Sectoral dynamics
What is grid side energy storage? What is user side energy storage?
According to the installation location of the energy storage system, we divide the energy storage application scenarios into three main types: power generation side, grid side, and user side. With the rise of shared energy storage, the boundary between power generation and grid side energy storage is gradually blurred. Based on the different beneficiaries, we classify new energy distribution and storage as power generation side energy storage, energy storage for peak shaving and frequency regulation as grid side energy storage, and energy storage for distributed optical storage integration and peak shaving and valley filling as user side energy storage. The business models for energy storage vary in different application scenarios, and each has its own application necessity.
Power generation side: short-term use for new energy consumption
New energy generation is unstable and unable to fully follow the power grid dispatching instructions. Energy storage stations store their excess electricity and release it during low output periods to assist in the consumption of new energy and generate profits through the excess wind and solar energy generated.
Figure: Schematic diagram of the "duck shaped curve" under carbon neutrality scenario
At present, the proportion of new energy generation in China is relatively low, and the issue of consumption is not prominent. Relying solely on wind and solar power generation cannot make up for energy storage costs, and this business model has poor economic efficiency. Under the high proportion of new energy integration, the net load of the power system will exhibit a "duck shaped curve". During the decline period of new energy generation, sufficient climbing resources are required, and the net load of superimposed photovoltaic and wind power will eventually be met during the stage of zero photovoltaic output.
In a carbon neutral scenario, the proportion of adjustable power sources such as thermal power is relatively low. With its fast and precise regulation characteristics, energy storage will become a suitable climbing resource, and can meet nighttime electricity demand by utilizing the electricity stored during the peak period of new energy generation during the day.
Grid side: fast energy storage response speed
The value of energy storage is mainly realized on the grid side through the electricity auxiliary service market. Auxiliary services are service products provided by market entities (including power generators, power users, and energy storage enterprises) to maintain the safe and stable operation of the power system, mainly including peak shaving, frequency regulation, backup capacity, etc.
The power system needs sufficient flexibility to maintain a balance between supply and demand. At present, the volatility of both supply and demand sides of China's power system is increasing simultaneously, posing higher requirements for the flexibility of the power grid. On the electricity consumption side, the proportion of residential electricity consumption in China has been continuously increasing in recent years, and residential electricity consumption is more volatile compared to industry, commerce, and large industries, making it more difficult to predict; On the power generation side, the proportion of new energy generation continues to increase, while the volatility of wind and solar power generation is greater than that of traditional units.
Energy storage is a flexible resource with flexible regulation and fast response speed. With the gradual improvement of auxiliary service markets in various regions, energy storage has begun to participate frequently in the auxiliary service market, and its business models have become more diversified.
Figure: The proportion of wind photovoltaic power generation in China from 2014 to 2021
China's electricity load has a significant difference between peak and valley, and the spot electricity market is not yet perfect. Therefore, peak shaving auxiliary services have been launched to promote the balance of supply and demand in the power system through peak shaving compensation. The future electricity spot market will gradually improve, and peak shaving will gradually withdraw from the auxiliary service market.
Figure: Peak shaving demand principle
Energy storage frequency regulation is more effective than traditional methods and is a necessary means to maintain the stability of the power grid. Frequency modulation service is the ability of the unit to track changes in electricity load in a short period of time. The unit providing frequency modulation service increases or decreases its output by receiving automatic control signals for power generation. Typically, this adjustment process is completed within a few seconds.
The purpose of frequency modulation service is to correct the frequency deviation that occurs in the system and maintain the stability of the power system frequency. The rated power of China's power system is 50Hz. For large capacity systems above 3GW, the normal frequency deviation operating value is ± 0.2Hz, while for small systems, it is ± 0.5Hz.
Energy storage has the characteristics of fast response and precise tracking, which is more effective than traditional frequency modulation methods. At present, large thermal power units are mainly used as frequency modulation power sources in China's power grid, and the power output is adjusted to respond to system frequency changes. However, the frequency regulation performance of thermal power units is poor, with long response time delay and low unit climbing speed, making it unsuitable for short-term frequency regulation.
Electrochemical energy storage has fast response speed and high adjustment accuracy. Within the rated power range, it can complete the specified power output with over 99% brightness within 1 second. The AGC tracking curve of electrochemical energy storage can almost coincide with the AGC command curve, while thermal power units may experience delayed regulation, deviation regulation, and even reverse regulation.
User side: reducing electricity usage costs
Energy storage is used for peak and valley electricity price arbitrage. Users can use energy storage to store electricity during periods of low electricity prices, and use stored electricity during peak periods to avoid direct large-scale use of high priced grid electricity, thereby reducing electricity usage costs and achieving peak and valley electricity price arbitrage.
Figure: Schematic diagram of user side energy storage utilization peak valley price difference arbitrage and capacity cost management profit
Under the two-part electricity price system, the power supply department will charge a certain basic electricity price every month based on * large demand. Enterprises can use energy storage systems for capacity cost management, reducing high power consumption without affecting normal production, thereby reducing capacity costs.
Figure: Application distribution of electrochemical energy storage projects in China as of 2021
From the perspective of application status, new energy distribution and storage are the main application scenarios in China, while power side auxiliary services are the main application scenarios globally. According to CESA, both the global and Chinese power systems currently focus on new energy distribution and storage, power auxiliary services, and grid side energy storage. Among them, the global proportions of the three are 33%, 37%, and 24%, respectively, with a relatively balanced distribution. In China, the proportions are 45%, 29%, and 22%, respectively. The proportion of new energy distribution and storage is significantly higher than other scenarios.
Source: National Energy Administration/CITIC Securities/Huaxin Securities Research
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