Grid service payments the key to unlocking China’s energy storage potential


Although utility scale energy storage has been driven by state-run projects thus far in China, an evolution in the way ancillary grid services are rewarded will pave the way for exponential growth in storage capacity next year.

U.K. consultancy Wood Mackenzie has cited announcements by China’s National Energy Administration that compensation for grid balancing and other services offered by energy storage would change by next year.

The current flat payment system will, according to WoodMac, change “to a market integrated with spot energy prices by 2020” and that change, together with technology advances and cost reductions, will pave the way for China to supplant South Korea as the biggest energy storage market in the Asia Pacific region.

The consultant predicted the 489 MW/843 MWh of installed energy storage in China two years ago would rise to 12.5 GW/32.1 GWh in 2024.

WoodMac highlighted the role the state played in the deployment of energy storage last year with public utility the State Grid Corporation of China deploying 452 MWh of the 1.14 GWh/580 MW of capacity added, to account for 83% of the year’s utility scale storage growth. The state-run storage pilot projects concerned were backed by government research grants.

Grid services hold the key

At current cost levels and under the existing payment system for grid services, there is no business case for utility scale storage, particularly as far as solar project developers are concerned, with the state winding down public solar subsidies in a push for ‘grid parity’ PV.

With China last year reaching a cumulative 1.07 GW/1.98 GWh of energy storage – most of it ‘front of meter’, grid connected capacity, it is the grid services the tech offers that will drive its wider adoption.

WoodMac stated, in a press release yesterday, 60% of the grid ancillary service-targeted energy storage facilities deployed last year were standalone projects, 14% were installed alongside coal power plants and 19% were developed with solar or solar-wind hybrid power generation assets in Qinghai province to reduce curtailment of excess energy.

Although front of meter dominated last year’s storage deployment in China, WoodMac added on-site, ‘behind the meter’ facilities did play a role for commercial and industrial power consumers, for energy intensive manufacturing operations and for small commercial clients in densely populated areas. Commercial and industrial behind the meter deployment amounted to 513 MWh last year, according to the consultant.

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