China ESS Industry Analysis

In China, the utilization rate of energy storage on the grid side remains very high, while the utilization rate on the generation side is relatively lower. Under circumstances where the generation-side utilization rate is very low, how should we understand the continued enhancement of storage matching ratios by various localities?

In the context of current economic and energy policies, despite the higher utilization rate of grid-side energy storage and the comparatively lower utilization rate on the generation side, local governments are still strengthening the ratio of storage pairing. This is driven by two main motivations.

Firstly, the challenge of the economic situation makes it imperative for local governments to find new points of economic growth. In this context, many local governments view the development of new energy and its associated storage technologies as strategic emerging industries that can drive economic growth. For example, in Gansu, besides tourism, new energy is seen as a pillar of the regional economy. Therefore, even when the utilization rate of generation-side storage is not high, local governments still do not easily relax the promotion and requirements for new energy and storage pairing, unless the economy is overheated and no longer needs these emerging industries to stimulate growth.

Secondly, addressing the operation of the electric grid and the consumption of new energy is also an important factor. This year is considered to be a year with significant difficulties in the grid absorption of new energies, and it is expected that this situation may improve next year and in the following years. At the national level, high hopes are pinned on the development of new energy, not only to ensure the stability of energy supply but also to promote the transformation of the energy structure. Against this backdrop, even if boundary conditions do not significantly improve, such as a prolonged update cycle for infrastructure like grid-high voltage propagation, new energy storage technologies are still regarded as key solutions.

Since new energies have not yet been fully marketized and must be self-sustaining in terms of profit and loss without sufficient safeguards, requiring new energy projects to compulsorily equip with energy storage would increase costs, which is not appropriate under current conditions. Therefore, maintaining strong storage pairing policies in our current policy environment is reasonable.

Therefore, although the utilization rate of generation-side storage may be lower in the short term, strengthening the storage pairing policy is a result of multifaceted considerations, including a comprehensive balance of factors such as economy, environment, and energy security in the long run.