On September 11, 2023, data released by the Energy Storage Application Branch of the China Chemical and Physical Power Industry Association showed that, according to incomplete statistics, as of now, more than 70 enterprises such as Ningde Times, BYD, Yiwei Lithium Energy, Haichen Energy Storage, Chuneng New Energy, Ganfeng Lithium, Penghui Energy, Ruipu Lanjun, Funeng Technology, Xiamen Times, Shenghong Group, Tianjin Lishen, Desai Battery, Kunyu Battery have expanded their power and energy storage battery projects, The planned production capacity exceeds 1600GWh, with a total investment amount of over 700 billion yuan.
The “2023 White Paper on the Development of Industrial and Commercial Battery Energy Storage in China” released during the same period predicts that by 2025, the total installed capacity of industrial and commercial batteries in China will account for approximately 4.5% of the total installed capacity of new batteries. Based on an estimated total of approximately 70GW of new battery energy storage, the total installed capacity of industrial and commercial batteries in China at the end of 2025 will be approximately 3.2GW. According to the estimated cost of industrial and commercial battery energy storage systems of about 1.2-1.5 yuan/Wh and battery energy storage duration of about 2.5 hours, there is about 2.2GW/5.5GWh of growth space by 2025, and the cumulative market size of industrial and commercial battery energy storage by 2025 is about 6.5-8 billion yuan.
At present, user side battery energy storage is still in its early stage, and in the next 3-5 years, industrial and commercial battery energy storage will continue to become the mainstream, “said Liu Yong, Secretary General of the Battery Energy Storage Application Branch of the China Chemical and Physical Power Industry Association.
From January to July, over 2000 battery energy storage projects were registered in various provinces. “In the first half of 2023, the field of new battery energy storage was thriving, and the installed scale of new battery energy storage showed explosive growth. The total installed scale of battery energy storage projects put into operation in the first half of the year has exceeded the total amount of 2022,” said Wang Zeshen, Secretary General of the China Chemical and Physical Power Industry Association.
From January to June this year, a total of 159 battery energy storage projects were put into operation in China, including 154 new battery energy storage projects, with an installed capacity of 7.05GW/14.66GWh. From January to July, over 2000 battery energy storage projects were registered in various provinces, with East China ranking first with 1185 projects. Wang Zeshen further pointed out that the new battery energy storage industry will present five positive trends in the second half of this year: firstly, the export market for industrial and commercial battery energy storage and large storage products will further improve; Secondly, the new installed capacity of the domestic new battery energy storage market is further improving; The third is the further accumulation and extension of diversified application scenarios for new battery energy storage; Fourthly, the production capacity of battery energy storage batteries has been released better than the same period last year, and supply is in short supply; The fifth reason is that the cost of battery cells and system costs have decreased rapidly. Throughout this year, the newly installed capacity of new battery energy storage in China is expected to reach 15GW to 18GW.
According to incomplete statistics from the Energy Storage Application Branch of the China Chemical and Physical Power Supply Industry Association, as of now, more than 70 enterprises, including Ningde Times, BYD, Yiwei Lithium Energy, Haichen Energy Storage, Chuneng New Energy, Ganfeng Lithium, Penghui Energy, Ruipu Lanjun, Funeng Technology, Xiamen Times, Shenghong Group, Tianjin Lishen, Desai Battery, Kunyu Battery, have expanded their power and battery storage battery projects, involving production capacity planning exceeding 1600GWh, The total investment amount exceeds 700 billion yuan.
In the 2022 global ranking of battery energy storage system integrators in the global industrial and commercial energy storage industry, companies such as Tesla, Paineng Technology, Sonnen, LG, Wotai Energy, E3/DC, SENEC, and BYD are among the top in terms of shipment volume.
The largest scale of operation in East China
According to the “2023 White Paper on the Development of Industrial and Commercial Battery Energy Storage in China” edited by the China Chemical and Physical Power Industry Association, the new installed capacity of global industrial and commercial battery energy storage will reach 1.5GW in 2023, and it is expected that this number will increase to 11.5GW by 2025. At that time, the cumulative market size of global industrial and commercial battery energy storage will be between 19 billion yuan and 24 billion yuan.
From the perspective of global regional distribution, global industrial and commercial battery energy storage is mainly concentrated in the United States, Germany, Japan, and China. The installed capacity of industrial and commercial batteries in these four countries accounts for about 79% of the total global installed capacity. It is expected that by 2025, the global proportion of American industrial and commercial battery energy storage installed capacity may exceed 50%. The main reason mentioned in the report is that the industrial and commercial sectors (mainly industries) of the above-mentioned countries are relatively developed, and the policy support for industrial and commercial battery energy storage is relatively high.
From a domestic perspective, the cumulative installed power distribution of industrial and commercial battery energy storage in 2022 ranks among the top in terms of installed capacity in East China, South China, and Northwest China. The industrial and commercial battery energy storage operation scale in the East China region is the largest, reaching a total of 373MW, accounting for 37.8% of the total installed power of industrial and commercial battery energy storage in China.
The industrial and commercial battery energy storage installations in the East China region are mainly distributed in two major electricity consuming provinces, Zhejiang and Jiangsu. Their peak valley price difference is high, and there are many subsidy policies. Industrial and commercial enterprises have high enthusiasm for battery energy storage layout.
The White Paper shows that the current domestic industrial and commercial battery energy storage market mainly reflects four major business models: contract energy management, financing leasing+contract energy management, owner self investment, and pure leasing.
From the domestic situation, due to relatively high investment costs and user safety concerns, the early market was more inclined towards models such as contract energy management and financial leasing, which helped promote electricity companies to adopt battery energy storage technology more actively. However, as the market matures further, it is expected that the owner self investment and pure leasing models will gradually dominate.
In the contract energy management model, the energy service provider (investor) assumes the responsibility of purchasing battery energy storage and shares the benefits with the electricity consuming enterprise (owner) through the provision of energy services. Currently, the sharing is mainly based on a ratio of 90% to 10% or 85% to 15%.
The optimal scenario is that the energy service provider bears the initial investment cost of battery energy storage, while the electricity consuming enterprise shares the profits with it. Generally, within 5-6 years, energy service providers can achieve a return on costs through battery energy storage revenue. According to the White Paper, a typical industrial and commercial battery energy storage system has an annual net cash flow of approximately 190 yuan/kWh, an investment IRR of approximately 7.5% -11.2%, and a static investment payback period of 7.9-9.5 years.
A high IRR value means that battery energy storage systems bring high returns to businesses or investors. According to the White Paper, provinces such as Anhui, Beijing, and Chongqing have shown an IRR of 12.5%, 3.5%, and 15.2%, respectively, indicating significant expected returns for battery energy storage projects in these regions.
Challenges cannot be ignored
In recent years, industrial and commercial battery energy storage has received strong support from national policies, bringing numerous advantages and opportunities to the development of the industrial and commercial battery energy storage industry. Firstly, the “dual control of energy consumption” policy has stimulated the growth of industrial and commercial battery energy storage. Due to insufficient power supply, in recent years, many parts of the country have experienced the phenomenon of “power rationing” and implemented policies of “dual control of energy consumption”. Affected by this, industrial and commercial users have extended their downtime and increased their downtime costs, thereby increasing the production burden on enterprises. In order to reduce downtime and reduce the impact of downtime on production, many industrial and commercial enterprises are exploring the application of battery energy storage systems to cope with “power limit” and “dual energy consumption control”.
Secondly, the continuous increase in peak valley price differences and the gradual implementation of subsidy policies further promote the layout of enterprises in industrial and commercial battery energy storage. On the one hand, peak valley arbitrage is the main source of income for industrial and commercial battery energy storage. The continuous increase in peak valley price difference has improved the economic efficiency of industrial and commercial battery energy storage projects, promoting domestic enterprises to invest in battery energy storage projects. In the first half of this year, there were a total of 19 regions in China with a peak valley price difference exceeding 0.7 yuan/kWh, with Guangdong having the largest price difference, reaching as high as 1.35 yuan/kWh.
On the other hand, subsidy policies across the country have gradually been implemented. For example, Futian District in Shenzhen City provides support of no more than 0.5 yuan/KWh for electrochemical battery energy storage projects that have been connected to the grid and have actually invested more than 1 million yuan, based on the actual discharge capacity, and provides project owners with a one-time construction subsidy of 1 yuan/watt.
These positive factors will enhance the economy of industrial and commercial battery energy storage projects and bring about larger investments. However, it cannot be ignored that there are still challenges in grid connection, scheduling frequency, and business models for industrial and commercial battery energy storage projects.