Research on business model and market prospects of energy storage applications in energy internet

2016 is known as the first year of commercial energy storage in the industry. Recently, the China Electric Power Research Institute, a research unit directly under the State Grid Corporation of China, launched the "Research on Business Model and Market Prospects of Energy Storage Applications in Energy Internet" (Project No.: 8142DG160001) to explore the way to change the development mode of the power grid and the company as early as possible. The unit responsible for this project is the Shenzhen Prospect Technology Innovation System Research Institute, located in the School Industrialization Building of Shenzhen Virtual University Park, No. 2 Yuexing 3rd Road, Nanshan District, Shenzhen. The director of the unit, Zhang Yi, said that the prospect of energy storage applications lies in marketization, and answered some questions about the business model of energy storage applications.

Q: Why should the commercial use of energy storage be discussed within the framework of the energy internet?

Zhang: First of all, we need to see that this is a big picture. Last September, President Xi Jinping attended the United Nations Development Summit and proposed to explore the construction of a global energy internet. In March this year, China also initiated the establishment of the first international organization in the energy field, the Global Energy Internet Development Cooperation Organization. In the future, charging facilities, photovoltaics, wind power and other power generation and consumption will be connected to the power grid in large quantities, and the user side will also be activated with the reform of the power system. Centralized energy storage power stations and distributed energy storage equipment are the core of this energy internet. Power sales companies that provide integrated energy service providers, distributed energy management virtual power plants, and interactive energy trading systems based on big data platforms, these diversified business entities and the new business models that come with them in turn promote the promotion and application of energy storage. In this big picture, promoting the advancement of energy storage technology and its industrial application can be said to be a national strategy. This strategic deployment is in line with the requirements of the era of technological innovation and the marketization trend of power system reform.

Q: But for now, energy storage applications are basically still demonstration projects. Is there any practical significance in exploring business models at this stage?

Zhang: my country's energy storage industry has just started. On the one hand, the technology is still relatively lacking. There is more research on energy storage batteries, but it is only on materials and single devices. The entire system application and the entire industry do not have a clear technical route. It is still hard to say which type of technology and which project has more market development prospects. On the other hand, our country currently does not have a policy system and price mechanism tailored for the industrialization of energy storage technology. Especially for power energy storage, there is basically no policy with detailed implementation rules. The mechanism for participating in the power market is very imperfect. Most energy storage projects are not profitable due to high costs, and there is a lack of predictable returns to attract capital to follow up. It is difficult to achieve user-side means such as arbitrage by using peak-valley differences and obtaining additional returns by participating in demand response. Therefore, it is indeed as you said that most of the energy storage demonstration projects that have been carried out have not yet achieved commercial operation, and some equipment is even just a laboratory prototype. The project financing channels are also very limited, mainly the owner's own capital plus bank financing, and the project development has not yet been leveraged through industrial investment funds, and the connection between social capital is not enough.

But precisely because of this, we have to plan ahead and conduct more forward-looking research. It should be noted that breakthroughs in energy storage technology and improvements in technical and economic efficiency are foreseeable, the status of energy storage as an independent market entity is already very clear, and the rapid application and development of the energy storage industry is a foregone conclusion. In fact, countries such as the United States, Canada, Australia, Japan, and South Korea have only begun to promote the development of the energy storage industry in recent years. It can be said that the world's energy storage applications are still exploring the market-oriented path. China's weak links are very prominent, but it is not far behind. There will be breakthroughs in research and development, and technology can be introduced. Our weaknesses are mainly in policies and market environment.

We are studying the business model of energy storage applications in an environment where the marketization of electricity is not yet in place. In fact, we are looking for a business model innovation path that is easily accepted by stakeholders, such as increasing total value, enhancing lock-in, resource independence, rapid trial and error, and user and data-centricity. These research discussions will sort out the sensitive factors of business model innovation and put forward corresponding policy recommendations, which is equivalent to forcing the reform of the power system.

Q: What specific results do we expect to achieve through research on this topic?

Zhang: State Grid Corporation of China proposed to change the way of grid development and the company's development very early. This research project has reference value for supporting smart grid upgrades and power system reforms. It is also of substantial help to State Grid Corporation of China in innovating its operating model, grasping the direction of energy storage technology application, and achieving sustainable development of the company's business. At the same time, our research and compilation work is also a rare channel for enterprises in the energy storage industry to express their industry policy demands and express professional technical opinions. We hereby call on colleagues in the energy storage industry to actively provide feedback and suggestions to this research team.

Q: What are the advantages of the Institute of Science and Technology in researching this cutting-edge topic?

Zhang: Our team started to provide pre-investment consulting services for high-tech enterprise projects, especially innovative and entrepreneurial projects in strategic emerging industries such as new energy and new materials, nearly ten years ago, including the feasibility study of the National Engineering Center for Advanced Energy Storage Materials. Later, it expanded to serve high-level talent teams, conduct soft science research, undertake government procurement services, and provide long-term funding for the Business Innovation and Computing Laboratory of the Shenzhen Research Institute of City University of Hong Kong to conduct research on business model innovation.

We are in the Shenzhen-Hong Kong innovation circle where industry, academia and research are most closely integrated. We will organize senior industry professionals, investors and venture capital institutions, as well as researchers from the Business School of City University of Hong Kong, Shenzhen University and other domestic and foreign universities for this project to explore the various possibilities of energy storage application business models. Although Shenzhen is not the place with the most energy storage demonstration projects, its development positioning is an international science and technology and industrial innovation center. It is the place with the most concentrated and active science and technology finance. It has important energy storage companies such as Xinwanda Electronics, Boco Energy, Kelu Electronics, and BYD. It has built China's first megawatt-level battery energy storage station and a recent 23-megawatt energy storage power station, as well as the National Engineering Center Research Center for Advanced Energy Storage Materials and the world's first city-level commercial electric vehicle smart charging network infrastructure. The China Energy Storage Building, which was successfully capped in May last year, is the landmark building of the High-tech Park. The research scope of this project is certainly not limited to Shenzhen, but Shenzhen is a very suitable landmark to explore the application of energy storage technology and its commercial operation model.