Energy storage profit is difficult, Will shared energy storage become a breakthrough? What does Stor

Shared energy storage is an independent energy storage power station built by a third party and leased to the demander in the form of capacity lease. Shared energy storage provides a more flexible new way of energy storage supply, and capacity lease payment is considered to be an effective business model. However, the author believes that the profit dilemma of new energy storage lies in the mismatch between its high cost and various market pricing mechanisms. As the evaluation of storage efficiency becomes more focused on actual operational performance, the benefits of shared storage will depend on the value for money paid by end users. Without the rapid reduction of costs or the support of new supportive policies, it is difficult to truly realize the closed-loop business model.

The advantages of shared energy storage

"Shared energy storage" refers to a large independent energy storage power station invested and constructed by a third party, which rents out all or part of its capacity to new energy power stations and other demand parties to obtain rental income. With the rapid increase of the penetration rate of new energy, the flexible resources of the power system are more and more insufficient. In order to make new energy have stronger regulation ability, all provinces and cities in our country have taken the configuration and construction of energy storage as a pre-condition of new energy grid connection or approval. Although the mode of intensive distribution of new energy storage has promoted the growth of new energy storage, the development mode of heavy grid-connection and light operation has brought about problems such as increased investment in new energy, low quality of energy storage equipment and unsatisfactory actual operation effect, which deviates from the original intention of new energy storage to serve the operation of power system.

New energy self-storage has caused widespread controversy in the industry, and the builders of new energy power stations hold a wait-and-see attitude on whether to build self-storage. In this case, the leasing of third-party energy storage to meet the needs of the grid has emerged, and the mode of shared energy storage has gradually emerged. In theory, shared energy storage has the following advantages:

The first is to build scale advantage. For small and medium-sized new energy power stations, self-built energy storage is relatively dispersed, while shared energy storage has better scale advantages. Through large-scale procurement and standardized construction, the cost of energy storage stations can be reduced and the quality of energy storage projects can be improved. At the same time, it is easier to be incorporated into the power system dispatching operation. The mode of shared energy storage is conducive to the promotion of independent energy storage, and it is easier to form the standardized design, construction, maintenance and operation of energy storage power stations, so as to promote the unification of technical standards.

Second, a flexible and win-win business model. At present, the state encourages new energy enterprises to build or purchase energy storage peak load balancing capacity to fulfill the consumption responsibility, but the allocation ratio and mandatory standards are not uniform across the region. Capacity leasing seems to be a more convenient and flexible way to build new energy power stations. Shared energy storage can also effectively solve the problem of mismatching the timing of self-built energy storage of some new energy power stations or the high cost of self-built energy storage.

The third is to reduce the investment risk of the lessee. Similar to a mode of operating lease or financial lease, shared energy storage provides a financing means for the lessee, reduces the lessee's investment risk and avoids certain technical and engineering construction risks.

Is the basic business logic for shared energy storage sound?

For a long time, the cost difference of new energy storage has been a major problem hindering the development of the industry. Shared energy storage seems to be an effective way to solve the revenue source problem by leasing capacity for rent. The Implementation Plan of the 14th Five-Year Plan for the Development of New Energy Storage also proposes to explore and promote the mode of shared energy storage, encourage new energy power stations to configure energy storage by means of self-construction, lease or purchase, and give full play to the shared role of one-station energy storage. Provinces have also emerged a number of shared energy storage projects for the record, continuing to promote the energy storage construction boom.

However, a careful analysis of the business model of shared energy storage shows that compared with self-built energy storage, the first is to introduce the third-party investment to achieve more flexible capacity sources for the lessee; Second, some regions share energy storage temporarily to obtain capacity lease, participate in the power market income superposition. However, in addition to the difference between investment and income stream, the shared energy storage project itself cannot solve the problem that the current market income of energy storage cannot cover its cost, and the shared energy storage model does not realize the closed loop of the business model.

1. How does the tenant pay?

Tenants share storage capacity and still pay based on the true value of the storage, or the overall benefits of the storage. Only when the comprehensive benefits of leasing energy storage capacity are greater than the rent will the tenant choose to share energy storage, thus returning to the origin of the energy storage business model. There are two possible ways for a lessee to assess the overall benefits of storage. First, if the lessee must realize the grid-connection of the new energy power station by obtaining the energy storage capacity, the cost method can be used to calculate the comprehensive benefits; Second, the lessee does not require a mandatory storage configuration. Instead, the revenue method can be used to calculate the comprehensive benefit when the lessee makes a profit by leasing the shared energy storage capacity (such as the virtual power plant operator).

For the former, when the cost method is adopted, the lessee will compare the cost of self-construction with the lease fee of shared energy storage. Only the third party has strong cost control ability in equipment purchase and engineering construction, which makes the cost of shared energy storage power station significantly lower than the cost of the lessee's self-built energy storage. At the same time, it has certain advantages in the competition among the same type of shared energy storage investment enterprises. However, the enterprises with such capability mainly include battery manufacturers and energy storage integrators, while the general investment platform companies do not have such advantages.

For the latter, when the income method is adopted, the new energy storage will participate in the auxiliary service of frequency modulation and peak regulation with its available capacity, or obtain profits through spot market trading. Some provinces (such as Shandong and Henan) have introduced capacity compensation mechanism, so that new energy storage can obtain certain capacity compensation benefits. However, according to the author's previous analysis, due to the low capacity compensation standard and auxiliary service fee standard, and the spot market is faced with large profit risks brought by the charge-discharge price difference and the uncertainty of peak-valley period, overall, the comprehensive income of new energy storage in various markets cannot cover its cost. This also fundamentally leads to the loss of the status as an independent accounting unit of new energy storage, whether it is self-built or shared, leading to a decline in investment intention.

To sum up, although shared energy storage provides a certain degree of flexibility for the lessee, the lessee can still pay the lease fee according to its value. This mode cannot amplify the market returns of energy storage, so it is fundamentally difficult to solve the business model problem of energy storage. The same is true in reality. According to relevant reports, due to the lack of pricing mechanism, there is no guide price for reference, lessor and lessee have certain differences in the value of shared energy storage capacity, resulting in a low actual rental rate of shared energy storage.

2. Other problems caused by shared energy storage

In addition, shared energy storage is similar to contract energy management, which can make the business model more complicated:

First of all, higher requirements are put forward for the comprehensive benefits of the project. Shared energy storage projects need to have excess returns (either relative cost savings or real money earned through the market), and leaser and lessee can share the excess returns to make the business model sustainable.

Second, shared energy storage mode may bring many intermediate risks, the first is the rental risk. Insufficient or discontinuous leasing will dramatically increase the risk of shared energy storage investors; At the same time, there may be more disputes between the lessor and the lessee in the business relationship, such as the credit risk caused by the lessee's ability and willingness to pay, and the security risk caused by the unclear asset management interface.

3. The connection in the operation is complicated

New energy station self-built energy storage and main station integration. Energy storage can improve the primary frequency modulation capacity, secondary frequency modulation capacity, power prediction capacity and voltage regulation capacity of the new energy station. It can be operated jointly with the new energy station to meet the increasingly strict requirements of "two regulations". However, due to the physical separation of shared energy storage lease capacity, it is difficult to achieve coordination in terms of rapid regulation ability, and its effect is inevitably lower than that of self-built energy storage.

Is the overlaying of capacity lease costs and operating income sustainable?

The purpose of developing new energy storage is to play a regulating role in the operation process, improve the absorption capacity of new energy, and provide capacity support and emergency backup for the power system. Paying for performance is extremely important. However, in the existing new energy storage methods, the new energy storage configuration is taken as the threshold of grid connection, and the supervision and assessment of its operation effect has not been formed, resulting in insufficient operation effect of energy storage configuration and resource waste.

At present, the separation of grid-connected capacity and operation effect brought by new energy intensive distribution of energy storage makes shared energy storage realize the superposition of benefits in many places. On the one hand, capacity leasing can meet the grid-connection threshold of energy storage configuration of new energy stations. On the other hand, shared energy storage still retains the benefits of participating in the ancillary services market or the spot market, achieving "one fish for more". However, this obviously distorts the original intention of developing new energy storage, because the reason why energy storage with a certain proportion of new energy allocation is allowed to obtain grid-connection qualification is that the allocated new energy storage can increase the absorption capacity of corresponding new energy power stations in the operation process, and the construction and operation cannot be separated.

With the attention paid to the low effective utilization rate of energy storage, the separation of grid-connected capacity and operation effect will gradually reverse. In May 2022, the National Development and Reform Commission and the Energy Administration issued the Notice on Further Promoting the Participation of New Energy Storage in the Electricity Market and Dispatching Operation, which put forward higher requirements for the dispatching operation of new energy storage, and proposed that on the basis of the new Regulations on the Management of Grid-Connected Power Operation and the Administrative Measures for Auxiliary Power Service, Local governments should promptly revise and improve the implementation rules for the management of grid-connected operations and auxiliary services that accommodate the participation of energy storage, and encourage energy storage to play a positive role in peaking and valley filling and optimizing power quality. Energy storage projects should improve the technical support system in the station, and upload real-time charge and discharge quantity, state of charge and other operation information to power grid enterprises. Projects participating in power market and dispatching operation should also have the ability to accept dispatching instructions.

After the improvement of the energy storage operation mechanism, with the improvement of the grid-connected operation requirements of new energy power stations, the payment of shared energy storage by new energy leasing will include its operation effect, and the pure capacity lease serving the grid-connected new energy will eventually exceed the service of the overall operation of the lessee. This model can be compared with the pumped storage capacity leasing model of power grid enterprises.

On this basis, the model of revenue stacking (including not only the lessee's capacity leasing fees but also the operating income from ancillary services or spot markets) is unsustainable. Some documents issued by some provinces have surfaced recently. For example, the recently released Interim Rules for the Market-oriented Operation of Power Auxiliary Services in Gansu Province (draft for Comments) stipulates: "After signing a lease capacity with a new energy company, the remaining capacity of its energy storage facilities can participate in the peak capacity market trading under the condition of independent operation with the lease capacity." Only the surplus capacity beyond the leased capacity can participate in the market to obtain profits, and the leased capacity should serve the operation needs of the lessee.

In summary:

Shared energy storage has realized the innovation of investment mode and provided more flexible energy storage supply for the market, but it has not effectively solved the problem of new energy storage profit model. The fundamental reason is that it only relies on the market nature of energy storage, and its excessive cost cannot be recovered under the current electricity market environment. At the same time, simply from the single function of peak regulation, frequency modulation, transmission, energy storage will be replaced by thermal power depth regulation, controllable load, electric vehicles and other cheaper regulatory resources. If the entry of new energy storage system depends entirely on market competition, it still needs to rely on the substantial reduction of the cost of new energy storage and the continuous improvement of the technical level.

On the other hand, the construction of new power systems has a more urgent demand for energy storage, and it is more important to create a good policy environment for the development of energy storage industry. Reasonable understanding energy storage in the function orientation and the value of the new power system, the push to formulate reasonable supporting policies and pricing mechanism, promote the implementation of grid side electricity price details, such as alternative energy storage capacity building to manifest the value of new energy storage and the cost of economic attribute distribution mechanism, is a new energy storage at this stage to mature and expand the necessary condition!