As ten Chinese provinces eliminate the time-of-use electricity pricing approach, the peak-valley arbitrage model that has long supported the energy storage sector has unraveled, pushing companies to explore alternative strategies.
The removal of fixed-rate pricing will have immediate implications for the peak-valley arbitrage strategy used in industrial and commercial energy storage. According to Liu Yang, deputy general manager of Poweroad Renewable Energy Technology, fixed price calculations will lose their effectiveness, heavily impacting market players who lack the capability to anticipate fluctuations in electricity demand and prices. Those unable to adapt quickly are likely to face significant challenges or exclusion from the market.
Recently, Anhui, Henan, Hubei, Liaoning, Shaanxi, and five other provinces announced that entities involved directly in electricity trading would no longer be subject to fixed time-of-use pricing schedules starting in April. This move follows new regulations introduced last December by the national development agency and other governmental bodies, which came into effect in March.
Traditional fixed time-of-use pricing divides the day into peak, off-peak, and valley periods, assigning different electricity rates to encourage consumers to reduce consumption during busy hours and increase it during low-demand times. This system historically enabled energy storage operations to buy electricity during low-cost periods and sell during high-demand times, creating arbitrage opportunities.
Energy storage systems can also contribute to ancillary services markets, earning revenue through peak shaving and backup power solutions, according to Xinnuo New Energy Technology. Additionally, they can supply continuous power and voltage support to critical infrastructure like data centers and high-precision manufacturing plants, generating income termed as ‘reliability insurance.’
“In the future, utilizing energy storage to transfer inexpensive photovoltaic-generated electricity during specific times may become a standard industry practice,” commented Yang Xiaoguang, deputy general manager of Hoenergy Power Technology. Integrating storage with renewable energy plants can help mitigate the variability of wind and solar outputs, facilitating greater integration of renewables into the energy mix,” he added.
As the electricity market develops and price signals more accurately reflect supply and demand, the energy storage market in China is anticipated to grow more swiftly over the next two to three years, Liu forecasted.