Improve the energy storage cost compensation mechanism to help build a new power system with new energy as the main body

Under the background of the "dual carbon" goal, my country's power system will transform into a new power system with new energy as the main body. Energy storage plays an important role in the new power system as a flexible power source. However, except for pumped storage, new energy storage technologies are still in the early stages of commercialization and large-scale development. The relevant electricity price policies and market mechanisms are not yet perfect. There are problems such as poor cost guidance, low effective utilization rate, and low social willingness to invest, which are not conducive to the healthy and sustainable development of the industry and the realization of the "dual carbon" goals. In order to promote the healthy and sustainable development of the energy storage industry, promote the enthusiasm of society to participate in energy storage investment, construction and operation, and guide energy storage to give full play to its regulatory role in grid security in different scenarios, it is urgent to improve the top-level design of energy storage policies, study the application scenarios of various energy storage technologies in new power systems, and establish an energy storage cost compensation mechanism that conforms to my country's national conditions and the stage of electricity market development.

1. New energy storage is developing rapidly, and supporting policies are constantly improving

New energy storage refers to new energy storage technologies other than pumped storage, including electrochemical energy storage, physical energy storage, heat storage, hydrogen storage and other technologies. From the perspective of the installed capacity structure of various types of energy storage, according to data from the National Energy Administration, as of the end of 2021, my country has put into operation a cumulative installed capacity of 36 million kilowatts of pumped storage, accounting for about 89% of the total installed capacity of energy storage; the cumulative installed capacity of electrochemical energy storage exceeds 4 million kilowatts, of which lithium-ion batteries are the main ones, accounting for about 9% of the total installed capacity of energy storage; other technologies account for a relatively small proportion. From the perspective of growth trends, according to statistics from the Zhongguancun Energy Storage Industry Technology Alliance, in 2021, the cumulative installed capacity of pumped storage, electrochemical energy storage, and compressed air energy storage increased by 25%, 63% and 15 times year-on-year, respectively.

The rapid development of new energy storage has benefited from the country's energy strategy adjustment and the continuous improvement of energy storage policies. In March 2021, General Secretary Xi Jinping proposed the requirement of building a new power system with new energy as the main body at the ninth meeting of the Central Financial and Economic Commission, which pointed out the direction and provided guidance for the development of the energy storage industry. Subsequently, relevant departments followed up and issued policies in a timely manner to accelerate the deployment of new energy storage key technologies for research and development, promotion and application. In July 2021, the National Development and Reform Commission and the National Energy Administration issued the "Guiding Opinions on Accelerating the Development of New Energy Storage", proposing that by 2025, the installed capacity of new energy storage will reach more than 30 million kilowatts, which will be nearly half of the 62 million kilowatt installed capacity of pumped storage. The opinion proposes to improve the policy mechanism, create a healthy market environment, and improve the new energy storage price mechanism. In December 2021, the National Energy Administration issued the newly revised "two detailed rules", namely the "Grid Connection and Operation Management Regulations" and the "Power Auxiliary Service Management Measures", which clearly included new energy storage such as electrochemistry, compressed air, and flywheels into the scope of auxiliary service providers, which has a positive effect on the recovery of investment costs of new energy storage. In January 2022, the National Development and Reform Commission and seven other departments issued the "Implementation Plan for Promoting Green Consumption", requiring the vigorous development of green consumption and strengthening the construction of supporting infrastructure such as new energy storage and hydrogen refueling. Since February 2022, the National Development and Reform Commission and the National Energy Administration have jointly issued the "14th Five-Year Plan for the Development of New Energy Storage", further clarifying the development goals and key tasks of new energy storage, which will effectively promote the large-scale, industrialized, and market-oriented development of new energy storage. Driven by a series of central department policies, local governments have actively issued relevant policies to accelerate the layout of the energy storage industry and continuously improve the regulation capacity of the power system.

2. Energy storage development faces many problems, which affect the industry's investment enthusiasm

The large-scale application of new energy storage is showing a good development momentum. Related technologies are being widely used in various scenarios. Great progress has been made in technology research and development, project construction, business model exploration, and standard system construction. Its supporting role in promoting my country's energy low-carbon transformation is becoming increasingly apparent.

However, new energy storage technologies are still in the early stages of commercialization and large-scale development, facing problems such as imperfect market mechanisms, investment return mechanisms, and cost guidance mechanisms, unclear application scenarios of various energy storage technologies, the inability to fully reflect the value of public services, difficulties in guiding costs to beneficiaries, and the need to improve the maturity and practicality of energy storage technologies.

First, on the power supply side, energy storage is mostly combined with generators to improve the frequency regulation performance of power generation and promote the consumption of new energy. Some regions regard supporting energy storage as a prerequisite for new energy power generation projects, but how to participate in grid dispatch is unclear, and the conditions for power supply side energy storage to participate in the auxiliary service market are not mature, the implementation effect of relevant policies is poor, the utilization rate of some supporting energy storage is low, and the enthusiasm of new energy companies to actively invest is generally not high;

Second, on the grid side, energy storage is mainly used to reduce or delay grid equipment investment, alleviate grid congestion, and provide auxiliary services such as peak load regulation and frequency regulation for the power system. The "Guiding Opinions on Accelerating the Development of New Energy Storage" proposed to study and explore the inclusion of the cost and benefits of alternative grid energy storage facilities into the transmission and distribution price recovery, leaving policy space for energy storage cost relief, but the implementation details have not yet been issued;

Third, on the user side, the current commercial model is relatively simple, and profits are mainly obtained through the peak-valley price difference mechanism. There are problems such as imperfect mechanism, insufficient role, difficulty in cost recovery, and low user investment enthusiasm.

3. Taking the cost compensation mechanism as the starting point, improve the top-level design of energy storage policy

The "14th Five-Year Plan" is a critical period for "carbon peak". We should comprehensively consider my country's national conditions and the stage of development of the electricity market, strengthen the top-level design of energy storage policies, carry out research on the application scenarios and cost compensation mechanisms of energy storage in new power systems, explore ideas and methods to solve the bottlenecks that restrict the development of energy storage, promote the vigorous development of various energy storage technologies, and play an important supporting role in ensuring the safe and stable operation of new power systems.

1. Research and establish the functional positioning and role value of various types of energy storage in building a new power system

The main identity of energy storage in the power system is an important basis for determining its price and cost policy orientation. We should deeply analyze the development status, technical characteristics, functional categories and application scenarios of various energy storage technologies, clarify the functional positioning and role value of various energy storage technologies such as electrochemical energy storage (lithium-ion batteries, flow batteries, nano-sulfur batteries, etc.), physical energy storage (flywheel energy storage, compressed air energy storage, etc.), heat storage (molten salt energy storage, etc.), and hydrogen storage in the new power system, and provide support for the reasonable formulation of relevant policies.

2. Accelerate the formulation of cost management mechanisms for various types of energy storage in different application scenarios

Focusing on common problems faced by the energy storage industry, such as poor cost guidance, and comprehensively considering factors such as the application characteristics of various energy storage technologies, their functions and roles in new power systems, and whether the services provided have public goods attributes, the study proposes a cost guidance mechanism that is compatible with various energy storage technologies and can reflect their value and economic attributes, in order to create a good policy environment for promoting the development of the energy storage industry, thereby guiding and enhancing the society's willingness to actively invest.