Electrochemical energy storage industry: a strategic choice that needs to be solved urgently

Application in the field of new energy consumption

In terms of promoting the consumption of new energy, Qinghai has broken the boundaries of the original energy storage application, created a new model for energy storage to participate in grid dispatching and operation, and proposed a new concept of shared energy storage. On June 3, 2019, the Northwest Energy Supervision Bureau issued the "Qinghai Power Auxiliary Service Market Operation Rules (Trial)", pointing out that energy storage power stations can participate in the market-based transactions of peak-shaving auxiliary services as market entities, and there is still surplus charging capacity after the transaction. When the grid needs peak-shaving resources, the dispatching agency can call energy storage facilities to participate in the peak-shaving of the Qinghai power grid according to the grid's call for energy storage peak-shaving price (tentatively set at 0.7 yuan/kWh).

Qinghai's shared energy storage auxiliary service market officially started trial operation on June 18. According to the operation of a 50MW/100MWh energy storage project in Qinghai Province, the peak-shaving charging capacity from June to August was 4.7064 million kWh, and the cumulative discharge capacity was 3.5252 million kWh.

Based on the unit price of 1,800 yuan/kWh, the static investment of the project is 180 million yuan. The annual discharge volume is estimated to be 21 million kWh based on the existing charge and discharge records. Assuming that the market transaction price is also 0.7 yuan/kWh, the annual income is about 14.7 million yuan. Taking into account the operation and maintenance costs, it is not possible to achieve a good return on investment for the time being. Of course, the discharge volume is only estimated based on the operation of the first two or three months. It is believed that with the continuous improvement of the system, the growth of transaction power and call power of energy storage stations, it is expected to achieve the expected win-win situation of new energy stations and energy storage power stations. The practice of the shared energy storage model is conducive to the participation of social capital in investment.

In July this year, the Xinjiang Autonomous Region Development and Reform Commission officially issued the "Notice on the Pilot of Photovoltaic Energy Storage Joint Operation Project on the Power Generation Side", which will deploy photovoltaic and energy storage joint operation pilot projects in the four prefectures in southern Xinjiang, and clearly stated that for projects completed before October 31, 2019, the photovoltaic power stations where they are located will increase their priority power generation by 100 hours per year starting in 2020 for five years. Xinjiang's projects have attracted widespread attention. In the first batch of pilot projects announced, there are 36 photovoltaic and energy storage projects that meet the pilot conditions, with a total scale of 221 MW/446 MWh. According to the pilot requirements, a 20 MW photovoltaic power station must be equipped with at least a 3 MW/6 MWh energy storage system, with an investment of about 9 million yuan. The annual increase of 100 hours of power generation will increase revenue by about 1.6 million yuan, and the total revenue will increase by 8 million yuan in five years. At present, it seems that it is not enough to recover the investment in energy storage.

Grid-side peak load regulation and other auxiliary service applications

In terms of auxiliary services such as grid-side peak shaving, the positioning of energy storage facilities, especially electrochemical energy storage facilities, is both clear and vague.

In 2018, my country's electrochemical energy storage achieved a breakthrough development, with a cumulative operational scale of 1.073 GW, 2.8 times the cumulative operational scale in 2017, breaking through the "gigawatt" for the first time. According to statistics from the CNESA energy storage project database, the scale of grid-side electrochemical energy storage newly put into operation in 2018 (excluding planned, under-construction and under-commissioning energy storage projects) was 206.8 MW, accounting for 36% of the newly put into operation electrochemical energy storage scale in 2018, and ranking first among all types of energy storage applications. At the beginning of 2019, the two major power grid companies issued guidance opinions on supporting the development of energy storage, and they both proposed to include the grid-side energy storage invested by provincial power companies in effective assets. This move is of course directly related to the general background of the upcoming release of the new "Measures", but it also shows that as a power grid company that ensures the safe and reliable operation of the power system, it recognizes the role of electrochemical energy storage facilities from a functional perspective.

The originally clear investment guidance strategy has become confusing after the release of the new "Measures". But this is only a superficial phenomenon.

Grid-side energy storage is to effectively improve the safe and stable operation of the power system. Therefore, the power and capacity of energy storage facilities have certain entry barriers, and their design and layout should be subject to the unified planning of the power grid. Since energy storage facilities are so closely related to the power grid, why does the new "Measures" clearly stipulate that the costs of energy storage facilities and other costs that are not related to the power transmission and distribution business of power grid companies shall not be included in the power transmission and distribution pricing costs?

The interpretation of this policy is that, first of all, this is a supporting measure for the power reform to "control the middle". Electrochemical energy storage facilities on the grid side can indeed improve the utilization efficiency of the grid and improve the reliability of power supply, but it is difficult to accurately quantify where they should be placed, how to reasonably dispatch them, and how to carry out charging and discharging plans. This situation is inconsistent with the goal of clarifying and controlling the transmission and distribution costs of the power reform. Secondly, strictly speaking, "not included in the transmission and distribution pricing costs" does not mean that the grid is not allowed to lease energy storage services. For investment in electrochemical energy storage facilities, the grid and social capital are theoretically open. The key difference between the old and new mechanisms is that the value of energy storage to the grid in terms of peak and frequency regulation, system standby, improving power quality, alleviating peak load power supply pressure, and delaying the upgrade and expansion of transmission and distribution facilities will become clear and precise due to the new mechanism. Even though the grid still has an advantage over social capital in investing in energy storage and calling services based on its comprehensive understanding of the power system, the relevant decisions are bound to be more scientific and comprehensive than the old mechanism; thirdly, in line with the vision of an electricity market characterized by reflecting spatiotemporal signals and giving play to the role of the market in allocating resources, the functional positioning and profit model of grid-side energy storage will become clear.

Peak shaving and valley filling practice on the user side

User-side energy storage is the earliest field of commercial application of energy storage. Its income mainly comes from peak-valley arbitrage, which is mainly concentrated in Jiangsu, Beijing, Guangdong, Zhejiang and other regions with large peak-valley electricity price differences. Since last year, the general industrial and commercial electricity price has been reduced by 10% twice, which has caused the peak-valley price difference in many regions of the country to continue to narrow, and the profitability of relying solely on the peak-valley difference is not ideal. According to the energy storage cost of 2 yuan/watt-hour, assuming two daily charging and discharging (peak-valley + flat valley, DOD depth of 85%, 15% comprehensive loss), the peak-valley price difference is 0.7 yuan/kWh, and the peak-flat price difference is 0.35 yuan/kWh, then the investment payback period will also be more than 10 years. If the attenuation of lithium batteries is considered, especially the accelerated attenuation of two charging and two discharging, the shortened service life, and the need to replace batteries during operation, the investment will be even more difficult to recover. During this period, if the user enterprise cannot operate and produce normally, it will also make it difficult to recover the investment, which will bring more uncontrollable risks to the project. The user-side income is single and long-term operation is not guaranteed, which is not attractive to social capital. Most of the electricity users who consider configuring energy storage have comprehensive needs such as backup power and capacity expansion.

Differentiated strategic choices for power-based electrochemical energy storage

FM

The typical application of power type is mainly frequency regulation auxiliary service, and the income is calculated by adjusting the mileage. At present, independent power type energy storage power stations have not yet appeared. They mainly rely on the method of combined frequency regulation of thermal storage. The installation of energy storage facilities inside the thermal power plant and the joint participation in frequency regulation of thermal power units is a unique application form under my country's current policy environment. Energy storage and thermal power units are bundled to participate in frequency regulation services, which can achieve rapid response to dispatch instructions and have a certain promoting effect on improving the regulation rate and response time of the power grid. The general power configuration is 3% of the rated power of the thermal power unit, and the energy storage time is configured to be half an hour at the rated power.