EV growth, trade war, government incentives and the Chinese storage market

The year 2018 witnessed a milestone in the China energy storage market with the Chinese government approving the country’s first large battery storage pilot project that aims at maximising clean energy output to improve grid stability.

The Chinese authority will be investing $174 million in developing the initial phase of the venture that will be implemented in the north-western province of Gansu.

This article was originally published in Smart Energy International 2-2019.  Read all articles via our digital magazine today.

The project will create an energy capacity of 720MW hours and storage of four hours.

The project is necessarily an emphasis on China’s efforts to balance out renewable energy generation that fluctuates depending on the amount of available wind or sunlight. The Chinese economy is dominated by heavy industries and infrastructural development which have caused an alarming rise in the country’s greenhouse gas emission levels. But on the other hand, the nation has become one of the global leaders in renewable energy generation which has consequently fostered the expansion of the energy storage market.

China’s gargantuan renewable energy generation capacity and its implications

Elaborating on China’s transformative reorientation of its economy and the reason behind its motivation for promoting renewable energy resources, it is imperative to mention that China has one of the highest levels of polluted air.

According to the World Health Organisation, nearly one million people in China die annually as a result of overexposure to polluted air. The country is, therefore, working speedily to improve its air quality, a move that will also be beneficial for mitigating climate change.

The International Renewable Energy Agency recorded that China has been growing its renewable energy capacity at the rate of 15% annually for the last ten years, which is twice as much as the global average.

Remarkably, as of 2018, China has increased its renewable capacity by 255% over the last decade while developed nations, especially Europe and the US, that were known for holding a bulk of renewable energy, have fallen behind China.

Experts estimate that since 2008, China’s hydroelectric power capacity has increased by approximately 97%, while there has been a nearly 20-fold increase in wind power capacity. The most remarkable growth, however, has been in solar capacity which has increased from 113MW in 2008 to 130.6GW in 2017 and the country has been producing 60% of the world’s solar cells.

However, the astronomical growth in renewable energy generation is bound to be wasted if consumers are unable to access clean energy. The problem had already come to the surface when the grid system in China struggled to effectively integrate the green energy and a large portion of turbines in the north and west of China were forced to remain idle in 2016.

Efforts are therefore being undertaken to enhance not only the grid system but also the overall energy storage industry in China to accommodate the generated power and add flexibility to the grid.

Government efforts and private sector investments

A significant amount of capital in the Chinese economy is being invested in the renewable energy market, which in turn is adding stimulus to the energy storage market in China, facilitating the growth of energy storage technologies that include batteries, pumped hydro, thermal storage and others.

Recognising the value and importance of energy storage to empower renewable energy, Chinese policymakers have been rapidly expanding the country’s energy storage capacity. In 2017 the central government released its first national-level policy on energy storage to complement its national renewables and grid modernisation policies in which development goals for the next ten years have been set.

Significantly, energy storage has been recognised as a key to grid modernisation and ensuring grid reliability, resilience and safety.

The document has urged government agencies to establish policies governing technology standards, pricing mechanisms, intellectual property protections and battery material recycling. Regional governments are also expected to contribute to the success of the plan by drafting new policies that are designed to implement the national level policy. To achieve energy storage and grid modernisation goals, China set up a 100MW battery storage project that was successfully connected to the grid in 2018.

China has also set up the 13th Five Year Hydropower Plan that focuses on increasing pumped hydro storage from 23GW to 40GW by 2020, a pumped hydro capacity target that is almost twice as much as that of the United States.

The Chinese government is actively promoting emerging energy storage technologies. For instance, in 2016, the central government released a 15-year Energy Technology Innovation Action Plan that encouraged increased research into advanced energy storage technologies to support renewables integration, microgrid development and electric vehicles.

The plan has already started to take shape as in April 2016 the National Energy Administration approved the construction of a massive energy storage project in Dalian.

As a part of the project, Dalian Rongke, the Chinese battery manufacturer, is in the process of building a 200MW vanadium redox flow battery facility. The system is anticipated to lead to a threefold increase in China’s grid-connected battery capacity.

Due to increased support by the central government, private investors are also gaining confidence in the energy storage market, and an increased share of investment in the energy storage market in China is being garnered from private stakeholders, whose ventures are being met with commercial success.

For instance, in northern China, where wind and solar curtailment has been severe, the National Energy Administration started an energy storage compensation scheme in 2016, in which energy storage providers were paid for storing energy during the night.

Previously, energy was sourced from coal plants, and since coal plants are not easily turned on or off, they were paid to wind down. Now the revenue is channelled to the energy storage facilities, an action that is a positive growth indicator for the Chinese energy storage market.

Electric vehicle market

The rapidly expanding electric vehicle market in the region has also propelled the energy storage market as the battery in the electric vehicle is essentially its driving force. China is estimated to have four of the six largest battery factories in the world by 2020.

Contemporary Amperex Technology, which has set the record for being the fastestgrowing battery factory in the world, is anticipated to overtake Tesla’s Gigafactory in battery production volume.

In 2017, the country produced more EVs than the rest of the world combined and therefore the country is working hard to consolidate control over raw material supply: nickel, cobalt, and lithium that are used for the development of batteries and other related technologies.

US-China trade war

Considering the effect of the ongoing US-China trade war, it is imperative to mention that though the overall economies of both the countries will take a considerable hit due to the conflict, China’s self-sufficiency in the production of energy storage technologies and facilities is anticipated to protect the China energy storage market from facing a major setback.

Owing to the trade war, certain positive outcomes have been noted in an indirect manner as Tesla has recently accelerated the construction of its $2 billion Gigafactory in Shanghai, meant for the production of Model 3 electric cars.

Tesla was losing ground to competitors due to the rising import costs in China and therefore is setting up its own factory in the country to avoid the brunt of the trade war.

China has lofty battery ambitions, as evidenced by the fact that at the start of 2018, China had an operational battery-storage capacity of 389MW but by August alone, an additional 340MW battery capacity had been added. Thus making 2018 the year that had the China energy storage market witness a nearly hypersonic growth rate, as noted by the China Energy Storage Alliance. Powered by a highly supportive administrative framework, the China energy storage market is expected to record stellar growth over the coming years. SEI

About the author

Paroma Bhattacharya

Equipped with a prestigious postgraduate degree in Journalism and Mass Communication, Paroma took to writing like a fish to water. Endowed with a passion for playing with words, Paroma commenced her career in writing penning down highly resourceful and informative content across a spate of industry verticals. Harnessing her core educational expertise and rich experience in content development, she writes articles spanning numerous domains such as finance, technology and energy, with exceptional ease and clarity.