Sectoral dynamics
The development of the domestic large storage market has exceeded expectations, and it is expected that by 2025, the new installed capacity of China's pre meter energy storage will reach 262.3GWh
It is expected that the compound growth rate of the new installed capacity of China's energy storage system from 2021 to 2025 will reach 174.3%. Among them, the large storage capacity in front of the table will be the main force for installation in China. It is expected that by 2025, the new installed capacity of China's pre meter energy storage will reach 262.3 GWh, with an annualized compound growth rate of up to 190.2%.
Figure: Forecast of China's energy storage market space by 2025
Continuous growth of energy storage capacity in front of the table under the mandatory allocation policy
Under the expectation of establishing a strong allocation policy and business model, the domestic large storage and procurement and bidding volume continue to increase. The current rising demand for domestic energy storage installations mainly stems from policy demands. On the one hand, local governments are forcing new energy allocation and storage, and on the other hand, the State owned Assets Supervision and Administration Commission has set a rigid requirement of 50% for the proportion of new energy installations by central power generation enterprises such as the "five major and four small" by 2025, which is an important reason for the rise of domestic large energy storage demand in recent years.
Domestic large storage bidding has grown rapidly, exceeding market expectations
The bidding volume for domestic energy storage is rapidly increasing. According to incomplete statistics, as of October 2022, the cumulative bidding volume for domestic energy storage projects exceeded 12.1GW/26.1GWh. Since the second half of the year, the bidding process for domestic energy storage projects has accelerated significantly, and the installed capacity of pre meter energy storage in China will be significantly increased in the future.
Figure: The bidding volume of domestic energy storage projects has significantly increased since June 2022
Source: Energy Storage Headlines, Open Source Securities
The reform of the electricity market will continue to promote the acceleration of domestic large-scale storage
The rapid outbreak of independent energy storage on the grid side is closely related to the acceleration of power market construction and economic improvement. Independent entities obtain rental fees, auxiliary service benefits, participate in spot pilot markets/obtain capacity compensation, etc., rather than relying on simple arbitrage of peak valley differences.
From the perspective of mature international experience, the economic sources of energy storage mainly come from spot market arbitrage and the provision of auxiliary services. Currently, spot trading is being piloted in 8+5 provinces. The "two detailed rules" further expand the scope and market space of auxiliary service markets, while clarifying the independent subject status of energy storage participating in auxiliary services. With the electricity reform entering deep water areas, there is great potential for energy storage development. The decrease in the price of photovoltaic modules has driven the recovery of large storage power station installation, and the Q4 large storage rush installation effect is gradually implemented. The reform of the electricity market will continue to accelerate the domestic large storage.
