Shandong: Energy Storage+Photovoltaics Welcome New Opportunities! The capacity electricity price from 11 to 14 hours is designated as a deep valley period, * low or reduced to 0.1 yuan/kWh

On November 16th, State Grid Shandong Electric Power Company, in conjunction with Shandong Power Trading Center, issued a notice on the release of the 2023 capacity compensation hourly peak valley coefficient and execution period. According to the document, State Grid Shandong Electric Power Company, in conjunction with Shandong Power Trading Center, completed the calculation of the peak valley coefficient K1 and K2 values and execution period for capacity compensation in different seasons of 2023 based on system requirements, and introduced deep valley and peak coefficients and execution periods.

The details are as follows:

Source: Energy Storage and Electricity Market

As shown in the above table, except for summer, the capacity electricity price will have a depth range of 2-3 hours during the noon period throughout the year; Throughout the year, there will be 2-3 hours of peak periods in the evening. The standard for capacity electricity price is 0.0991 yuan/kWh. Calculated based on a deep valley coefficient of 0.1 and a peak coefficient of 2.0, the electricity price difference caused by capacity electricity price will reach 0.18829 yuan/kWh (0.0991 * 2.0-0.0991 * 0.1). Combining peak and valley periods, if a 2-hour energy storage system is configured, it will be able to utilize the peak and deep valley price difference with large capacity.

The increase in peak valley electricity prices may bring more market opportunities to distributed photovoltaic+energy storage.

Obviously, the full participation of power users in the spot electricity market, combined with costs such as peak valley capacity electricity prices, may bring about a higher price difference space, which is conducive to user side energy storage and electricity price arbitrage to obtain more profits. In addition, due to the fact that distributed photovoltaics and other resources are mostly generated during the low noon electricity price period, the application of user side distributed photovoltaics combined with energy storage may usher in certain development opportunities.

According to the announcement of the agency purchase price of State Grid Shandong Electric Power Company, the time of use electricity price is composed of the agency purchase electricity price, capacity compensation electricity price, allocation standard for added profit and loss of guaranteed electricity quantity, allocation standard for agency purchase electricity profit and loss, transmission and distribution electricity price, as well as government funds and surcharges. The adjustment in this document is the capacity compensation electricity price (0.0991 yuan/kWh).

However, this document introduces deep valley and peak coefficients as well as the execution period for the first time. From the adjusted policy, the period of 11:00 to 14:00 with high photovoltaic output is basically classified as the deep valley period. The adjustment of capacity electricity prices during deep valleys, peak coefficients, and execution periods will provide reference for the overall trend of electricity prices in the future. In addition, participating in market-oriented electricity trading can be expected to become a period of low electricity prices for users in the future.

It is reported that with the implementation of policies for deep valley periods and coefficients, the low electricity price of Shandong Industrial and Commercial Industry in the deep valley at noon may decrease to around 0.1 yuan/kWh. Although the spot electricity market in Shandong does not have floor prices every noon, and the deep valley period of capacity compensation electricity prices does not cover all periods of photovoltaic power generation, it can be clearly stated that in the spring, autumn, and winter when photovoltaic efficiency is high, the daytime electricity prices of Shandong's industrial and commercial industries * decrease, and are in the middle * low period of the day.

Industry insiders believe that in the future, with the adjustment of market transactions and time periods, the average electricity price in Shandong may decrease accordingly. For example, during the daytime photovoltaic power generation period in Shandong, the average unit price is 0.75 yuan/kWh. After adjusting the period, the average electricity price may decrease to 0.7 yuan/kWh or lower. This also means that the Shandong distributed photovoltaic investment calculation model will be adjusted based on the execution period and changes in electricity prices, and the project income may be discounted.

It can be seen that the adjustment of the electricity price period is also brought about by the changes in the structure of the Shandong power grid. As of the third quarter of 2022, the cumulative installed capacity of Shandong photovoltaic power stations is 39.58GW, of which 28.85GW is distributed photovoltaic, both ranking first in the country. The rapid increase in photovoltaic installation has led to a significant increase in output during the noon period, and has also changed the execution time of peak and valley periods. In areas with a high proportion of photovoltaic installations, this will become the norm.

On October 20th, the Shandong Provincial Energy Bureau issued a notice on soliciting opinions on the work related to the 2023 provincial electricity market transactions. The notice pointed out that the trading scale of the electricity market in Shandong Province in 2023 is about 400 billion kilowatt hours, including directly participating in market trading electricity and purchasing electricity on behalf of power grid enterprises. According to the principle of "whoever benefits, whoever bears", orderly promote the allocation of market costs for distributed new energy participation; Adjust and improve the electricity price structure of power grid enterprises' proxy electricity purchasing users, and implement the same electricity price policy as direct trading users for their transmission and distribution electricity prices, and no longer implement peak valley time of use electricity prices.

According to a report by China Energy Daily, "The Notice is currently soliciting opinions and we have collected suggestions from many industry experts. After the policy is improved, it will be officially introduced in the near future." The relevant person in charge of the Shandong Provincial Energy Bureau stated that after the cancellation of the time of use electricity price, the transmission and distribution electricity price for power grid enterprises to purchase and sell electricity will be consistent with the electricity price directly traded in the market, which is more conducive to deepening the electricity reform in Shandong Province. Next, Shandong Province will improve the pricing mechanism of the retail market and promote the formation of time-of-use prices in the retail market. That is, referring to the time-of-use electricity price signal of the spot electricity energy market, combined with the collection method of capacity compensation electricity price, we will try to implement a retail package time-of-use price constraint mechanism.

In addition, the cancellation of the time of use electricity price for proxy purchase and sale of electricity transmission and distribution prices is also aimed at widening the peak valley price difference among users, promoting peak shaving and valley filling, and ensuring the high proportion of new energy grid connection and grid safety in Shandong Province.

It should be noted that due to the further increase in the volatility of industrial electricity prices, the financial return calculation of industrial and commercial distributed photovoltaic projects also needs to be adjusted or the investment boundary further blurred. In addition, the increase in peak and valley electricity prices may bring more market opportunities to distributed photovoltaic+energy storage.

Source: China Energy Daily Energy Storage and Electricity Market Photovoltaics, Western Carbon Neutral New Energy