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Analysis of Large-size Energy Storage Types and Main Participants in the Industrial Chain

published: 2023-09-25 15:46

According to the concept of large-size energy storage capacity, the categorization of large-size energy storage systems mirrors the evolution of developmental stages and influencing factors. Typically, international initiatives in this category are often denoted as Utility-Scale or Grid-Scale projects, commonly encompassing the umbrella term FTM energy storage or large-size energy storage. Furthermore, this categorization is generally not subject to further sub-division.
In China, energy storage projects were traditionally categorized as power-side and grid-side projects. However, since 2022, an independent energy storage model has been steadily emerging, giving rise to two primary statistical types: new energy distribution storage and independent energy storage.

In terms of application scenarios, there exists no definitive distinction between grid-side energy storage and independent energy storage, a classification that enjoys consensus and acceptance within the industry. This categorization effectively mirrors the various developmental stages of energy storage projects and the factors propelling their installed capacities.

In the domestic market, the promotion of Renewable Portfolio Standards (RPS) plays a pivotal role in determining the installed capacity of large-scale energy storage. As of the end of June 2023, a minimum of 24 provincial administrative regions in the country have unveiled their installed capacity targets for the 14th Five-Year Plan, with a combined capacity goal of 67GW. Considering a minimum requirement of more than two hours of stored energy, it is projected that the cumulative installed capacity for new energy storage will surpass 130GWh by the close of 2025. The provinces with planned installed capacities exceeding 5GW are predominantly concentrated in the northwest and northern regions of China, which are known for their abundant wind and photovoltaic installations. Notably, Qinghai, Gansu, and Ningxia account for over 50% of the total new energy installed capacity. Energy storage projects in these areas offer flexible resources for the consumption and transmission of renewable energy to the aforementioned provinces, thus mitigating the impact of a high proportion of renewable energy on the grid.
The eastern provinces of China are also making substantial strides in planned installed capacity. Their energy storage initiatives are well-positioned to capitalize on market-driven approaches, as they are actively addressing the allocation demands of wind and photovoltaic energy storage.
The Renewable Portfolio Standard (RPS) serves as a manifestation of the collective responsibility among market stakeholders for the utilization of renewable energy, fostering the harmonious growth of both energy storage and renewable energy installation. In China, the primary burden of renewable energy consumption falls upon power grid enterprises. As the proportion of new energy installations and power generation continues to rise, the strain on power grid consumption escalates. The RPS underscores the direction of compelling power generation companies to assume a proportionate share of the responsibility for grid connectivity and consumption, exhibiting a degree of rationale in its approach.
In the realm of independent energy storage, a business model that combines policy endorsement with market enhancements is anticipated to gain traction, thereby accelerating the growth of investments in large-scale energy storage. Independent energy storage refers to energy storage projects that operate autonomously, not relying on new energy power stations, but functioning as autonomous entities participating in the power market. Following the publication of the Administrative Measures for Auxiliary Electricity Services and Regulations for Grid Connection and Operation of Electric Power Plants in December 2021, energy storage emerged as an autonomous market player, with independent energy storage assuming a pivotal role in the domestic large-scale energy storage landscape.

In theory, independent energy storage can generate revenue through capacity leasing, auxiliary services, peak and off-peak energy price arbitrage, capacity compensation, and various other avenues. Evidently, the revenue sources for independent energy storage are more diversified compared to those for new energy storage allocation, making it a critical facet of the transition from scaling up energy storage to a market-driven approach. As policies continue to improve and the market matures, the independent energy storage business model is expected to become more established and economically viable, thereby expediting investments in energy storage projects.
The United States stands as the primary global market for large-scale energy storage, boasting a wealth of project reserves. In 2022, the newly installed energy storage capacity soared to 4.80GW/12.18GWh, with large-scale storage installations accounting for 4.01GW, representing a commanding 84% share of the total power generated in the United States for that year. However, the industry was not immune to the disruptions caused by supply chain issues and other factors. Over 7GW of energy storage projects across the United States in 2022 encountered delays or cancellations, impacting the overall installed capacity to some extent.
Figure: the United States‘ quarterly new energy storage installed capacity from 2022 until now

Based on data from ACP and Wood Mackenzie, the first half of 2023 witnessed a surge in new installed capacity for utility-scale energy storage (grid-level) in the United States, reaching 2.06GW or 6.65GWh. This marked an impressive year-on-year increase of 8.4% and 35.5%, respectively. According to Wood Mackenzie's projections, the United States is poised to augment its installed energy storage capacity by a staggering 75GW between 2023 and 2027, with large-scale storage accounting for a remarkable 81% of this total. Anticipations are high for 2023, with expectations that new installed capacity for large-scale storage in the United States could potentially reach around 8GW, reflecting a staggering year-on-year growth of approximately 100%.
In the near future, lithium-ion battery energy storage is poised to dominate the landscape as the primary installation choice for large-scale storage systems. The industry’s supply chain primarily comprises energy storage equipment in the upstream sector, system integration in the midstream sector, and power station deployment in the downstream sector.

Within this chain, energy storage batteries and power conversion systems (PCS) stand out as the two most pivotal components, collectively representing approximately 60% and 15% of the total system cost, respectively.
The significance of energy storage safety is steadily gaining prominence, with temperature control and fire protection measures accounting for approximately 2% to 5% of the total system cost each. The growing adoption of liquid cooling programs and the promotion of pack-level fire protection measures have the potential to further enhance the value of these safety systems.

The system integration phase involves a diverse array of participants, ranging from specialized integrators to high-power PCS manufacturers and seasoned power equipment producers.

As our energy storage industry progresses from rapid expansion to market maturation, it is poised to achieve substantial growth in the near future, guided by policy directives. Presently, various provinces in China follow distinct models and processes for energy storage development, but all receive support, resulting in a thriving market for large-scale energy storage. Domestic energy storage companies across all segments can capitalize on the opportunities within the large-scale energy storage market. By leveraging favorable positions and adopting forward-thinking strategies, they can secure significant market share and reap the benefits of market growth.

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