Energy Storage Industry Report: Energy Storage Business Model: Power Generation Side Energy Storage

Through the sharing of the past few days, we have learned about the development background of China's energy storage industry , the overview of the main energy storage technologies , the scale of the energy storage industry, and the development status of new energy storage at home and abroad . Today, China exportsemi net will talk about the business model of energy storage based on different application scenarios of energy storage downstream. How is the business model of power generation side energy storage developing? Let's take a look.

The downstream application scenarios of energy storage can be mainly divided into power generation side, grid side, user side, etc. On the power generation side, it mainly plays the role of matching power production and consumption, reducing grid pressure, etc.; on the power grid side, it is mainly used to reduce or delay investment in grid equipment. , alleviate grid congestion, and provide auxiliary services such as peak and frequency regulation for the power system; on the user side, it helps users implement modes such as peak shaving and valley filling or self-use of photovoltaics to reduce electricity expenses (Figure 13).

Figure 13 : Schematic diagram of downstream application scenarios of energy storage

As of the end of 2022, the cumulative installed capacity of electrochemical energy storage power stations in operation in China is mainly distributed on the power generation side, with a total energy of 6.8GWh, accounting for 48.4%, followed by the grid side (38.7%) and the user side (12.9%). From the perspective of subdivisions, the power generation side is dominated by new energy distribution and storage (81%) applications, the grid side is dominated by independent energy storage (89%), and the user side is dominated by industrial and commercial (42%) applications (Figure 14) .

Figure 14 : Cumulative distribution of electrochemical energy storage application scenarios in China in 2022

Analysis of application scenarios and business models of energy storage on the power generation side

Power generation side energy storage refers to the electrical energy storage facilities built in thermal power plants, wind farms, photovoltaic power stations and other power generation gateways or the electrical energy storage facilities built in the power grid gateways of collection stations ²¹ . Energy storage on the power generation side includes traditional energy storage based on pumped hydro energy storage and new energy storage represented by electrochemical energy storage. This section mainly discusses the application scenarios and business models of electrochemical energy storage on the power generation side.

Many places have introduced policies on mandatory storage of new energy, and grid connection of new energy has become the main application scenario of electrochemical energy storage

Wind power and photovoltaic power are very intermittent and volatile. In order to ensure the overall balance of the power system, some areas often abandon wind and solar power. As a "stabilizer" for new energy, electrochemical energy storage can smooth out fluctuations, not only improve the local energy consumption capacity, but also assist the off-site consumption of new energy. At present, new energy power generation side energy storage is still in the exploratory stage, and the country has intensively introduced policies to promote the development of power generation side energy storage.

From the perspective of national policies, in July 2021, the National Energy Administration issued the "Notice on Encouraging Renewable Energy Power Generation Enterprises to Build or Purchase Peak Shaving Capacity to Increase the Scale of Grid Connection", which proposed "to encourage power generation enterprises to participate in peak shaving in a market-oriented manner" For resource construction, the scale beyond the guaranteed grid connection of power grid enterprises will initially be equipped with a peak shaving capacity based on a power linkage ratio of 15% (duration of more than 4 hours), and priority grid connection will be carried out according to a linkage ratio of more than 20%. "In 2021. In July, the National Development and Reform Commission and the Energy Administration issued the "Guiding Opinions on Accelerating the Development of New Energy Storage", proposing that "it is necessary to vigorously promote the construction of power-side energy storage projects, combine the actual needs of the system, and deploy a batch of system-friendly new energy sources equipped with energy storage. Power station projects ensure efficient consumption and utilization of new energy through coordinated and optimized operation of energy storage, providing capacity support and certain peak-shaving capabilities for the power system.”

From the perspective of local policies, power generation policies in various regions can be mainly divided into two categories. First, most provinces (municipalities directly under the Central Government) require that new energy projects must be equipped with power generation side energy storage according to a certain power ratio. The new energy allocation energy storage ratio is 5%-20%, and the configuration hours are mostly 2 hours. Some provinces require 1 hour or 4 hours. hours (Table 7). The second is to provide subsidies for energy storage projects. Subsidy policies can be divided into investment subsidies and operating subsidies. Nearly 30 provinces across the country have issued new energy storage plans or new energy distribution and storage documents for the "14th Five-Year Plan". The total new energy storage development goals planned by each province exceed 60 million kilowatts.^Twice the target of 30 million kilowatts by 2025 proposed in the "Guidance for Development" document22.

Table 7 : Renewable energy storage configuration requirements in some provinces and cities

Operation model: New energy storage power stations are mainly based on engineering general contracting (EPC)

Engineering general contracting refers to energy companies or utility companies purchasing battery systems directly from battery manufacturers through framework agreements, and project owners/developers directly sign agreements with battery manufacturers to maintain a stable supply of battery systems. Since the owners of new energy power station EPC projects represented by wind power and photovoltaic power have financing needs during the construction period or the construction period + operation period, financial leasing is often introduced in project development23 ^. In the "EPC+financial leasing" model, the financial leasing company (lessor) invests in the EPC party (supplier) to purchase all or part of the new energy power station equipment according to the needs of the owner (lessee), and then leases it to the owner, and the owner pays rent to the financial leasing company during the lease period agreed in the contract (Figure 15).

Figure 15 : “EPC + financial leasing” operating model

Economic Analysis of Electrochemical Energy Storage Power Station

Cost analysis: The total investment cost of electrochemical energy storage power stations is relatively high, with batteries and energy storage systems being the main costs.

Investment in energy storage power stations mainly includes equipment purchase fees, installation engineering fees, construction engineering fees, other expenses, basic reserve fees, etc. The main cost of an electrochemical energy storage power station is the battery and energy storage system. According to data from the Yunnan Energy Research Institute, for lithium battery electrochemical energy storage, project equipment purchase fees account for approximately 87%, cable and grounding and other material purchase fees and installation engineering fees account for approximately 1% each, and construction engineering fees account for approximately 4%. Other expenses and basic reserve fees account for about 7% (Figure 16).

Figure 16 : Cost structure of electrochemical energy storage power station

The energy storage battery system dominates the project equipment purchase cost. Energy storage battery systems mainly include batteries, PCS (bidirectional converter), BMS (battery management system) and EMS (energy management system). Taking the listed company Nebula as an example, its battery costs account for 59%, PCS accounts for 16%, and BMS accounts for 13% (Figure 17).

Figure 17 : Energy storage system equipment cost structure

The distribution and storage of new energy power stations increases the initial investment cost, and the pressure of self-built energy storage on the power generation side is high.

Mandatory distribution and storage of new energy will increase the initial investment cost of the project. According to China Energy News, if a photovoltaic power station is equipped with an energy storage project with an installed capacity of 20% and a duration of 2 hours, its initial investment will increase by 8%-10%; while a wind farm equipped with an energy storage project with the same capacity will have an initial investment cost of It will increase by 15%-20%, and self-built energy storage on the power generation side faces certain ^{difficulties24} . In addition, due to restrictions on distribution and storage capacity and duration, energy storage has limited impact on the consumption problems of power generation companies, and some companies choose to abandon power. Taking a wind power supporting energy storage station in a severe wind curtailment area as an example, it is configured with 10% of the rated power and 4 hours of energy storage, and the wind curtailment rate is 20.6%. If it is configured with 20% of the rated power and 4 hours of energy storage, the wind curtailment rate is still 20.6%. 19.7% ²⁵ . At present, the distribution and storage costs of new energy enterprises are mainly borne by the enterprises themselves, and the rising cost of lithium mines has put greater pressure on the enterprises. Enterprises may be inclined to choose energy storage products with poor performance and low initial cost, and use energy storage as a tool to prioritize the integration of renewable energy into the grid.

Income analysis: On the power generation side, the main function of energy storage is to improve the consumption of new energy and smooth the output of new energy. The revenue generated by these functions on the power generation side of energy storage mainly comes from the increased electricity revenue after reducing the amount of "abandoned wind and light" electricity, as well as the reduced assessment fees.

Xinjiang explores compensation for the charging capacity of new energy storage power stations

In order to encourage distribution and storage of new energy power stations, Xinjiang began to try to compensate new energy distribution and storage stations that meet certain conditions. According to the "Interim Rules for Energy Storage Management on the Generation Side of Xinjiang Power Grid" issued by Xinjiang in May 2020, the charging capacity of electric energy storage facilities constructed within the power generation gateway of wind farms and photovoltaic power stations can be declared as self-use capacity and peak load regulation available capacity. , self-use capacity and peak-shaving available capacity must obey scheduling instructions and be settled in the corresponding manner.

The release of the new rules provides two different operating modes for wind power and photovoltaic energy storage power stations: one is to declare self-use capacity. The self-use capacity is used by the wind farm and photovoltaic power station where it is located. The power released is equivalent to the power generated by the power plant. It is settled according to the relevant contract power price of the power plant and does not participate in market settlement. Electric energy storage facilities can negotiate and sign contracts with power generation companies on their own, and the discharged grid-connected electricity will be regarded as the grid-connected electricity of the power generation company, and will be settled according to the grid-connected electricity price of the power generation company. During the period when "light abandonment" is more serious, the energy storage system in the photovoltaic power station selects energy storage capacity for self-use, and the electricity stored in the energy storage equipment is released and settled according to the on-grid electricity price of the power generation enterprise. The target on-grid electricity price for new energy parity projects put into operation in Xinjiang in 2021 is 0.262 yuan/kWh. When the actual transaction price of new energy projects in Xinjiang is lower than the market average price, electricity price support will be provided based on the difference between the market average price and 0.262 yuan/ ^kWh26 . In other words, the kilowatt-hour income from energy storage reducing "power abandonment" is equal to the new energy grid-in electricity price. The second is to declare available capacity for peak shaving. Energy storage power stations can voluntarily serve as independent power users, declare available capacity for peak shaving, and make settlements based on actual calls. Compensation will be made for the electricity charged by the electric energy storage facilities that enter the charging state according to the instructions of the power dispatching agency. The compensation standard is 0.55 yuan/ ^kWh27 . "Abandoned light" is gradually decreasing. The energy storage system in the photovoltaic power station chooses to store the available capacity for peak shaving. After being used by the power grid, a charging subsidy of 0.55 yuan/kWh can be obtained.

Promote new energy distribution and storage stations to participate in the “two detailed rules” assessment28 ^and reduce assessment expenditures

At present, each province has not yet formed a unified and standardized model for energy storage to participate in the power market, and there are obvious differences in the market models and transaction rules that energy storage market entities can participate in. The National Energy Administration proposes to strengthen the management of energy storage grid-connected operations, promote the establishment of an evaluation and assessment mechanism for the operation effects of energy storage power stations, and include energy storage power stations in the assessment scope of the "Two Detailed Rules". New energy storage and new energy power stations will participate together. assessment, reduce assessment expenditures, and improve the operation level of energy storage power stations29 ^.

my country's electricity marketization mechanism is still immature. The participation of new energy distribution and storage in spot transactions in the electricity market is still being explored. The capacity compensation mechanism is still being researched and formulated. There is a lack of a unified, equal and stable energy storage capacity recovery mechanism, and energy storage on the power generation side is still under development. The market conditions for participating in ancillary services are not mature. In addition, the utilization rate of new energy distribution and storage is low. The operation strategies of new energy distribution and storage vary greatly. Most power stations adopt an operation strategy of charging and discharging when power is abandoned. In some projects, only some energy storage units are used, charging and discharging an average of 2 times per month, or even not using them at all. Condition. The China Electricity Council conducted a survey on new energy distribution and storage projects that account for two-thirds of the country's total installed capacity of new energy distribution and storage. The equivalent utilization coefficient of new energy distribution and storage of ³⁰ is only 6.1%, which is lower than the average of 12.2% for electrochemical energy storage. level, with the lowest utilization coefficient among various application scenarios (the equivalent utilization coefficient of thermal power plant energy storage is 15.3%, the equivalent utilization coefficient of grid-side energy storage is 14.8%, and the equivalent utilization coefficient of user-side energy storage is 28.3%) ³¹ . These factors result in the insignificant economics of new energy distribution and storage, which restricts the development of new energy power generation-side distribution and storage projects. Policies are still the main driving factor for the current development of new energy distribution and storage.