Addressing Profitability Hurdles in Energy Storage
In early November, a significant push will be made to expand demonstration application scenarios, aiming to enhance both power supply and grid-side energy storage applications while also diversifying user-side energy storage solutions. Recent visits to various projects across China reveal a landscape rapidly progressing towards integrating renewable energy with advanced storage methods.
One noteworthy initiative is the 150MW Agricultural and Fishery Photovoltaic Complementary Project in Shiheng Town, Feicheng, Shandong, developed by Trina Solar. Alongside this ambitious solar project, a second phase of energy storage, the Feicheng Energy Storage Power Station, demonstrates a quintessential example of a power-side integration application, merging solar energy generation with energy storage systems.
As policies unfold across several provinces enforcing strict energy storage mandates for photovoltaic projects, some regions provide attractive subsidies to boost development. Industry experts frequently voice concerns regarding the profitability of solar-storage projects in China, prompting many developers to weigh the added costs of energy storage options during the bidding process. This cost-sensitive approach has, unfortunately, led to price competition and market saturation among storage manufacturers. Industry insiders suggest that to surmount these challenges, there must be innovative expansions into downstream solar-storage scenarios to deliver enhanced user value.
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Maximizing the efficiency of photovoltaic power stations will be paramount in this endeavor. During my visit, it was clear that the site for the Trina Solar project was a previously mined subsidence area, creatively transformed into a dual-purpose landscape featuring a model of agriculture under solar panels paired with aquaculture below, combining underwater fish farming with floating photovoltaic panels. This synergy is designed not only to reclaim land but to optimize land use for sustainable energy production.
Utilizing Trina Solar's top-tier 670W series components facilitates a reduction in cost per kilowatt-hour and ensures a profitable return for investors. Nearby, the Feicheng Energy Storage Power Station employs the Elementa series liquid-cooling energy storage system, integrating core components such as battery cells and storage controllers—all designed in-house by Trina Solar. This design includes additional safety measures such as AI-powered battery monitoring and comprehensive fire prevention systems, which assure safe and reliable energy management.
Wang Sen, head of marketing for Trina Solar's energy storage division, emphasized the importance of in-house capabilities for both battery cells and power conversion systems (PCS) as these are critical for the success of energy storage projects. So, how does a solar-storage power station like Trina’s stand out compared to traditional photovoltaic facilities? Through a robust integration of storage capabilities, the project addresses issues common to solar energy, such as curtailment by adjusting energy output efficiently, thus enhancing the overall utilization of solar power.
The Trina Energy Storage Power Station can also meet the grid's demand for frequency regulation, granting additional support to maintain stability within the energy network. By using a unified energy management cloud platform, Trina Solar can deliver real-time dispatch and intelligent control, aligning solar generation with energy storage in an optimal configuration. This not only boosts the efficiency of renewable energy use but also stabilizes the power supply for critical infrastructure.
Notably, leading photovoltaic manufacturers are increasingly entering the energy storage arena, developing integrated solar-storage solutions. However, the unique characteristic of the Feicheng initiative is the total supply of solar panels and storage systems coming from a single manufacturer, enhancing the operational efficiency of the project. Wang Sen highlighted that aligning all services under one team minimizes the communication burden on the client, from initial consultations through after-sales service.
The need for a comprehensive solution doesn’t end with product integration. Trina Solar offers a holistic intelligent solution spanning the design, construction, and operational management of projects. Their global engineering service centers supply a diverse array of project solutions, ensuring systems operate safely throughout their lifecycle. They also focus on crafting a "closed-loop" localized service support plan, guaranteeing rapid responses to customer inquiries and efficient resolution of issues.
Moreover, as a strategic response to foster various application scenarios for integrated solar-storage systems, Trina has proposed systemic solutions to facilitate the successful implementation of innovative projects. Constant technological improvements enable Trina to enhance product efficiency while concurrently slashing production and implementation costs. The goal is to innovate around solutions that address unique application challenges while broadening the scale of renewable energy utilization.
Investor enthusiasm for demonstration projects remains high, with nearly 40 local governments establishing policies that specify energy storage requirements for photovoltaic deployments. Most regions mandate that energy storage capacities represent between 5% to 30% of installed capacity, primarily requiring configurations from 2 to 4 hours, though some areas allow for as little as 1 hour. Furthermore, detailed requirements for distributed solar-plus-storage projects have emerged.
While there is a clear advantage in enhancing solar utilization through integrated storage, concerns persist regarding the profitability of solar-storage sites due to significant upfront costs. For instance, the project in Feicheng is owned by the State Power Investment Corporation, which stands to gain by configuring a higher ratio of storage relative to solar capacity, thus securing faster approval for renewable energy indicators and enhancing grid interconnection speed.
Currently, the revenue model for energy storage facilities primarily revolves around grid ancillary services, such as peak shaving and frequency regulation, supplemented by external leasing opportunities. An anonymous industry expert pointed out that independent energy storage systems in China face several obstacles, notably due to the lack of a clearly defined pricing framework based on a fair competitive market for energy storage. Despite ongoing calls for market-oriented reforms in the energy sector, the inherent monopolistic nature of the grid poses significant challenges to achieving market liberalization akin to established systems in Europe and California.
Despite the hurdles, there are positive signals of change. Another industry analyst voiced optimism, noting that recent policies are beginning to guide China's energy market toward a more market-driven structure; even while profit challenges remain, bundling solar and storage projects to optimize economic viability aligns well with the evolving energy landscape.
This brings about the question of which customers or regions are more inclined to invest in solar-storage integration projects amidst the continuing economic pressures. Analysts indicate that customer willingness to undertake solar-storage projects, particularly on the user side, has strengthened significantly due to decreasing equipment costs. Scenarios such as user-side solar-storage charging stations, zero-carbon factories, and microgrids are gaining traction. Additionally, state-owned enterprises have shown a keen interest in developing demonstration projects.
Therefore, it’s become apparent that a strategic focus on identifying high-potential downstream application sectors will be crucial for the scaled development of solar-storage integration, delivering both social and economic benefits. Trina Solar has earmarked several target areas for future growth, including microgrid solar-storage projects in remote areas, exploring hydrogen and ammonia production opportunities, and capitalizing on the burgeoning green computing sector driven by advancements in AI and high-performance computing centers.
Furthermore, recent action plans emphasize the importance of diversifying user-side energy storage applications, which include developing new storage solutions for data centers, intelligence computing facilities demanding high reliability and energy quality, and encouraging the establishment of microgrid systems. The promotion of comprehensive charging and swapping stations supporting the interaction between electric vehicles and energy storage is also prioritized.
As the energy storage market has become increasingly competitive, industry experts highlight the declining prices of storage products, often leading to a price war reminiscent of previous challenges faced in the photovoltaic sector. Some leading manufacturers are offering storage products that previously had a warranty of 15 years at prices as low as 0.6 RMB per watt-hour, while smaller integrators attempt to cut costs by reducing warranty periods or opting for different brands of battery cells.
The ongoing price competition in the storage sector stems primarily from limited profitability and homogenization of products. An anonymous industry expert indicated that while it’s typical for product prices to drop as a market matures, energy storage projects face distinct economic challenges requiring both power supply and grid-side systems to focus intensely on cost reduction strategies.
Should suppliers provide only standardized products, price competition will likely persist for an extended period. Currently, domestic storage market conditions are particularly volatile, with the potential for these pricing pressures to extend to international markets as well. Essentially, if every vendor's offerings are identical, clients are more inclined to choose the least expensive alternative.
International developments present various scenarios. For instance, the European and North American markets share similar trends, while markets in the Middle East and Africa exhibit stark contrasts. In the South African market, extreme low-price competition has led to concerns regarding product quality, resulting in diminishing warranty periods and increased safety risks.
To navigate these challenges, Wang Sen emphasized the need for a diversified solution approach tailored to the unique economic conditions facing solar-storage projects. The goal is to demonstrate the economic viability of these applications, thus enhancing customer receptiveness to investment in energy storage systems.
As a case in point, Trina Solar is exploring the downstream application scenarios and values while developing differentiated solutions. They are presently engaged in various demonstration projects, such as microgrids and green hydrogen production projects, and actively seeking solutions for hydrogen-based ammonia and alcohol production.
While the price war within the domestic energy storage sector may continue, experts warn it might compromise product quality. However, they also argue that these issues are not entirely synonymous since advancements along the product value chain continue to enhance the overall maturity of the storage supply chain. Both centralized and decentralized customers are increasingly vigilant to the operational risks associated with their equipment providers, leading many to prefer reputable brands.
Notably, major state-owned enterprises have begun reassessing bidding practices for energy storage projects to temper the low-price competition dynamics. Some bidding requirements now mandate a minimum registered capital, while performance benchmarks set higher thresholds for potential suppliers, effectively filtering out smaller firms from the bidding process.
As experts have pointed out, conditions will tighten further as clients seek verifiable research and development capabilities. Major projects often mandate that critical components like PCS, BMS, EMS, and battery units derive from the supplier’s own R&D efforts rather than being wholly externally sourced.
Overall, future industry standards are likely to reflect stringent qualification criteria, exemplified by changes spearheaded during collective procurement phases by entities like the Inner Mongolia Energy Group, which have now introduced performance benchmarks for bidders. As the industry undergoes fierce competition, a risk of significant operational challenges faces smaller firms, further underlining the rationale behind state-owned enterprises prioritizing quality in their supplier selections rather than relying solely on pricing considerations.