In recent years, as installed capacities have expanded and technologies have advanced, the cost of renewable energy power generation has dropped significantly, gradually approaching that of fossil energy and in some cases even lower than that of fossil energy. The pairing of “renewable energy + energy storage” has gradually become the consensus for future renewable energy development.
In the past two years, many provinces, cities, and regions in China have issued ancillary services construction plans and operations regulations, such as updates to the grid regulations in northwest China, updates to grid regulations and ancillary services market regulations in northeast China, regulations for energy storage engaged in peak shaving in Shanxi, rules for third-party independent participation in the north China peak shaving ancillary services trial market, updates to grid regulations in southern China, and other regulatory updates. These rules have helped to promote the healthy and orderly development of the power ancillary service market, and have provided a platform for new market players and new technologies such as energy storage to participate in the power market. For example, Zhejiang has carried out transactions for ancillary services such as frequency regulation, voltage regulation, backup, and black start, explored a joint clearing model for ancillary services and the spot market, and optimized the marginal clearing of electricity and ancillary services.
In addition, over the past two years, more than ten provinces including Inner Mongolia, Hubei, and Henan have issued policies requiring new renewable energy projects to be equipped with 5%-20% energy storage systems to promote renewable energy + energy storage applications.
Renewable Energy + Energy Storage Application Business Models
Centralized wind/solar stations + storage application models typically engage in services such as peak shaving, capacity firming, grid support, and output smoothing. Current profit points include load shifting during limited power periods, priority dispatching, and reduction of thermal power spinning reserves. Potential profit points include revenue from solar-storage and wind-storage and from participation in frequency regulation and ancillary services. The advantages of these application models are that they can limit the risk of generators being penalized. However, the true value of lowering such risks is difficult to assess, and there is no compensation mechanism to measure the value created by energy storage. Economical projects are also difficult to guarantee. Additional challenges include a lack of rational investment undertaken by the power generation side, a lack of supporting policies, a lack of a market mechanism, and a lack of large-scale energy storage planning.
New Energy Storage Policies and Trends in China
Energy storage development in China is seeing new trends emerge.
First, energy storage technology is a multi-disciplinary, multi-scale integration of science and technology. Chemical and physical energy storage technologies involve electric power, machinery, control and other aspects. Energy storage materials, units, systems and other components require multi-disciplinary cross-integration. This cross-integration will become a major trend as new technologies are developed and existing technologies improve.
Second, there are currently a variety of energy storage technologies, which may become centralized on a handful of mainstream technologies in the future. At the same time, new technologies will continue to emerge. Whichever energy storage technology will dominate the market will be a matter of the market “voting with its feet.”
Third, the price of energy storage is rapidly falling. Only under the precondition that both renewable energy and energy storage prices continue to fall can renewable energy + energy storage become an established business model.
In the future, energy storage and renewable energy will see integrated development. Renewable energy development in China will pass through three stages, namely, the subsidy support stage, the renewable energy parity stage, and the renewables + storage parity stage. Only when the renewables + storage price (parity) and performance (dispatchability) become comparable to fossil energy will the era of mainstream renewable energy truly arrive.
Energy storage itself will also pass through four stages of development: a technical verification stage, an applications demonstration stage, an initial commercialization stage, and a large-scale development stage. Energy storage in China still faces some major challenges, such as safety concerns, a lack of clarity on what entity should be responsible for energy storage management, a lack of a reasonable price mechanism that can properly compensate storage’s value, an incomplete support mechanism for participating in the energy market, and other challenges.