Commercial energy storage-profit channel analysis and prospect

Commercial energy storage is one of the main types of user side energy storage systems, which can maximize the self utilization rate of photovoltaic, reduce the electricity expenses of industrial and commercial owners, and help enterprises save energy and reduce emissions. Commercial energy storage mainly makes profits through energy time shift, peak valley price difference arbitrage, capacity electricity tariff reduction and demand response.

In China, in the context of the “double carbon” goal and the industry trend of building a “new power system with new energy as the main body”, various favorable policies have been introduced, which has accelerated the formation of the commercial energy storage business model. This article will mainly talk about the profit channel analysis and prospect of commercial energy storage.

Commercial energy storage related favorable policies in China

On January 29, 2022, China set the development goal of new energy storage, and proposed that by 2025, it would step into large-scale development from the initial stage of commercialization and have the conditions for large-scale commercialization; Electrochemical energy storage technology was further improved, and the system cost was reduced by more than 30%; By 2030, new energy storage will be fully market-oriented.

On April 2, China proposed to accelerate the research of core technologies of power grid and build an intelligent and efficient advanced power grid that is compatible with large-scale renewable energy and distributed power generation, friendly grid connection, two-way interaction between source, grid and load;

Break through the key technologies and core equipment of energy storage ontology and system integration, and meet the energy storage development needs of different application scenarios of energy systems.

On June 7, China issued a policy to encourage new-type energy storage to participate in the power market independently, adhere to market-oriented pricing, improve the overall utilization level of energy storage, and promote the healthy development of the industry. These policies will have a significant impact on the development of new energy storage in China.

On July 23, the trial operation kick-off meeting of southern China’s regional power market was held, marking the landing of China’s unified power market system in southern China. After the regional power market is launched and put into trial operation, the medium and long-term trading cycle will cover years, months and weeks.

Spot trading will be expanded from Guangdong to Yunnan, Guizhou, Guangxi and Hainan in China, so as to realize cross regional and inter provincial power spot trading in five provinces in southern China; The varieties and compensation mechanism of the auxiliary service market will be further improved. Next, we will analyze the profit channels of commercial energy storage.

Analysis of main profit channels of commercial energy storage

Energy time shift

Energy time shift is the first channel of commercial energy storage. According to the latest data, in the first half of 2022, the installed capacity of industrial and commercial PV in China was 10.74GW, which surpassed household PV for the first time and became a hot development direction of distributed PV.

China has a lot of great manufacturers in the field of energy storage, which can be seen in detail in the top 25 energy storage companies in China in 2022. However, there is a time-space mismatch between the output curve of industrial and commercial photovoltaic power generation and the load consumption curve.

When the photovoltaic power generation capacity exceeds the load consumption capacity, the excess power should be sold to the power grid company at a low price;

When the output of photovoltaic power generation is insufficient, industrial and commercial users have to buy high price power from the grid, resulting in industrial and commercial users still have to use part of the high price power of the grid even when installing photovoltaic, and the cost of electricity has not been reduced to the maximum.

When the output of photovoltaic power generation is large, the electric energy that can not be used temporarily is stored in the battery; When the photovoltaic power generation output is insufficient, the electric energy in the battery is released to the electric load for use.

Therefore, it can maximize the proportion of self use of photovoltaic power generation, minimize the cost of electricity consumption, and help enterprises reduce carbon emissions.

Peak valley arbitrage

China’s industry and commerce generally implement the time of use price policy and the peak price policy. Take Shenzhen, China as an example. From 2022, the peak period of Shenzhen’s electricity price will be increased, and the corresponding time period will be adjusted accordingly. The peak periods are 10-12 o’clock and 14-19 o’clock; The valley period is 0-8 o’clock; Other periods are flat sections.

The price ratio between peak and peak in Shenzhen is 1.53:1:0.32. The price ratio between peak and peak in non Shenzhen area is 1.7:1:0.38. The peak section electricity price is implemented in three full months of July, August and September, as well as high-temperature days with the highest daily temperature of 35 ℃ and above in other months. The execution period is three hours from 11:00 to 12:00 and from 15:00 to 17:00.

The peak period price is increased by 25% on the basis of the above peak period price of the time of use price in peak valley. The commercial energy storage system purchases low-cost electric energy from the power grid at the time of the electricity price Valley and supplies it to the load at the time of the electricity price peak or peak, thereby reducing the electricity expense of the enterprise.

Demand management

China adopts a two-part power price for large industrial power with a receiving transformer capacity of 315 KVA and above. The two-part power price includes the electricity price and the capacity price. The electricity price is calculated according to the actual electricity consumption of the user. The capacity price can be calculated according to the fixed capacity of the transformer or the maximum demand of the transformer. 

The two kinds of electricity charges are calculated separately and added together, which is the total electricity charges payable by the user.

The power of the commercial energy storage system can replace the capacity of the transformer and reduce the overall capacity demand of the transformer at the peak of load power consumption, thus reducing the construction cost of transformer capacity expansion and the later fixed capacity electricity fee or maximum demand electricity fee.

In view of the old industrial and commercial scenarios where the power load capacity is insufficient and new charging piles are built, the long-term and high costs caused by transformer capacity expansion can be avoided, and dynamic capacity expansion can be realized through the energy storage system.

Backup power supply

For applications requiring high power grid continuity, commercial energy storage system can be used as backup power supply in case of power grid outage, which can replace the function of traditional UPS power supply, provide backup power supply guarantee for key uninterrupted loads in industrial and commercial parks, deal with sudden power outage, and save some input costs of UPS power supply equipment for industrial and commercial owners.

For example, rack mount lithium battery is commonly choice because it can not only supplies a continuous supply of power but also saves from the sudden shock of a power outage which can harm precious data.

Spot electricity trading

At present, the power market in southern China has started trial operation, and it is expected that China’s unified power market will also start operation in the near future. Relevant policies have made it clear that market players such as energy storage will be introduced to participate in green power trading in due time.

It should be noted that the distributed energy storage system is difficult to meet the buyer’s demand for one-time call volume in the power trading market due to its small capacity. It can participate in the power market transactions in an aggregated manner through virtual power plants (VPP).

Power auxiliary services

Power market auxiliary services refer to the services provided by power generation enterprises, power grid operation enterprises and power users in addition to normal power production, transmission and use, in order to maintain the safe and stable operation of the power system and ensure power quality.

On July 23, 2022, the southern China regional power market was launched, and it was clear that the varieties of auxiliary service market and the compensation mechanism would be further improved.

Auxiliary services will also become an important part of the trading varieties in the power market, and commercial energy storage can also serve as a new profit channel by providing auxiliary services in the power market.

Prospect of commercial energy storage

Under the policy of widening the price difference between peak and valley in various regions of China and adding peak electricity prices, the economy of energy storage installed by industrial and commercial users has been significantly enhanced.

In the future, with the accelerated construction of China’s unified power market and the mature application of virtual power plant technology, spot power trading and power auxiliary services will also become profit channels for commercial energy storage.

With the reduction of the cost of energy storage batteries, the investment cost of energy storage systems is bound to be more optimized, the market potential of commercial energy storage will be further stimulated, and commercial energy storage is expected to become a new outlet after industrial and commercial photovoltaic.