The energy storage industry operates through an interconnected chain, much like a well-oiled machine. Upstream, you find suppliers of battery raw materials and production equipment. Midstream lies the heart: suppliers of batteries, battery management systems, energy management systems, and energy storage converters. Downstream, we meet the end-users: energy storage system integrators, installers, and terminal users. Each link in this chain plays a crucial role in bringing energy storage technology to life.
In general, energy storage technologies can be broadly classified into three categories: thermal, electrical, and hydrogen-based (including ammonia). Within the electrical category, it can be further divided into electrochemical, mechanical, and electromagnetic types. While pumped storage currently dominates the landscape of energy storage projects, a variety of new energy storage technologies, especially those within the electrochemical category, are swiftly gaining traction. As per China Energy Storage Alliance’s (“CNESA”) definition, new energy storage technologies encompass electrochemical energy storage technologies including lithium batteries, sodium-sulfur batteries, lead-acid batteries, and flow batteries, along with mechanical energy storage technologies like flywheel storage and compressed air storage.
The Grid-scale Energy Storage Technology and its Advantages
New developments in technology, particularly within the electrochemical category, are paving the way for significant progress in grid-scale energy storage. To put it simply, grid-scale storage allows us to store energy from renewable sources, like sunlight or wind, and then feed it back to the power grid at a more convenient time. For example, energy stored during the day when the sun is shining can be used at night when solar power isn’t available. Or, when wind turbines produce excess power during windy weather, the excess power can be stored for times when the wind is calm.
Batteries, in particular, are playing an increasingly significant role in this area. They can be installed virtually anywhere and in a wide range of capacities, offering numerous advantages. These energy storage systems provide a multitude of benefits. One is system frequency regulation, which is like a balancing act to ensure there’s just enough electricity supply to meet demand, helping to keep the power grid stable. Another advantage is power peak shaving, which is like trimming off the top of ‘peak’ demand periods. By reducing the amount of energy drawn from the grid during these busy times, we can manage electricity costs better and reduce stress on the power grid. Furthermore, energy storage systems bring an extra benefit to the table: they can support what’s known as ‘auxiliary dynamic operation.’ In simpler terms, this means they can provide extra services that help keep our power grid running smoothly and without interruptions. In conjunction with these benefits, grid-scale storage technologies play a pivotal role in enhancing grid stability, ensuring a reliable power supply, facilitating the effective integration of renewable energy sources, and potentially reducing the overall cost of energy for consumers.
The Impressive Growth of Global Energy Storage Installed Capacity
From 2016 to 2022, the annual increase in installed capacity for new energy storage projects in global power systems has risen from 0.7GW to 20.4GW, with an average compound annual growth rate (CAGR) of 75.4%. The share of the cumulative installed capacity of new energy storage projects that have been put into operation has increased from 1.2% to 19.3% of the global total installed capacity of new energy storage projects during the same period. Although the installed capacity of new energy storage technology in the power system is still not large at this stage, the rapid pace of development and the immense potential for growth are noteworthy . To put things into perspective, the average electricity consumption per household per month in Hong Kong is about 275 kWh. 1 GW energy storage system could theoretically power over 2.65 million average households in Hong Kong (i.e. almost the entire Hong Kong) for a year , assuming the system is fully charged and discharged once per day every day for a year.
China’s Steady Ascent in Energy Storage Installed Capacity
China’s growth in energy storage installed capacity is outpacing global rates, demonstrating an impressive commitment to renewable energy and advanced technology. But what is driving this surge in China? One key driver is China’s ambitious renewable energy goals, which are supported by significant government endorsement and investment. Additionally, China’s energy policies have been designed to prioritize the development and implementation of energy storage technologies, thereby creating a favorable environment for growth.
According to data from the CNESA Global Energy Storage Project Database, by the end of 2022, China’s operating energy storage projects had reached a cumulative installed capacity of 59.8GW, representing 25.2% of the worldwide cumulative installed capacity. This reflects a year-on-year growth of 37.8%. From 2016 to 2022, the CAGR of the installed capacity of China’s operating energy storage projects was 16.2%.
The Power of Policy: Driving the Energy Storage Industry
China’s government has implemented mandatory storage requirements and support policies for renewable energy, creating a favorable environment for the energy storage industry. As per the general guidelines proposed in June 2022 in the “14th Five-Year Plan for Renewable Energy Development” energy storage is expected to promote the efficient utilization and absorption of new energy, ensuring the scalable development of renewable energy. In response to these guidelines, 25 provinces and cities have proposed requirements for energy storage paired with new energy by the end of 2022. The required proportion of energy storage often falls between 10%-20%, with the duration of energy storage typically required to be over 2 hours (some provinces have requirements as high as 4 hours).
Additionally, some regions provide subsidies of 0.3-0.8 RMB/KWh to energy storage stations connected to the grid, based on their power generation. The implementation of energy storage-related policies by various provinces and cities will further increase the application of energy storage on the grid side of new energy.
The Rise of Independent Energy Storage
Independent energy storage stations, which are standalone systems that store and release energy, are becoming increasingly important in the energy sector. But what exactly are these stations? These are facilities, often fitted with large-scale batteries, that store energy when demand is low and then feed it back into the grid when demand is high. They’re not tied to any specific power generation source, meaning they can store energy from various sources – be it solar, wind, or traditional fossil fuels. This flexibility makes them a key player in the energy transition, as they can help balance the grid, integrate more renewable energy, and ensure a reliable power supply no matter the circumstances.
Looking at specific regions, Ningxia stands out with its independent energy storage projects. In the last year alone, Ningxia has commissioned projects with a scale of 0.9GW/1.8GWh, and projects exceeding 2GW/4GWh have entered the implementation stage. This makes Ningxia the largest domestic market for independent energy storage. Meanwhile, Shandong leads with a business model that combines “capacity leasing + peak shaving/power spot + capacity compensation.” In 2022, Shandong launched a total of 29 market projects with a total scale exceeding 3.1GW. The actual scale of subsequent projects put into operation will be closely watched and is expected to make significant contributions to the energy storage sector.
In conclusion, the energy storage industry is an exciting and rapidly evolving sector with enormous potential. Its growth and development are not only crucial for our transition to a greener future but also present intriguing opportunities for professionals, from financial advisors to lawyers, to contribute to and benefit from this burgeoning industry.
Pelican’s Role
At Pelican, we not only observe these trends but actively participate to shape them. Pelican has carved out a niche focus in the energy storage sector and consistently attracts high-quality deals, demonstrating its significant influence and leadership in this field. Pelican’s team of professional consultants, with their deep expertise in this area, ensures the accuracy of their deal filter. This precision allows us to identify and seize the most promising opportunities in the energy storage market, contributing significantly to the industry’s growth and the advancement of sustainability goals.
Moreover, Pelican boasts a wide network of investors, listed companies, and projects within the energy storage sector. This expansive network accelerates the deal-making process, allowing Pelican to respond more quickly to market trends and opportunities than others.
As we continue on this exciting journey, we welcome conversations with those interested in the energy storage sector, be they potential investors or partners. Please don’t hesitate to reach out to us to explore how we can shape the future of energy together.
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