Behind the meter energy storage represents an opportunity to generate extra revenues and reduce the local power’s carbon footprint

Guangdong’s largest BTM Energy Storage System was put in operation

The largest LFP electrochemical BTM project in Guangdong, with a total capacity of 9.5MW/19.14MWh, was recently put in operation in Foshan. The system’s total charge /discharge volume can reach 32.3 MWh per day. The energy storage system was built for Foshan Innolux Optoelectronics Ltd., a leading TFT-LCD manufacturer in South China invested by the Guangdong Power Grid Energy Investment Company. It will serve the daily operation of Innolux, by taking advantage of the peak/valley price gaps in Guangdong and generating revenues by participating in the Demand Side Response (DSR) ancillary services market in Guangdong. The project is expected to generate revenues of over 5 million CNY per year for Foshan Innolux. At the same time, the new infrastructure will help provide peak regulation, alleviating the pressure of the local distribution network.

Generating revenue with behind the meter energy storage solutions

Guangdong’s latest TOU tariff table shows that the price gaps for peak/shoulder/valley hours are 1.7:1:0.38, which means the electricity tariff of peak hours is 4.5 times larger than that of the valley hours. Besides, Guangdong also has 3 hours of critical peak hours every day from July to September during the province’s hot season. The critical peak tariff is 25% higher than the peak tariff, which means the critical peak/valley electricity price ratio can reach a vertiginous 5.6:1. The TOU tariff is universally imposed on all industrial power users excluding those with regulatory exemptions.

In practice, if we use a Virtual Power Plant (VPP) – a digital platform to connect and manage multiple units of a single type of asset (such as a battery or a device in a demand response program), or a heterogeneous mix of assets, the business value can be much greater than a simple arbitrage of TOU tariffs. China’s recent campaign to build a New Power System suggests that remarkable business opportunities exist for new energy services providers such as VPP and independent energy storage operators. On March 2021, Guangdong Energy Bureau issued a Market-based DSR Trading Implementation Plan. Big power users and power aggregator (e.g. VPP aggregating resources such as interrupted power load, demand side ESS, distributed power, EV charging, etc.) can participate in the DSR market by reducing power load on a voluntary basis. The financial settlement will be based on system marginal price (i.e. universal settlement price decided by the system for all market players).

Regarding the case of Foshan Innolux, the company can benefit from the DSR financial compensation while resuming their production activities with the help of on-site ESS. According to the D-1 DSR market transaction organized in May 2021, the system marginal price closed at 4500CNY/MWh.

Furthermore, certain qualified “grid-controlled adjustable power load over 30MW” – VPP or big power users, can provide peak and frequency regulation services in the power ancillary services market. According to the newly released Southern Region Power Ancillary Services Parameter (draft for consultation), such market players can receive a financial compensation of 1584 CNY / MWh by providing peak-shaving services in Guangdong (直控型可调节负荷的调峰(削峰)辅助服务调节 电量按 2×24×R5 进行补偿, R5=33) and 792 CNY / MWh by providing valley-filling services (直控型可调节负荷的调峰(填谷)辅助服务调 节电量按 24×R5 进行补偿, R5=33). At the same time, it will also be possible for these market participants to provide other ancillary services such as frequency regulation, APC (Automatic Power Control), etc. for extra revenue.

Certainly, the Chinese government and grid companies have several strict requirements regarding technical and safety parameters and contractual conformity (e.g. deviation evaluation) for future market participants in the power ancillary services market. However, the gradually maturing Chinese power market is opening a new chapter for the Behind-the-Meter side users and service providers. Power affordability, security, and low emissions are achievable for those who stay close to the fast-developing power market in China.

(NEA Southern China Region, Energy Storage Net)

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