China’s energy storage market has experienced a boom in 2020, following the releases of series national and local policies. However, the upcoming 14th Five Year Plan for Energy Storage shall address some critical matter.
The country is eyeing on a massive renewable expansion in the coming decades, driven by the ambition to hit carbon neutrality by 2060. The nascent energy storage infrastructure becomes an obvious weak link.
While more regions have developed policies to either encourage or demand energy storage progress, a top national strategy that provides a business model is still not in place.
The upcoming 14th Five Year Plan should consider providing a better policy infrastructure for the nascent energy storage market–especially, a policy framework that would provide a solid commercial case for storage developers.
China’s Battery Storage Market Trends in 2020
Renewable plus Storage is the Direction
As we mentioned in our previous analysis, the renewable market saw a new hype of developing centralized power projects (gigawatt-size) that are bundled with energy storage solutions. [READ our Analysis on China’s “Great Leap Forward” on Renewable Plus Energy Storage ]
At least a dozen of juggernaut-size “wind and solar plus storage” projects have taken place in the past months.
The “hype” comes in the heels of Beijing’s recent emphasis on building “integrated” power projects—in other words, renewable plants with built-in storage capacity that are flexible loads for the grid.
It is also against the background of more and more regional governments imposing energy storage requirements for new renewable projects.
Battery is the Key Storage Solution for Renewable
More of such “renewable plus storage” is expected to take place, as the wind and solar industries embrace ambitious development targets for 2025.
The wind industry expects 30-50GW new capacity to be built every year between 2021-2025. And solar developers eye on 50-80GW.
Pumped hydro so far remains the dominant technology in the world’s energy storage scene. Currently pumped hydro represents 91.9% of the global cumulative storage capacity (186.1GW by Sep 2020). It also takes up 91.6% of the Chinese capacity (33.1GW by Sep 2020).
However, pumped hydro is not an ideal option for China’s wind and solar projects, many of which are located in the remote Northwestern parts of the country with limited hydro resources.
So far, battery storage appears to be preferred by renewable developers.
Battery Market Growth Mainly Driven by Generation-Side Demand
Renewable developers’ strong demand for storage capacity is a crucial reason behind China’s recent battery market boom.
Between Jan-Oct 2020, China has added 533.3MW installed battery energy storage capacity, of which over 2/3 are applications for renewable generation. ‘
This is different from the global market, where grid-side storage application dominates (1/3).
By the end of Sep, the cumulative battery storage capacity in China has exceeded 2GW (2242.9MW).
China’s Energy Storage Policy Momentum
Renewable developers’ rising demand for battery storage is an outcome of the policies set by Beijing and regional governments.
Central Government Energy Policy Review
On the national level, two polices call for energy storage development:
In May: NEA issued the “Guiding Policy for Establishing a Long-term Effective Mechanism for Clean Energy Consumption,” which calls for renewable developers to “improve” the capacity ratio between energy storage and renewable generation.
In August: NEA and NDRC issued the “Guideline on Wind-Solar-Hydro-Thermal Integration and Generation-Grid-Load-Storage Integration Development,” that encourage renewable projects with built-in storage units.
Regional Energy Storage Policy Review
Regional governments may have played an even heavier role. Already 19 provincial governments have established policies to support energy storage development.
That number has grown significantly in 2020—from just 5 provinces with such policies at the beginning of the year. [READ our previous analysis published on early 2020. ]
Energy Iceberg recently has summarized the regional policymaking development in the following tables.
Seven provinces with fixed storage capacity requirements
Key Issues in 14th Five Year Plan Energy Storage
However, several critical issues remain in the current policy infrastructure:
- Lack of Business Incentives: current market momentum is driven by the hard requirement set by many regional governments regarding built-in storage capacity. Although state-owned energy players would cater to the requirements–in order to exchange for project approval, the hard-liner requirement has a questionable effect on providing long-term investment enthusiasm.
- Lack of Financial Supports: only a limited amount of provincial governments provided some pricing mechanism for energy storages units to participate in the power trading market. But those pricing conditions are largely uncertain. And battery storage units are hard to compete with thermal units in some regional auxiliary services market.
- Responsibility of Storage Investment Unclear: while some regulators tend to believe that renewable developers are responsible for investing (taking the cost of) building storage units, it is far from a consensus. And the policymakers also face push-back from the renewable industry.
- Safety Regulation a Major Concern: the market has experienced steep cost reduction due to the surge of battery and renewable supplies. However, safety issues regarding battery safety become a growing concern. Both the national and the provincial policies so far offer any solution for the safety concern.
The upcoming 14th Five Year Plan would need to provide answers to these issues regarding energy storage.