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17 policy increases! Energy storage participates in the electricity spot market and welcomes opportunities
2022/12/6
Recently, various regions have intensively released policies to promote the participation of energy storage, peak shaving, virtual power plants, and other power auxiliary services. With its fast and accurate response ability and flexible layout, energy storage has emerged in the broader power auxiliary service market.
01 China's Power System Auxiliary Service Market
Power system auxiliary services refer to services provided by power generation enterprises, power grid enterprises, energy storage facilities, electricity users participating in market-oriented transactions, aggregators, virtual power plants, and other third parties to maintain the safe and stable operation of the power system and improve power quality, in addition to normal power production, transmission, and use.
Division of responsibilities for the construction of power auxiliary services in China:
The dispatched agency of the National Energy Administration: The dispatched agency of the National Energy Administration is responsible for the management of power auxiliary services in the region, organizing the construction of a power auxiliary service market, and organizing power grid enterprises and grid connected entities to determine the compensation standards or price mechanisms for power auxiliary services.
Power dispatch agency: The power dispatch agency is responsible for the selection, invocation, measurement, cost calculation, data statistics, publicity, verification, and technical support system construction and operation of power auxiliary services in accordance with the implementation rules of power auxiliary service management and market transaction rules.
Power trading institutions: Power trading institutions are responsible for disclosing relevant assessment and compensation results to all market entities through information disclosure platforms, formulating information disclosure standard formats, and opening data interfaces.
Power grid enterprises: Power grid enterprises, power dispatch agencies, and power trading agencies settle fees with grid connected entities in accordance with relevant regulations and responsibilities.
The electricity auxiliary service market is a market-oriented mechanism that incentivizes market participants in auxiliary services.
At present, the product variety in China's power auxiliary service market is relatively complete, including basic auxiliary services, primary frequency regulation, basic peak shaving, and basic reactive power regulation; Paid auxiliary services include automatic generation control (AGC), paid peak shaving, paid reactive power regulation, automatic voltage control (AVC), rotating backup, hot backup, and black start. Each province has slight differences in products based on its own situation.
China has initially formed a regional and provincial-level auxiliary service market system with trading varieties such as peak shaving, frequency modulation, and backup as the core.
The regional auxiliary service market mainly focuses on regional peak shaving auxiliary services, achieving the sharing and mutual assistance of peak shaving auxiliary service resources within the region, effectively improving the absorption capacity of regional power grids for new energy.
North China, East China, Central China, Northeast China, and Northwest China have all officially operated regional peak shaving auxiliary service markets, while Southwest China officially launched the Sichuan Chongqing integrated power peak shaving auxiliary service market in July 2022; At the same time, the southern region has further explored the regional FM auxiliary service market, which has officially started operation in April 2021. It has achieved unified rules, centralized declaration, and collaborative clearance of FM auxiliary services in the southern region, and achieved large-scale optimization and allocation of FM auxiliary service resources in the southern region.
The provincial-level auxiliary service market mainly provides peak shaving auxiliary services and frequency modulation auxiliary services. Except for Tibet, all other provinces within the State Grid operating area have already carried out auxiliary service market operation or trial operation, including participating in peak shaving auxiliary services (including regional peak shaving); Seven provinces, including Shanxi, Shandong, Jiangsu, Zhejiang, Fujian, Gansu, and Sichuan, have carried out FM auxiliary services; Jilin and Heilongjiang have simultaneously established provincial backup auxiliary service markets.
02 Policy based guidance for energy storage to participate in the auxiliary service market
At present, the main body of China's electricity auxiliary service market is power generation enterprises, mainly thermal power plants, followed by hydropower plants. Electrochemical energy storage has enormous application space in the electricity auxiliary service market due to its advantages of high flexibility, fast response speed, small environmental resource constraints, large space for technological progress, and high synergy with new energy. In the future, with the transformation of China's energy structure, the maturity of the electricity market, and the reduction of energy storage costs, electrochemical energy storage will unleash enormous potential.
According to calculations by Dongfang Securities, the global energy storage demand driven by grid side frequency regulation demand in 2025 is 6.9 GWh, with a compound growth rate of 65.7%. The energy storage demand generated by grid side peak regulation demand is 20 GWh, with a compound growth rate of 31.3%.
With the further deepening of electricity market reform, the electricity auxiliary service market has become a hot and key focus of reform. With the National Energy Administration as the core, the six major regional regulatory bureaus have successively issued two implementation rules for auxiliary services, encouraging and allowing energy storage to participate as an independent entity in the electricity auxiliary service market.
In 2021, the National Energy Administration issued the "Regulations on the Management of Grid Connected Operation of Electric Power" and the "Measures for the Management of Electric Power Auxiliary Services", clarifying that the providers of electric power auxiliary services include thermal power, hydropower, nuclear power, wind power, photovoltaic power generation, pumped storage, new energy storage, and other grid connected entities that can respond to scheduling instructions, including adjustable loads aggregated through aggregators, virtual power plants, and other forms.
In August 2022, two detailed rules in the East China region clearly stated that energy storage can participate in auxiliary services such as primary frequency regulation, AGC, peak shaving, and reactive power regulation; In September, two draft rules for soliciting opinions in the North China region stipulated that the power generation side grid connected main body, load side grid connected main body, and new energy storage can participate in auxiliary service categories such as active power balance, unrelated peace, accident emergency response and recovery, while new energy distribution and independent energy storage cannot temporarily participate in peak shaving auxiliary services.
Provinces and cities such as Fujian, Shanxi, Hubei, and Gansu have also introduced policies allowing independent energy storage to participate in the auxiliary service market.
In terms of auxiliary service varieties, in June 2022, Shanxi issued a notice on the Implementation Rules for Shanxi Electric Power Primary Frequency Regulation Market Transactions (Trial), which pointed out that new energy enterprises are encouraged to purchase primary frequency regulation services from independent energy storage operators through bilateral negotiations and transactions, which is a local policy officially issued nationwide for the participation of new energy storage in primary frequency regulation paid services. In August 2022, Yunnan released the "Trading Rules for Yunnan Black Launch Assistance Service Market (Draft for Soliciting Opinions)". The document specifies the technical conditions for electrochemical energy storage black start, preparation for black start, self start, start-up of power generation equipment, and requirements for restoring substation power supply.
In terms of energy storage compensation standards, there are two forms: fixed compensation and market-oriented compensation. Fixed compensation generally obtains benefits according to the standards specified in the implementation rules of the provincial power auxiliary service management, while market-oriented compensation obtains market-oriented benefits according to the operating rules of the regional auxiliary service market.
03 Future Power Auxiliary Service Market Scale
In the future, the scale of the electricity auxiliary service market is expected to expand, reaching 171 billion yuan by 2025 and 1980 billion yuan by 2030. According to the National Energy Administration, the current market size of auxiliary services accounts for about 1.5% of the total electricity bills in society, and it is expected to reach over 3% in the future and continue to increase with the large-scale integration of new energy.
According to predictions from China Electricity Union and the National Energy Administration, the total social electricity consumption is expected to reach 9.5 trillion kWh and 11 trillion kWh in 2025 and 2030. Assuming that the electricity price maintains the national average selling electricity price of 0.6 yuan/kWh in 2018, based on international experience, the proportion of auxiliary service fees to the total social electricity consumption cost is taken as 3%. The market size of auxiliary services will reach 171 billion yuan and 1980 billion yuan respectively in 2025 and 2030.
Source: International Energy Network/Energy Storage Headlines
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