In the Era of Capacity Surplus, How Can the PV ESS Industry Transition from Cut-Throat Competition to Win-Win? [New Energy Summit]

At the 2025 (10th) New Energy Industry Expo - New Energy PV ESS Forum hosted by SMM Information & Technology Co., Ltd., Tang Tuo, Consulting Engineer at the Policy and System Research Institute of CGN Times (Shanghai) New Energy Storage Technology Research Institute Co., Ltd., shared insights on the topic of "How the PV ESS Industry Can Transition from Cut-throat Competition to Win-Win in the Era of Overcapacity." He stated that the transaction prices in the new energy market may further decline, especially for PV projects with higher output consistency, where negative electricity prices may occur during peak PV generation periods during the day. The strategy for new energy investment and development has shifted from "pure resource competition" to "comprehensive capability competition," with the returns of new energy investment entities directly linked to capabilities in planning and layout, cost control, transaction operations, and technological innovation. While the demand for power system regulation resources faces a short-term decline, long-term demand is expected to increase. Regulatory resources will transition from "policy-driven" to "market-driven," potentially widening the peak-valley price spread and increasing auxiliary service revenues. The focus on power supply-side ESS has cooled overall, with development priorities shifting to grid-side and user-side shared standalone ESS. I. Overview of New-Type Energy Storage Development I. Overview Installation Distribution The scale of new-type energy storage installations continues to grow rapidly, reaching 73.76 million kW by the end of 2024, with an average energy storage duration of 2.3 hours. Regionally, north-west and north China benefit from abundant wind and solar resources, leading to large-scale ESS installations. In terms of power station scale, there is a trend toward centralized and large-scale projects. Regarding energy storage duration, the trend is toward longer storage times. Technology Pathways The mainstream technology remains lithium-ion batteries. Flow batteries, compressed air energy storage, and hydrogen storage are undergoing demonstration applications. Flywheel energy storage has seen project applications, but on a relatively small scale; gravity energy storage has yet to see any operational projects domestically. Application Scenarios These mainly include the power supply side, grid side, and user side. In the early stages of development, the focus was on mandatory ESS integration on the power supply side for new energy. In recent years, grid-side standalone ESS power stations have gained attention and experienced rapid development. On the user side, industrial and commercial ESS dominate, with highly customized application scenarios and varying scales, ranging from hundreds of kW to tens of MW. Cost Situation Over the past year, the prices of lithium battery raw materials (lithium carbonate) have generally continued to decline, compounded by intense market price competition, leading to a sustained decrease in battery cell prices, which in turn has driven down the transaction prices of ESS and EPC. II. Key Issues in New-Type Energy Storage II. Key Issues Utilization Status The utilization of some new-type ESS has fallen short of expectations. The main reasons include: 1) uneven equipment quality in some projects, resulting in low availability; 2) small scale and low access voltage levels, making them difficult to dispatch; 3) low operational levels in some projects, preventing full utilization of ESS regulation capabilities; 4) a lack of clear investment return models, reducing the enthusiasm of owners to use ESS. Functional Positioning Reducing new energy curtailment. Primarily used for power system supply assurance and promoting new energy consumption, based on three aspects: Functional Positioning Substituting for transmission and distribution investments. Deploying grid-side ESS near heavily loaded sections of transmission channels can alleviate grid congestion and promote wind and solar consumption. However, it is currently not suitable for addressing substation overload issues, as ESS power stations do not offer advantages in land use and cost compared to main transformer expansions. Project Economics Assuming the energy stored in ESS is entirely from curtailed new energy, ideally discharged at the new energy on-grid tariff. ESS only becomes economical when the levelized cost of storage (LCOS) < the new energy on-grid tariff; otherwise, it is better to directly curtail the energy. Taking a 100 MW/400 MWh lithium-ion ESS power station as an example for calculation: III. Policy Situation and Impact Analysis Development History The development of new energy on-grid tariffs has transitioned from policy pricing to market-oriented reforms. The "Notice" (Document No. 136) clarifies that the on-grid electricity of new energy projects should, in principle, fully enter the power market, with tariffs formed through market transactions, and establishes a "more refund, less compensation" differential settlement mechanism to stabilize corporate returns and promote high-quality development of new energy. Mechanism Electricity Provinces are required to align with current policies on guaranteed electricity scale and consider adjustments based on the non-hydro renewable energy consumption responsibility and user affordability for the year. Therefore, the guaranteed electricity scale in each province will remain stable, mainly including the previous year's policy-guaranteed new energy electricity and newly added new energy mechanism electricity. Mechanism Tariff Priced based on the marginal clearing model, with projects selected in order of lowest to highest bids during the bidding process, and the mechanism tariff is, in principle, determined by the highest bid of the selected projects. The upper limit of the mechanism tariff can be considered as the local coal power benchmark tariff or the on-grid tariff level of typical units with high yield; the lower limit can refer to the on-grid tariff level of the most advanced units of the same type in each province. Project Return Analysis Policy Impact The transaction prices in the new energy market may further decline, especially for PV projects with higher output consistency, where negative electricity prices may occur during peak PV generation periods during the day; The strategy for new energy investment and development has shifted from "pure resource competition" to "comprehensive capability competition," with the returns of new energy investment entities directly linked to capabilities in planning and layout, cost control, transaction operations, and technological innovation; While the demand for power system regulation resources faces a short-term decline, long-term demand is expected to increase. Regulatory resources will transition from "policy-driven" to "market-driven," potentially widening the peak-valley price spread and increasing auxiliary service revenues. The focus on power supply-side ESS has cooled overall, with development priorities shifting to grid-side and user-side shared standalone ESS. 》Click to view the special report on the 2025 (10th) New Energy Industry Expo