Global energy storage has rapidly realized the transformation from project demonstration to market-oriented development.
In this article, we follow the energy storage definition established in the Clean Energy Package, Article 2(59) of Directive (EU) 2019/944 of the European Parliament and of the Council. According to the "Energy Storage Targets 2030 and 2050" by the European Association for Storage of Energy (EASE), storage solutions providing system flexibility are distinguished (i) in one-direction i.e. not giving electricity back to the system, by Power-to-X technologies and (ii) bi-directional i.e. electricity is stored and given back to the electricity system (energy shifting), provided by Power-to-X-to-Power technologies.
The reason that we need energy storage is due to unmatched demand and generation of energy. Take European seasonal energy shifting as an example. Excess electricity produced in summer months when the demand is low is stored and used to meet higher demand peaks in winter months – electricity use is therefore "shifted" from summer to winter using energy storage.
In the past few years, global energy storage has rapidly realized the transformation from project demonstration to market-oriented development. In overseas markets, thanks to the cost reduction of lithium batteries and the increase in cycle times, household mobile energy storage has developed rapidly and has begun to replace small diesel generators. At the same time, demand for residential energy storage in Europe has surged amid soaring energy prices and increasing supply instability. In China, the energy storage/frequency regulation requirements for new energy power generation have brought corresponding policy markets. At present, there are a large number of energy storage projects registered. Earnings will improve significantly, and energy storage installations may also explode.
In overseas markets, thanks to the cost reduction of lithium batteries and the increase in cycle times, household mobile energy storage has developed rapidly in the past few years and has begun to replace small diesel generators in the market. At the same time, European energy prices have skyrocketed in the past three years, and the conflict between Russia and Ukraine has further deteriorated the energy supply and demand in Europe. Energy security and economic advantages are stronger driving factors for new energy installations. The model of photovoltaic + energy storage has been quickly accepted and adopted by the European market. Accelerate penetration. In 2021, the installed capacity of household storage in Europe will be about 1GW/2GWh, a year-on-year increase of 56%/72%. However, the current household storage penetration rate is still low. Since the beginning of this year, the demand in the European household storage market has surged, and the supply is in short supply. Household energy storage is a typical consumer market, with greater profitability flexibility.
In China, the demand for domestic energy storage came more from the mandatory matching of new energy power generation projects, which was very sensitive to cost. Through demonstration and exploration, the income channels of domestic energy storage projects have gradually evolved, which may include peak-valley arbitrage, ancillary services, and capacity leasing in the future. At the same time, the independent/shared energy storage model breaks the original source-grid-load side classification standards and revenue boundaries according to grid connection points, and fits the operating characteristics of grid interconnection and dynamic balance, which may accelerate the large-scale development of energy storage. At present, the recording capacity of domestic energy storage projects is huge. If the price of upstream resources is adjusted back, the development may be accelerated.
As of the end of September 2022, the cumulative installed capacity of power storage projects in China has reached 50.3GW, +36% year-on-year and +7.5% quarter-on-quarter. After the cumulative installed capacity of pumped storage continued to decline, it began to pick up, up 0.2 percentage points from the end of last year. The cumulative installed capacity of new energy storage projects was 6663.4MW, +78% year-on-year. The installed capacity of lithium batteries still accounted for the largest proportion, but the share decreased by 0.4 percentage points compared with the end of last year. Thanks to this, the proportion of installed capacity of flow batteries has increased by 1.4 percentage points compared with the end of last year. In the first three quarters of 2022, the installed capacity of new energy storage projects put into operation in China was 933.8MW/1911.0MWh, and the power scale was +113% year-on-year. The installed capacity is not in line with market expectations, but the commissioning period of most projects is concentrated in the fourth quarter, especially at the end of the year, and the installed capacity will definitely increase significantly by then.
In the process of building a new power system, the proportion of renewable energy such as wind power and photovoltaics continues to increase on the power generation side, which will cause two major challenges. Second, the adjustable capacity and inertia of the power system are reduced, and the system's ability to deal with imbalance is weakened. Energy storage is an inevitable choice for the power system to maintain safe and stable operation after a high proportion of new energy access is realized. In addition, household photovoltaics is the direction of rapid development, and the household storage integration model is gradually becoming economical.