Views: 342 Author: Ubest Publish Time: 2023-10-03 Origin: Site
Currently, industrial and commercial energy storage in China is receiving high praise and developing robustly. While the market scale is advancing by leaps and bounds, factors such as economy, safety, and policy variability persistently exist, hindering the industry's healthy and sustainable development.
We have summarized the following seven impending challenges that industrial and commercial energy storage may encounter for your reference.
The leading logic for the current profit model of domestic industrial and commercial energy storage is based on peak-valley arbitrage under time-of-use (TOU) electricity pricing.
TOU pricing is typically determined by macroeconomic policies, the shift of which is almost unpredictable for end electricity users. This unpredictability results in many business owners adopting a wait-and-see approach when purchasing equipment. Current economic models for commercial energy storage projects primarily rely on existing TOU pricing mechanisms. Given the 10-year warranty and the 15-year design life of commercial energy storage cabinets, whether the TOU pricing in place at the time of project construction will continue throughout the lifecycle of the project is a significant unknown. Energy storage does not have a deterministic profit model similar to distributed photovoltaics for calculating long-term returns.
Uncertainty of Peak-Valley Electricity Prices
(1)Short-term electricity price uncertainty may be linked with temperature changes.
(2)Long-term uncertainty might stem from how the spot-price on the wholesale side is transferred to the retail contract price after the future marketization of electricity. This situation could result in variances in electricity prices, pricing periods, and methods of handling deviations agreed upon in the annual sales contracts signed by each power company and electricity user.
(3)In the medium and long term, there's significant uncertainty linked to possible policy alterations in peak-valley periods and peak-valley electricity prices. For example, in some areas, electricity peaks occur at 23:00 due to concentrated electric vehicle charging. Consequently, there could be upward pressure on electricity prices during this period in the future.
Industrial and commercial electricity users have significant uncertainty in their usage patterns. For example, a specific energy storage project may be designed to charge and discharge twice a day. However, the enterprise might have to run full-capacity night shifts for several months to fulfill rush orders, preventing complete charging of the energy storage system. This directly impacts the annual return rate. The uncertainty in user load (whether it increases or decreases, or the peak-valley periods of the user load curve change) is closely related to the ROI of the storage, and these risks cannot be avoided by locking in contractual time periods and prices.
Therefore, the energy storage system needs to acquire load-side data and dynamically optimize the Energy Management System (EMS). When the rules for time-of-use electricity rates are rewritten, equipment suppliers, such as EMS, need to reset operating strategies. How to define and standardize the charging method for subsequent upgrade services is still at an unclear stage. If the price difference between two charges and discharges is less than one block, it undoubtedly shakes the fundamental logic of the storage in the industrial and commercial sector.
3.Increasing Non-technical Costs
The continuous safety incidents in energy storage projects are leading to tighter construction requirements for such projects in various regions. Consequently, the non-technical costs of project construction are growing. For instance, additional costs such as firefighting facilities, extra station facilities, etc., can cumulatively increase the project cost by 0.2 yuan per Wh.
Current investment calculations for commercial and industrial storage projects often overlook various non-technical costs, which can easily get "out of control" during the specific execution of the project. However, as the industry continues to standardize, more guidelines will be issued, and non-technical costs will become transparent and gradually controllable.
The cycle times of a battery cell does not equal the cycle times of the entire system. There indeed lies a significant hidden risk here. Battery cell manufacturers might state the need for constant operation at 25°C and that it's challenging to distinguish responsibilities if this requirement is not met. However, is it practical to maintain a constant 25°C environment? There certainly needs to be a range.
Another crucial point is about tracking every charge and discharge event. Can we record every single one, distancing battery cell manufacturers from the excuse that system integration issues are the cause? Simple parallel and series connections are manageable for anyone, but it's these connections that cause the bottleneck in the project, creating a very uncontrollable situation. We need to note every event now and continuously monitor the operating state of each battery cell – whether it is running healthily, in sub-health condition, or on the verge of entering a red zone. Proper system integration requires constant monitoring of each cell's state. How can we guide it back from sub-health to health? How can we balance and adjust the system online? Can you detect each battery cell?
Commercial and industrial energy storage in a way awkwardly sits between large-scale energy storage and home-use energy storage. Large-scale ground energy stations, due to their large size, have concentrated project commissioning, after-sales maintenance, and centralized management of spare parts. Project EPCs (Engineering, Procurement, and Construction) can hire local maintenance and inspection personnel, ensuring timely responses to maintenance needs, effectively protecting the owner's benefits. The maintenance cost incurred through the project's entire lifecycle spread over each Wh is minor and manageable.
Meanwhile, commercial and industrial energy storage cabinets belong to distributed energy storage in large amounts, scattered across various provinces in the country. Some industry practitioners even joke that the effort for a large-scale energy station equals the effort for hundreds of commercial and industrial storage projects. Still, you don't need to go through the process of commissioning and delivery station by station. A large-scale ground station may be completed within half a year, but it could take several strenuous years to get hundreds of commercial and industrial stations up and running. This is reportedly one reason why major investment funds hesitate to invest.
Both large-scale energy storage and home storage industries have accumulated over ten years of knowledge and experience. Unlike these, the commercially used storage cabinets circulating in the market have mostly not exceeded three years from production until now. Without extensive installation and long-term operational validation, the industry's common fault rate remains a taboo unknown within the sector.
Here, we define a profit model based on the price difference between peak and non-peak electricity demand as a strong profit model, while other profit models include applications like commercial and industrial photovoltaic energy storage, demand management, and demand-side response services, which are defined as weak profit models.
Commercial and industrial photovoltaic energy storage is inherently flawed. The typical application scenario for commercial and industrial users often exhibits a large electricity load during the day, which means that the photovoltaic power generated during daylight is almost entirely consumed instantly, so it's somewhat forced to posit a storage cabinet that stores excess photovoltaic power for future use. The logic of commercial and industrial energy storage coupled with photovoltaics seems more reasonable. However, the primary reason for the existence of commercial and industrial energy storage is currently the price difference between peak and non-peak usage. The starting point is not the logic of utilizing photovoltaics because of their lower cost compared to municipal electricity. The overall model's return cannot support the large-scale application of commercial and industrial energy storage.
Technical issues ultimately have technical solutions, but unstable market mechanisms, impetuous social attitudes, and misguided public opinion can turn a perfectly good industry into a slaughterhouse for short-sighted financial gains.
The development of any industry is inseparable from capital. There are two types of capital: one that allows industry and enterprises to grow healthily, and the other primarily aimed at making money. Some listed companies, especially, sometimes lose sight of their fundamental principles. In any industry, only brands driven by technological innovation can have longevity.
Energy storage is a highly complex engineering task involving electrical systems, power electronics, electrochemistry, computer hardware and software, the management of thermal runaways, handling of big data, and algorithm development for artificial intelligence, among others. It is a high-tech industry that is not easily accessed by just any company or capital venture claiming to charge into the energy storage market - it requires years of accumulated knowledge and depth.
Of course, enterprises need capital boosts for better development and research of new technologies. The question then revolves around the purpose of this capital injection - is it for the healthy development of the enterprise, or simply to make a quick buck and then withdraw? Some investors often look for companies that are switching to energy storage, and stocks see a rise. Capital has an exit mechanism; they enter when low and sell when high, with no real plan for the ultimate state of the energy storage project.
In the end, we hope for the lasting vitality of commercial and industrial energy storage, and let's explore the future together!