system is high enough to be noticeable to users, then resistance will be even greater than it is now.

In summary, when it comes to energy storage in the ancillary services market, a market mechanism should be optimized in stages. The market identity of various energy storage applications must be defined first, regulatory requirements in different power system environments should be clarified, and, finally, market regulation should be implemented which reflect the flexible regulation capabilities of energy storage, with beneficiaries paying for the cost of services.

*The “two regulations” are 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

Author: Guo Fan
Translation: George Dudley

How Have Different Countries Facilitated the Participation of Distributed Energy Storage in Power Markets?

Market regulators in the United States, United Kingdom, Germany, Australia, and other countries have been active explorers of models and mechanisms which allow distributed energy storage to participate in the wholesale electricity market. The experiences of these countries have provided references for other worldwide distributed energy storage markets to update their relevant market rules.

United States

The United States has taken many steps in both technical and market regulations to remove barriers for energy storage and distributed energy to participate in the power market. In technologies, the US Department of Energy released the Network Optimized Distributed Energy Systems (NODES) program, which provided funding to support the grid integration of virtual energy storage resources. The program has helped to develop a system that can flexibly regulate and optimize distributed energy applications such as energy storage, improving the grid’s ability to safely integrate distributed energy resources, and ensuring that the quality of customer electricity is not affected. In market regulations, the Federal Energy Regulatory Commission (FERC) released Order No. 792 in 2013, which simplified the grid connection process for small-scale generation equipment. In 2015, FERC released Order No. 745, which allowed consumer energy products and services to participate in the wholesale electricity market. Finally, in 2016, FERC begin to solicit proposals and comprehensively revise the rules on energy storage and distributed energy participation in the electricity market.

Below, we explore these power market regulations in detail.

In November 2013, FERC released Order No. 792, simplifying the grid connection process for small-scale generation equipment, including energy storage systems. During the policy development process, FERC conducted a seminar focused on resolving the issue of whether energy storage systems should or should not be classified as small-scale generation (equipment capable of generating electricity in accordance with grid connection regulations and agreements). In the end, FERC Order No.792 defined small-scale storage as the following: equipment which, after connecting to the grid, is able to generate/store electricity, and has an output power no greater than 20MW. Small-scale generation falling under this new definition includes energy storage technologies, thereby providing a foundation for the future of energy storage and creating a clear path for the identity and integration of storage in the grid under the jurisdiction of FERC.

In January 2016, the United States Supreme Court issued its decision on FERC Order 745, ruling that consumer energy products and services, including demand response, would be allowed to participate in the wholesale power market and collect compensation similar to conventional generation resources. The ruling allowed I&C and residential applications of renewable energy technologies to receive greater compensation, stimulating growth of solar PV, energy storage, energy management, and other new energy technologies. The ruling also increased the competitiveness of demand response, distributed generation, energy storage, and other new resources with conventional fossil fuel generation, helping drive down the costs of electricity.

Also in 2016, the California Independent System Operator (CAISO), the Pennsylvania-New Jersey-Maryland Interconnection (PJM), and the New York Independent System Operator (NYISO) submitted proposals to FERC, suggesting that it update its market regulations to promote greater aggregation of distributed energy resources to participate in power market transactions. In response to these proposals, FERC in November 2016 released a notice on proposed amendments, suggesting how to eliminate barriers to the participation of energy storage and distributed energy aggregation in the wholesale electricity market. The notice first provided a definition for electric energy storage, stating, “we define an electric storage resource as a resource capable of receiving electric energy from the grid and storing it for later injection of electricity back to the grid regardless of where the resource is located on the electrical system. These resources include all types of electric storage technologies, regardless of their size, storage medium (e.g., batteries, flywheels, compressed air, pumped-hydro, etc.), or whether located on the interstate grid or on a distribution system.” FERC addressed distributed energy systems by proposing that each RTO/ISO “define distributed energy resources aggregators as a type of market participant that can participate in the organized wholesale electric markets under the participation model that best accommodates the physical and operational characteristics of its distributed energy resource aggregation.” The notice provided suggestions on qualifications, capacity requirements, coordination between parties, contracting, and other subjects related to distributed energy aggregation in the power market.  These subjects are shown in the table below:

Table: FERC suggestions for regulatory updates allowing distributed energy aggregators to participate in the power market

In February 2018, FERC released Order No. 841, “Final Rule on Electric Storage Resource Participation in Markets Operated by Regional Transmission Organizations, or RTOs, and Independent System Operators, or ISOs.” The ruling formally required RTOs and ISOs to establish wholesale electricity market models and market rules which recognize the physical and operational characteristics of electrical energy storage resources so that they may participate in RTO/ISO markets. FERC outlined four standards for market participation models and market regulations: 1) the model must ensure that energy storage resources are eligible to provide all of the technical services that they are capable of in the RTO/ISO markets (including capacity, energy, and ancillary services); 2) grid operators must be able to dispatch energy storage resources, and said resources must be able to set the wholesale market clearing price as both a wholesale buyer and seller in accordance with existing wholesale market price rules; 3) models must account for the physical and operational characteristics of energy storage resources through bidding parameters or other methods; 4) establish a minimum capacity requirement for energy storage resource participation in the market that does not exceed 100kW.

FERC also launched a new rule-making process to solicit suggestions for distributed resources aggregation. In April 2018, FERC held a seminar on distributed energy technologies to discuss topics including location requirements for distributed energy aggregation, distributed energy interconnection and grid access, the feasibility of distributed energy aggregation at multiple network nodes, double compensation of services, data and modeling of distributed energy, federal and state agency regulatory boundaries and coordination, and other issues. Following this seminar, FERC received more than fifty comments and suggestions. As of this writing, FERC is still in the stage of receiving and evaluating these suggestions to formulate the next work plan.

United Kingdom

Unlike the series of orders released by FERC in the United States, the United Kingdom’s Office of Gas and Electricity Markets (Ofgem) and the Department for Business, Energy & Industrial Strategy released the “Smart Systems and Flexibility Plan” (hereafter referred to as the “Plan”) in July 2017. The Plan promotes the construction of a smart and flexible energy system in the UK primarily through “removal of barriers to smart technologies (such as storage), enabling smart homes and business, and improving access to energy markets for new technologies and business models.” The Plan is the UK’s most important framework document for promoting energy storage in the energy market and solving key issues within the UK power system.

In order to reduce the threshold for energy storage and other flexible resources to participate in the market, the Plan proposes that the government should lower the market entry and management requirements for energy storage and demand response equipment, allow demand response providers to reallocate assets, and allow revenue stacking between the capacity market and ancillary services. Not long after the release of the Plan, many energy storage projects turned their focus to participation in the capacity and ancillary services markets.

In December 2017, the Department for Business, Energy & Industrial Strategy and the National Grid announced that the de-rating factor for 30-minute batteries would be lowered to 17.89% from the current rating of 96% in the T-4 capacity market, and lowered to 21.34% in the T-1 capacity market. An energy storage system with duration shorter than 4 hours would receive reduced compensation, leading to a shift in energy storage applications from the capacity market to the wholesale and/or balancing market to derive compensation from energy arbitrage.

In response to this market change and to eliminate barriers for distributed energy and other load-side resource participation in the balancing market, in May 2018, UK transmission operator National Grid released a report announcing relaxation of entry requirements for the balancing market. The report announced the creation of a new category of market participant, the “Virtual Lead Party,” as well as a new balancing market service provider, “secondary balancing mechanism units (SBMU).” SBMUs have a minimum size of 1MW, and can act independently or as aggregated resources. To simplify implementation, in the future the grid connection guidelines will be further revised and simplified, clarifying the process for aggregators to participate in the balancing market.

Germany

Germany was an earlier explorer of models such as “community energy storage” and “virtual power plants.” These efforts also revealed many obstacles to distributed energy storage’s participation in the power market. In recent years, Germany has also made efforts to modify its market regulations to allow distributed energy resources to more easily participate in the power market. Some of the most influential changes were the German Federal Network Agency’s updates to the bidding times and minimum bid size for secondary and tertiary frequency control.

Beginning in July 2018, secondary and tertiary frequency control bidding times were adjusted from a weekly to daily schedule. In addition, the auction times were modified from two 12-hour periods per day, to six 4-hour periods per day. Bidding was also modified to begin at 10:00AM a week before the delivery date, and close at 8:00AM the day before the delivery date.

Also beginning in July 2018, small-scale service providers that have obtained Federal Network Agency permission may provide secondary and minute control reserve services of less than 5MW (the previous minimum bid size). Such bids may include 1MW, 2MW, 3MW, etc. on the condition that in each frequency control area and delivery period, the provider only submits one bid for each frequency control product, thereby preventing large energy storage stations from breaking into smaller units to participate in bidding.

These regulatory adjustments have allowed operators of small-scale renewable energy systems, demand-side management systems, battery energy storage, and other systems the opportunity to participate in the ancillary services market. Daily bidding and a shorter service provision period have allowed available energy storage capacity to participate in more target markets, helping to increase avenues of revenue for aggregated storage capacity.

Australia

Australia has promoted the participation of energy storage in power market transactions primarily through regulatory changes that allow more open markets, maintain a fair and reasonable competitive environment, and create new market entity categories.

On November 24, 2016, the Australian Energy Market Commission (AEMC) released its “National Electricity Amendment Rule 2016” to "untie" ancillary services from the existing supply source system and open them to new market participants, namely, market-oriented ancillary service providers other than large power generation companies. After revision to the Australian frequency regulation ancillary services rules, market participants were allowed to provide ancillary services at one location, or can combine loads or generators from multiple locations together to offer services. The rule came into effect in July 2017, greatly increasing the opportunities for energy storage to participate in the ancillary services market, not only helping to increase the supply of frequency regulation service resources, but also reducing the market price of such services.

Among actions to create a fair and reasonable competitive environment In August 2017, AEMC released “National Electricity Amendment Rule 2017 (Contestability of energy services),” which took the following actions: 1) restricts the grid from owning or controlling behind-the-meter resources and allows consumers more control over the use of their assets; 2) restricts distribution system operators’ use of behind-the-meter resources to obtain unreasonable compensation (namely, compensation which has not been permitted by regulators). Distribution network operators should purchase these services from consumers or other energy suppliers; 3) improves the clarity and transparency of the energy regulatory framework, defines the scope of energy services subject to economic regulation, and defines the boundaries of the energy market opening; 4) stimulates and encourages market competition so as to foster the innovation and application of advanced energy solutions; 5) prevents distribution companies from maximizing grid benefits by restricting behind-the-meter resources from providing multiple services; 6) supports consumer use of market methods to choose energy supply methods. The Rule aims to protect behind-the-meter resources from unfair competition when participating in the electricity market by defining the ownership and control of behind-the-meter resources and clarifying which services behind-the-meter resources can provide.

In addition, AEMC is currently revising the rules, hoping to create a new market entity—the Demand Response Service Provider (DRSP)—so that demand response resources can directly bid into the wholesale market, providing the demand-side with greater and more transparent market opportunities. The creation of the DSRP would also invite more competition into the wholesale market to prevent artificially high prices and maintain power system stability.

Summary

With such a large amount of distributed energy storage scattered throughout the consumer side, many countries have confronted the challenge of aggregating distributed energy storage to participate in power market transactions. Countries such as the United States, the United Kingdom, Germany, and Australia have begun to eliminate barriers for distributed energy storage to participate in the electricity market by lowering market entry thresholds, creating new market entity categories, and opening more markets to distributed energy storage. However, distributed energy storage involves a number of variables, including technical equipment of different types, working conditions, and technical characteristics, as well as different market entities, such as energy storage equipment owners, aggregators, distribution companies, and RTOs/ISOs, and a variety of revenue categories, such as consumer bill management, energy markets, and ancillary service markets. With such a variety of factors, in the future, power systems must see greater coordination and optimization in technologies, market models, policies, and market rules to reach the goal of maximizing the value of distributed energy storage.

Author: Yue Fen
Translation: George Dudley

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.