It’s the Highlight for User-Side Energy Storage System(ESS)

Early in the morning of February 5, located in Qihe Economic Development Zone, Shandong Hengliyuan New Energy Co.,Ltd.

Recently, many enterprises come up with conception about the first year of an era of user-side ESS, so that China Energy News carries out a special report on ESS, and interviewed Fen Yue who is deputy secretary general and research director of ZOL Energy Storage Industry Technology Alliance.

The User-Side ESS may manifest an explosive growth in this year.

The GuangDong Provincial Development recently issued “Several measures to promote the development of new energy storage power station”(“The Measures”). The Measures propose that will encourage the development of user-side ESS and support industrial and commercial enterprises and other industrial parks in constructing new ESS power station in accordance with local conditions and the flexibility principle.

The Measures is called as ‘the strongest user-side ESS support policy’. The Measures point out that it is necessary to accelerate the promotion of distributed new energy and micro-grid configuration of new ESS power stations, and promote the integrated energy service on industrial park as well as commercial buildings. Meanwhile, it is clear that the products of ESS must obey advanced SOP, and the electricity consumption of ESS will be measured separately by following the electricity price policy of GuangDong Province.

With the viewpoint of expert, The Measures is just one of epitome in rapid development of user-side ESS in China, which means the user-side ESS may manifest an explosive growth in this year.

The continuity hot market

ESS is consist of power-supply-side ESS, grid-side ESS, new energy configuration side ESS and user-side ESS. However, due to lower electricity price and small gap between peak and valley among Chinese resident, there was an economic limitation of user-side ESS and narrow developing space, which it had not been taken seriously. With the continuous progress of achieving the goal of Carbon-peak and Carbon-neutral, and building new electrical system, it’s the Highlight for user-side ESS.

Many insiders said in the interview with the China Energy News, ‘The user-side ESS installation is much than before in this year’, ‘In the past, only some large energy customers paid attention to energy storage, and this year many small industrial and commercial users also began to pay attention to energy storage’, ‘"With the widening of the peak-valley difference, the attention and market heat of user-side energy storage are getting higher and higher’, and other comments.

Statistics from CEC shows that the total new installation of industrial and commercial ESS in China would reach 0.76 GWh in 2022. an increase of 106.29% YOY, and more than 80% of installation came from GuangDong, JiangSu, ZheJiang and other industrial provinces. As an example of GuangDong Province, there are abundant industry and commerce, and reform of electrical market is ahead of other provinces, so the user-side ESS has multiple application scenarios. In particular, The Measures clearly indicates that the electrical users who need reliable large power supply and high quality electricity standards, like precision manufacturing, communication, finance and so on, which can assemble new ESS power station on demand configuration; in other words, the there will be a installation tide of ESS in GuangDong province.

‘With the arrival of summer peak electricity consumption, to keep produce and order for goods, many enterprises in ZheJiang province and PRD city have highly motivated to install ESS’, said by Fen Yue who is deputy secretary general and research director of ZOL Energy Storage Industry Technology Alliance; additionally, she also mentioned to interviewer, ‘now all over the industrial transformation, energy storage and new energy is the direction encouraged by the government, and the main driving force to promote user-side ESS is attract investment into the industrial chain, as well as stimulate the local economy, forming a closed loop’.

New energy and energy storage expert, Kuankuan Peng, said to interviewer of China Energy News, compared with power supply side and grid-side, the user-side ESS can help peak shaving on grid and save the electrical cost for users. He also mentioned, ‘the earliest development of user-side ESS in 2016 had invest some projects, and these years have been implemented project gradually, but this year has a dramatic improve on installation, which mainly due to the widening of the peak-valley price difference and the optimization of the peak0valley period’.

The main limitation is the basic electricity payment model

The user-side ESS mainly relies on the construction of industrial and commerce, and its business model depends on the different price between peak-valley electricity, supplemented by direct or indirect benefits from demand-side response, demand electricity, distributed PV consumption, emergency backup and so on. Nowadays, most rapid developing area is in ZheJiang, GuangDong, JiangSu provinces which have large gap on peak-valley electricity fee.

‘The main limitation is the basic electricity payment model about the development of user-side ESS; the basic electricity payment model include on-demand and on-volume, and the former selection has important impact on the user-side ESS economy’, said by Kuankuan Peng, ‘besides the choice problem, another is the selection of ES land usage; because the factory is strict to land utilization rate, and have not much vacant lot to install the ESS’.

From perspective of Fen Yue, some enterprises cannot even get the basic electricity income. For example, a company with high load ratios may prefer paying basic electricity bills by the transformer capacity, and if the enterprise chooses on-demand payment as well as the stabilized load ratio, it cannot save the cost throughout ESS. Additionally, user-side ESS is highly dependent with user scenario, which is related to the actual production behavior and electricity load, etc., so that majority ESS has no way in a year to reach the goal of daily twice discharge-charge. If the enterprise can make daily twice discharge-charge, it will have nice income in these provinces that have large electricity bill gap of peak-valley. Presently, although the major profit method of user-side ESS is the different electricity price in peak-valley period, more and more provinces are increasing their effort to promote demand response and the construction of virtual power plant platform, bringing extra profit for user-side ESS.

‘We pay more attention to the safety and economy of user-side ESS,’ as said by Qiong Wei who is the CEO of MS Energy when he accepted interviewed by China Energy News, ‘economy is the key factor affecting the investment of user-side ESS.’ For example, to achieve stable power supply, ZheJiang Province designed different paek-valley price spreades in 2022. which has greatly improved the economy of ESS. It can be used for reference about ZheJiang’s method, which is not only reducing the comprehensive cost of electricity price, but also improving the stability of the power system.

Actually, many provincial governments have issued documents to support the widening of the peak-valley price gap, while establishing peak and seasonal electricity prices. For example, during peak summer hours, several provinces implement peak electricity prices to create space for the development of user-side ESS. Taking the national power grid agent purchase price in March this year as an example, in the national peak and valley price difference, Zhejiang Province is the highest, the price is 1.33￥/kWh. In addition, the peak-valley electricity price difference of more than 0.7￥reached 23 regions.

The experience of distributed PV system development is worth learning from.

The report in China Energy News learnt from interviews that the distributed PV system is similar to user-side ESS, which both of them reduce the cost of electricity by the construction of industrial and commercial enterprise, as well as market channels and construction model. However, the user-side ESS has high requirements on operational state, electricity load curve, plant station condition, power consumption and so on., compared with PV, its profit will have more uncertain condition.

‘It is necessary for user-side ESS to overcome the biggest barrier about basic electricity fee’, indicated by Kuankuan Peng, ‘On-demand payment is likely to increase the basic electricity bill, in this case, the company's energy storage project income will be affected.’ He also mentioned that the risk of user-side ESS is quite large, and the future development is facing uncertainty, and it is recommended to learn from the development experience of distributed PV in investment risk control.

In Qiong Wei’ view, the phenomenon of negative electricity prices in Shandong province is attractive, and it is a big step forward in the reform of electricity market. With the continuous increase of the proportion of new energy power, as long as the fully electricity market, the electricity cost will be optimized, and the future time-sharing price fluctuations in the electricity market bring imagination space for user-side ESS benefits.

Insiders believes that the exploration of use-side ESS as an independent energy to participate in the power market is one of the future development modes, and it still needs to continue to improve in terms of policy support, market price mechanism, and power call mechanism.