On February 9, the National Development and Reform Commission (NDRC) announced that the NDRC and the National Energy Administration jointly issued the "Notice on Deepening the Market-Oriented Reform of New Energy On-Grid Tariffs to Promote High-Quality Development of New Energy" (hereinafter referred to as the "Notice"). The "Notice" explicitly states, "In principle, all on-grid electricity from new energy projects (wind power and solar power generation, the same hereinafter) shall enter the electricity market, and on-grid tariffs shall be formed through market transactions." Additionally, it specifies, "The configuration of energy storage systems (ESS) shall not be a prerequisite for the approval, grid connection, or on-grid operation of new new energy projects." This policy aims to promote the full participation of on-grid electricity from wind and solar power generation in market transactions, achieve market-oriented electricity pricing, and eliminate mandatory ESS integration policies.
1. Impact of Electricity Marketization and the Cancellation of Mandatory ESS Integration on ESS Supply and Demand
The marketization of new energy electricity prices represents a shift in the pricing mechanism for new energy generation from a fixed-price guarantee system to a market transaction mechanism. This increases the volatility risk of returns for new energy projects, prompting project investors to potentially integrate ESS to participate in market adjustments and optimize investment returns, indirectly stimulating ESS demand. The new policy will also adopt differentiated measures for existing and new projects, with June 1, 2025, as the dividing period. For existing projects, the new energy mechanism tariffs will be aligned with current policies, while for new projects, tariffs will be determined through market-based bidding. This differentiation is expected to drive a rush for installations of new energy projects before the period, which will also extend to a surge in ESS installations. However, after the period, ESS demand may decline due to the economic uncertainties of new energy projects. Meanwhile, on the generation side, the cancellation of mandatory ESS integration policies relieves new energy projects of policy burdens, allowing them to integrate ESS as needed. In the short term, this may exert pressure on or reduce ESS installation demand. However, the essential need to address curtailment of wind and PV power generation and electricity consumption issues caused by the continuous growth of wind and solar power projects through renewable energy ESS integration will persist and continue to drive long-term ESS demand growth at a gradual pace.
2. Impact of Electricity Marketization and the Cancellation of Mandatory ESS Integration on ESS Business Models
The "Notice"
proposes establishing a sustainable pricing mechanism to reasonably ensure returns for new energy projects. After participating in electricity market transactions, a "more refund, less supplement" price difference settlement mechanism will be established outside the market. On the power grid side, ESS can participate in real-time and medium and long-term markets to earn charging and discharging revenues through peak-valley price spreads. It can also participate in ancillary service markets (e.g., deep peak shaving, primary frequency regulation, secondary frequency regulation, black start) to generate additional income, thereby broadening its profit models. On the user side, ESS can achieve peak shaving and valley filling of electricity loads through charging and discharging, leveraging peak-valley price spreads for arbitrage. The flexibility value of energy storage systems will become more prominent, with demand shifting from "passive ESS integration" to "active adjustment." In the future, ancillary service markets and peak-valley arbitrage may become the primary revenue models for ESS.
3. Impact of Electricity Marketization and the Cancellation of Mandatory ESS Integration on ESS Enterprises
Previously, mandatory ESS integration policies drove high growth in ESS installations. Following the release of the new policy, due to the economic uncertainties of new energy projects, investors' focus on ESS will shift from "grid connection thresholds" to "cost-effective competitive tools." Demand for low-efficiency ESS projects will significantly decrease, and competition in the ESS industry will shift from price to technology and value. ESS enterprises will proactively focus on the overall benefits of technology, cost, and service, rather than passively relying on policy support and financial subsidies to maintain economic viability. This policy reform may drive an industry reshuffle in the ESS sector, with top-tier enterprises leveraging their technological, cost, and service advantages to secure favorable positions and expand market share. Meanwhile, lower-tier enterprises, due to outdated technology and high manufacturing costs, will face market exit pressures. The market concentration of the ESS industry will increase, accelerating the process of survival of the fittest and laying the foundation for the long-term prosperity of the ESS industry and the efficient integration of resources.
Conclusion: The ESS Industry Will Enter a Phase of Differentiation and Value Reshaping
After a period of short-term pain, the ESS industry will transition to a structure characterized by "efficient technology-driven and market demand-oriented" growth. Industry differentiation will intensify (with top-tier enterprises increasing market share and lower-tier enterprises gradually exiting the market). The supply-demand relationship for ESS will shift from policy dependence to market balance, and ESS business models will undergo transformation.
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