A recent analysis published by Wood Mackenzie points to policy incentives as the main drivers behind China’s “rapid growth in storage deployments in 2018” which is already helping China step up into the second-largest Asia Pacific (APAC) market behind South Korea in terms of annual deployment. Specifically, according to Wood Mackenzie figures, China’s energy storage market deployed 580 MW/1.14 GWh in 2018, pushing its cumulative size up to 1.07 GW/1.98 GWh. Deployments were led by front-of-the-meter (FTM) storage which grew five-fold in terms of installed power capacity compared to the previous year.
The state-owned utility State Grid Corporation of China led the way last year, deploying 452 MWh of grid-connected front-of-the-meter pilot projects, accounting for 83% of 2018’s FTM market growth.
“Based on current project economics and without policy support, utilities have limited incentive to scale-up investment in FTM storage as part of grid infrastructure,” said Dr Le Xu, senior analyst at Wood Mackenzie.
However, Wood Mackenzie expects this to change beginning in 2020, after China’s National Energy Administration announced that the ancillary services market will be transitioning from a basic compensation mechanism to a market integrated with spot energy prices by 2020. Combine this with the inherent maturation of energy storage technology and Wood Mackenzie is expecting China’s energy storage market to experience “exponential” growth through to 2024.
“Although China’s energy storage market is still in its infancy, we can expect to see continued strong growth driven by battery cost reduction, policy incentives, and power market reform,” Dr Xu added. “By 2024, global cumulative capex investment in the energy storage sector could grow to US$71 billion. China will account for about 14% or just over US$10 billion.”
According to Wood Mackenzie data, 60% of Chinese storage projects deployed to participate in ancillary services in 2018 were deployed as stand-alone projects, while 14% were deployed paired with coal plants, and 19% were renewables + storage projects. This last was driven by utilities, which deployed 105 MWh of storage — paired either with solar projects or hybrid solar and wind projects.
China will become the largest energy storage market in the Asia Pacific region by 2024, with the country’s cumulative energy storage capacity expected to skyrocket from 489 megawatts (MW)/843 megawatt-hours (MWh) in 2017 to a mammoth 12.5 gigawatts (GW)/32.1 gigawatt-hours (GWh) in 2024.