In the context of the continuous improvement of the time-of-use electricity price system and the continuous improvement of the marketization of electricity prices, the expansion of the peak-to-valley price difference has created more profit models and broad profit margins for the energy storage industry, and promoted the rapid growth of industrial and commercial energy storage. In 2023, the demand for industrial and commercial energy storage will grow rapidly, and it is expected that by 2025, the new installed capacity will reach 15.9GWh. Looking ahead, with the deepening of power market reform, the newly installed capacity of industrial and commercial energy storage is expected to reach 100GWh by 2030, with a compound annual growth rate (CAGR) of 71%. This optimization is made possible by a combination of factors:
Widening peak-to-valley price gap: With the continuous improvement of the time-of-use electricity price mechanism, the peak-to-valley price gap in various regions is showing a continuous widening trend. For example, in February 2023, Zhejiang's industrial and commercial peak-trough electricity price spread has reached 0.98 yuan/kWh, which is significantly higher than the previous level. The number of provinces and cities with a peak-to-valley price difference of more than 0.7 yuan/kWh increased from 6 to 8, and the price difference between 22 provinces and cities widened, and the national average peak-to-valley price difference increased from 0.55 yuan/kWh to 0.61 yuan/kWh. This provides an opportunity for the arbitrage space of industrial and commercial energy storage to expand. According to PwC Consulting, the widening of the peak-to-valley price difference increases the profit margin of industrial and commercial energy storage projects, and the optimization of peak and valley hours adds arbitrage opportunities for industrial and commercial energy storage, and the profitability of industrial and commercial energy storage has improved.
Optimization of time-of-use electricity price mechanism: In July 2021, the National Development and Reform Commission (NDRC) issued the Notice on Further Improving the Time-of-Use Electricity Price Mechanism, which clarified that, on the basis of maintaining the overall level of sales electricity prices to be basically stable, the catalog time-of-use electricity price should be further improved, the peak-to-valley electricity price mechanism should be optimized, and a peak electricity price mechanism should be established, and the proportion of peak electricity prices rising on the basis of peak electricity prices should not be less than 20% in principle. The release of this policy encourages industrial and commercial power users to reduce the load of electricity during peak hours, increase the electricity consumption of valleys, and reduce the cost of electricity by changing the amount of electricity consumption by configuring energy storage and carrying out comprehensive energy utilization.
Figure: Proportion of industrial and commercial storage project application distribution (Source: PwC Consulting)
Explosion of demand for industrial and commercial energy storage: With the further improvement of time-of-use electricity prices and the further increase in electricity prices of high-energy-consuming enterprises, the economics of energy storage for industrial and commercial users have been significantly enhanced. In 2023, the cumulative installed capacity of China's energy storage market will be 22,545MW, and the cumulative installed power is expected to reach 25,305MW in 2024, with a CAGR of 12%. In addition, the electricity policy has given rise to the demand for backup power, and industrial and commercial energy storage has become the first choice for enterprises to reserve electricity. Under the imbalance between power supply and demand and power rationing policies, the demand for industrial and commercial energy storage as a means of backup has surged.
Improvement of the economy of energy storage system: The widening of the peak-to-valley price gap has helped improve the economics of domestic industrial and commercial energy storage. Taking Zhejiang industrial and commercial energy storage as an example, assuming that the initial investment cost of the system is 2 yuan/Wh, the payback period of the energy storage system is less than 6 years, and the IRR can reach 11% based on the calculation of the average peak-to-valley price difference in Zhejiang in 2022. This shows that the economics of industrial and commercial energy storage in some provinces in China have been considerable at the current peak-to-valley price difference level, and it is expected to further improve with the increasing trend of peak-to-valley price difference in the future.
The optimization of time-of-use electricity prices and the explosion of industrial and commercial storage demand are mutually reinforcing. Time-of-use electricity price optimization provides greater profitability and market demand for industrial and commercial energy storage; The explosion of industrial and commercial storage demand has promoted the continuous progress of energy storage technology and the further reduction of costs. In the future, with the continuous reform of the power market and the construction of a new power system, the time-of-use electricity price mechanism will continue to improve, and the industrial and commercial energy storage market will usher in a broader development prospect. At the same time, enterprises should also seize the opportunity to strengthen technological innovation and product quality improvement to meet the needs and expectations of the market.
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