Behind‐the‐meter energy storage in China: Lessons from California's approach

Abstract

AbstractBehind‐the‐meter (BTM) energy storage creates benefits for a large number of stakeholders, enhancing system operation, and mitigating the increase in peak demand, as well as offering potential income from arbitraging peak/off‐peak electricity tariff differentials, mitigating demand charges, and other ancillary service sources. The United States and China are among the leaders in development of energy storage, but these two countries are at different stages in terms of the storage policy landscape. The US system of federalism enables state‐level policy reform, and California has been leading the country for more than a decade with policy instruments addressing BTM storage. These policy instruments include procurement targets, financial incentive plans, as well as regulatory adaptations. Under China's centralized pattern of energy governance, the deployment of new technology largely relies on signals from the national level. The first standalone national‐level policy for energy storage was released in 2017, but major market barriers remain. This review draws insights from the experience of California, whose partially deregulated power market is relevant for China's ongoing market reform. In order to investigate whether the country's current market environment provides adequate opportunities for investors, this review outlines an investment analysis assessing the economics of BTM storage in China with different revenue sources. Results show that traditional revenue sources for BTM storage, namely price arbitrage and demand charge reduction, are inadequate to recover costs for investors in China. The review thus proposes policy recommendations for regulators in China aiming to further promote the deployment of BTM energy storage.This article is categorized under: Energy Infrastructure > Economics and Policy Energy Infrastructure > Systems and Infrastructure Energy Systems Economics > Economics and Policy