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China Turns to Energy Storage to Push Renewables

Provinces in the north of China wasted as much as 43% of their wind power in 2016. Investment in energy storage is seen as part of the solution (Image by Greenpeace / John Novis)

Despite another banner year for renewables growth in China, the country’s grid is still struggling to bring clean electricity to consumers. The problem is so serious in China’s north and west that turbines were forced to sit idle for much of 2016.

In response, China’s policymakers are now turning to energy storage to boost the grid’s ability to accommodate wind and solar power.

But significantly increasing the share of renewables will require big changes in how China operates the grid, raising questions about how much of a role energy storage will play in ensuring that renewable energy is not wasted through curtailment.

China’s energy storage push

Energy storage technologies – which include batteries, thermal storage, pumped hydro, and more – can help integrate wind and solar on to the grid by storing energy when power demand is low, and discharging power when demand is high. Energy storage adds flexibility to the grid, allowing renewables to generate power when they would otherwise be curtailed.

Recognising this value, China’s policymakers are planning a rapid expansion of the country’s energy storage capacity. To start, policymakers are calling for new construction of pumped hydro storage facilities, which store energy by pumping water uphill into reservoirs where it can later flow down again through turbines to generate electricity. The 13th Five-Year Hydropower Plan calls for an increase in pumped hydro storage from 23 gigawatts to 40 gigawatts by 2020 – about double the existing pumped hydro capacity of the United States.

The government is also promoting emerging energy storage technologies. In March 2016, the central government released a fifteen-year Energy Technology Innovation Action Plan calling for further research into advanced energy storage to support renewables integration, microgrid development, and electric vehicles.

One such demonstration project is already underway. In April 2016, the National Energy Administration approved the construction of a giant energy storage project in the northeast city of Dalian, where Chinese battery manufacturer Dalian Rongke is now building a 200-megawatt vanadium redox flow battery facility – a system so large that it will nearly triple China’s present grid-connected battery capacity when it is completed in 2018. Government planners hope that the system will help address renewable energy curtailment in the region, in addition to providing back-up power and other services.

Private investment

The country is also piloting new mechanisms to encourage private investment in energy storage. Until recently, battery storage companies have had few avenues for commercial success. Nearly all deployments have been small-scale demonstration projects or installations in places where electricity is particularly expensive, such as remote areas and island grids.

But in June 2016, the National Energy Administration (NEA) unveiled an energy storage compensation scheme in northern China, where wind and solar curtailment is most severe. The programme pays energy storage providers for storing energy at night for use during the day.

The mechanism works by taking advantage of an existing paid service normally provided by coal plants, called peak regulation. In northern China, coal generation is used to provide electricity during the day and to provide essential heating through district heating networks. Unfortunately, coal plants cannot be turned on or off easily and so must remain operating at night even when they’re unneeded. Although it’s less efficient, wind generators are asked to curtail power instead.

Currently, coal plants are compensated for having to ramp down power beyond a certain level. But instead of paying coal plants to not produce electricity, the new compensation mechanism pays energy storage to absorb excess power. This means fewer coal plants in operation, more efficient coal-burning in those coal plants that remain operational, less wind curtailment, and a financial saving for the grid.

Because China’s power sector is in a transition state, it is still unclear how compensation for storage will change in the coming years. Nonetheless, this mechanism is a strong indicator that policymakers are ready to put advanced energy storage to work.

Adapting the grid

Energy storage can do a lot to help integrate renewables on to the grid. But at low levels of wind and solar penetration, it’s not strictly necessary to prevent curtailment. Instead, optimising grid operations is the key to integrating solar and wind power. A US National Renewable Energy Laboratory study concluded that over 20% of electricity in the US could come from wind generation without significant curtailment or the need for energy storage. By comparison, wind accounted for only 4% of China’s electricity production in 2016, yet provinces with high deployments of wind generation like Jilin, Xinjiang and Gansu respectively wasted 30%, 38% and 43% of their potential wind output last year, according to the NEA.

Much of China’s curtailment challenge arises from institutional problems in its power sector planning and operations. Many of the practices that govern China’s grid today still prioritize coal as part of a planned economy rather than adapting to the needs of a diversified power sector.


This approach has tended to favor coal-fired generation at the expense of renewable generators. It has led to a mismatch between wind generation and transmission planning, which has left western wind farms sitting idle while waiting for transmission lines to be built to carry power to China’s demand centers in the east.

China’s approach to electricity dispatch has also Balkanized the country’s grids into provincial networks with inflexible means of balancing power supply and demand across the country.  At the moment, provincial governments are incentivised to dispatch power locally to support their tax base and oppose importing renewable energy from wind-rich provinces to protect the financial health of local fossil fuel generators.

Addressing these institutional barriers to clean energy integration is crucial to meeting the country’s air quality and carbon emissions targets.  Yet policymakers have found it difficult to implement the reforms needed to reduce curtailment. Although China introduced a new round of power sector reforms in 2015, some changes that would increase renewable energy utilization – such as optimizing power dispatch based on marginal cost – have been slow-coming.

Energy storage may be an attractive engineering solution to curtailment, especially as the prices of new energy storage technologies continue to fall, but given the political challenges it will remain one tool among many to help policymakers bring more renewables on to the grid.

Market barriers persist

But to make an impact, energy storage developers need the right investment signals and market reforms.

Despite the new storage compensation mechanisms in northern China, industry observers argue that China’s lack of electricity spot markets is hindering the widespread deployment of storage

“One important use of spot markets is to sell electricity at its true price as it changes with time,” writes Tina Zhang, secretary-general of the China Energy Research Society’s Energy Storage Committee.

These markets appear to be on the way: the 13th Five-Year Power Plan calls for pilot spot markets by 2018 and nationwide implementation by 2020.

But some observers contend that designing an effective spot market will be difficult. “China will face particular challenges in establishing competitive bidding in spot markets,” according to Wang Xuan and Max Dupuy, power sector reform experts at the Regulatory Assistance Project, a global NGO that advises governments on clean energy policy. “Institutions to support transparency, monitoring, and enforcement are somewhat lacking in capacity, and state-owned enterprises currently dominate the industry.”

This suggests that energy storage providers will have to wait before their products can make an impact on wind and solar curtailment in China.

Beyond addressing curtailment, energy storage may end up serving other roles in China’s future grid. Energy storage can help reduce the costs of upgrading transmission and distribution networks, provide back-up power and address small imbalances in supply and demand. In short, these technologies can create a more reliable, cost-effective, and clean grid.

But until the right policies and regulations are put into action, China’s renewables-friendly future remains remote.

This article was first posted here on the ChinaDialogue website. It is reposted with permission from the author and ChinaDialogue.

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China’s Impressive Clean Energy Progress Confronted by Emerging Challenges

Severe pollution levels in China are complemented by the rapidly growing presence of renewable energy infrastructure

Severe pollution levels in China are complemented by the rapidly growing presence of renewable energy infrastructure

The energy landscape in China is evolving rapidly. Dire environmental conditions throughout the country are complemented by the growing presence of renewable and efficient energy systems. This trend offers the vivid juxtaposition of a nation desperate to overcome its troubling present development stage through forward-thinking sustainable planning. The world’s second largest economy has also earned the status of the world’s worst polluter. Facing surmounting challenges, China seeks to revise its environmental trajectory, determined to smoothly and successfully transition from an overdependence on fossil fuels—particularly coal—to an embrace of clean energy.

Ambitious energy production and carbon reduction targetsoutlined in the recently released 13th Five-Year Plan indicate China’s serious desire to achieve a practical path to sustainability. With these goals in mind, the PRC government seeks to incorporate energy efficient technologies and investments into forthcoming urban development—an effort to withstand a slowing economy through innovative and sustainable systems that provide power for the masses at a reduced cost.

Beijing’s evolving reform of the Chinese economy intends for energy demands to sharply decline over the coming 20 years. This includes a concerted effort to significantly reduce dependence on coal—curtailing coal consumption to 0.2 percent annually during that period, following two decades of 12 percent annual demand growth. These plans vary by locality, as Eastern Chinese economic zones such as Beijing-Tianjin-Hebei (JingJinJi), Yangtze River Delta, and Pearl River Delta target major cuts, while lesser-developed regions in Central and Western China seek to control demand and accommodate gradual urban growth.

China’s NDRC and NEA recently announced the government has postponed construction of new coal-fired plants, while halting approval for new plants

China’s NDRC and NEA recently announced the government has postponed construction of new coal-fired plants, while halting approval for new plants

The government has demonstrated its commitment to these goals, as the National Development and Reform Commission (NDRC) and National Energy Administration (NEA) announced recently that China has halted plans for new coal-fired plants and postponed the construction of about 200 planned generatorsthroughout the country—forgoing roughly 105 gigawatts of environmentally unfriendly power production. This type of trend, though increasingly common in the US as a result of the Obama Administration Clean Power Program, is very new for China. The measures would suggest that Beijing has begun to take more thoughtful action around addressing the country’s egregious environmental situation—degradation that has had far-reaching global climate implications.

Meanwhile, China’s surging emphasis on clean energy offers accelerated natural gas production and imports, and will increase hydropower capacity by 60 million kilowatts. Nuclear power plants are under construction up and down China’s coasts, which will provide 30 million kilowatts in total capacity. China’s total wind power generation is expected to triple to 495 gigawatts of installed power capacity by 2030, compared to only 149 gigawatts in 2015. Already the world leader in solar capacity production, China added 15 gigawatts of new photovoltaic capacity in 2015.

China has also risen as a world leader in new energy vehicles, accounting for 40 percent of global sales in 2015

China has also risen as a world leader in new energy vehicles, accounting for 40 percent of global sales in 2015

Renewables, however, are only part of China’s growing efforts to incorporate efficient technologies into the broader national energy landscape. China has recently established itself as a world leader in new energy vehicles, as 2015 electric car sales reached 330,000—40 percent of the global total. Sales figures for the first quarter of 2016 are already double that of the year before, suggesting a continued surge in this trend. Seeking to reach five million electric vehicles by 2020, China’s local brands have invested nearly $6 billion over the past five years. During this period, manufacturers will strive to improve car battery durability and affordability, while increasing the number of charging stations, in a push to make new energy vehicles more accessible and desirable to the masses.

In addition to new electric vehicles, China is making strides in a variety of other clean energy technologies. A recent United Nations Environment Program (UNEP) report noted that China had built 10.5 billion square meters of energy saving buildings in urban areas through 2014. Last year, China began to require that at least 50 percent of new real estate projects comply with energy efficiency standards. Beijing, Shanghai, Tianjin, and Chongqing and other east coast provinces are promoting newly introduced green building standards, which focus on lighting, air conditioning, water heating, and other appliances—part of China’s broader eco-cities initiative.

China has shown strong interest in CCS technology development, as it tackles its vast pollution problems

China has shown strong interest in CCS technology development, as it tackles its vast pollution problems

Preparing for a 70 percent rate of urbanization by 2030, which will add 350 million people to the nationwide urban population, China outlined a wide range of infrastructure upgrades to public utilities, smart grids, smart transport, smart water supplies, smart land administration, and smart logistics in the 13th Five-Year Plan. This includes smart city-focused investments that exceed the $260 billion offered for these initiatives by the 12th Five-Year Plan. The Chinese smart grid market is expected to grow at a rate of 20 percent between now and 2020, the result of significant government investment. This includes plans announced in 2015 for $31 billion-worth of smart grid infrastructure in Xinjiang.

China has also shown leadership with carbon capture and storage (CCS) technology, which acquires carbon dioxide emissions from sources such as fossil fuel power plants and other large industrial plants, and stores this carbon underground. In many cases, these carbon dioxide emissions can be converted and then used to enhance production of oil and natural gas. With a wide range of projects underway, China has risen to number two in the world for CCS technologies. Many believe that China will be the location for the major CCS projects of the future.

China’s impressive efforts to assimilate renewables and other cutting edge efficient technologies into its broader energy expansion plans has demonstrated the ability for economically developing countries to play a prominent role in the global movement to combat climate change. Yet, while these trends are important and should be duly recognized, China’s prospects for accomplishing its lofty energy objectives depend on a number of uncertain factors—including potential obstacles.

Excess coal production in China, enabled by industrial overcapacity, has caused grid system operators to curtail renewables in order to satisfy coal generation quotas

Excess coal production in China, enabled by industrial overcapacity, has caused grid system operators to curtail renewables in order to satisfy coal generation quotas

Though China has risen to become the preeminent world leader in renewable energy investment—having committed $110.5 billion during 2015—limitations to energy infrastructure throughout the country are preventing proper integration of these systems into the larger national grid. Industrial overcapacity challenges continue to favor state-owned factories, as China’s official annual planning process is designed to ensure a minimum number of operating hours throughout the year for coal-fired generators. Seeking to meet this quota, system operators at grid companies most often curtail renewables to offset these coal-fired generation figures. Because generators are paid only when providing energy to the grid—guaranteed through a set price per kWh—there is no capacity payment for these generators. Making up more than 60 percent of total installed capacity and represented by longstanding influencers, the coal industry is resistant to concerted efforts to reform the current operating hour quota system.

These grid inefficiencies are disproportionately impacting the renewable energy sector—exemplified by a 15 percent curtailment in wind energy during 2015. Present challenges toward properly integrating wind, solar, and other renewables into the greater energy grid are illustrating the growing need for more effective energy storage mechanisms and technologies that ensure stronger short- and long-term efficiency.

Despite world-leading renewable investment and installed capacity figures, grid inefficiencies are allowing a large portion of China’s wind and other renewable energy generation to go to waste

Despite world-leading renewable investment and installed capacity figures, grid inefficiencies are allowing a large portion of China’s wind and other renewable energy generation to go to waste

Proving to be a major barrier to seamless grid integration for renewables following years of aggressive expansion, overcapacity has left the Chinese energy sector in more than $16 billion of outstanding debt—with $4.4 billion of those bonds due from renewable companies. This record debt is plaguing China’s largest renewable energy producers, with four companies defaulting on $1.8 billion worth of bonds—including top solar panel producer, Yingli Green Energy Holding Co., which missed payments on more than $268 million of notes. These financial trends are highly concerning, as solar- and wind-power generating plants throughout the country are noticeably lagging behind production of equipment—a potentially destabilizing trend as the Xi Jinping Administration strives to uphold its commitments toward reducing never-ending nationwide pollution problems.

Yet, while these limitations pose fundamental challenges for China in its long-term efforts to realize its energy efficient goals, they remain a technical obstacle within what is proving to be an encouraging stage in the country’s clean energy revolution. China’s impressive investments in renewables are influencing other developing countries to push strongly for similar clean energy development, while simultaneously pressuring leading developed countries—such as the US—to expedite domestic transitions to energy efficient economies. The International Energy Agency (IEA) announced earlier this month its decision to select a Chinese official as a special advisor to the IEA head. This is the first time a Chinese official has filled the role, underscoring growing cooperation between the leading energy agency and the world’s number one polluter and energy consumer.

China’s ability to overcome inefficiencies by successfully integrating renewables into the larger national grid could serve as a blueprint for a globally integrated sustainable energy grid

China’s ability to overcome inefficiencies by successfully integrating renewables into the larger national grid could serve as a blueprint for a globally integrated sustainable energy grid

China’s growing leadership around energy efficient technology and policy, coupled with its perpetuating environmental troubles and grid infrastructure inefficiencies, demonstrate the complex and dichotomous identity of this 21stcentury global giant. Though record-breaking investments in renewable energy and concurrent efforts to curb carbon output through coal factory closings offer a glimpse of China’s great desire to surmount its environmental struggles, a bureaucratic stranglehold over state-owned energy companies enables industrial overcapacity to offset much of the nation’s progress in clean energy.

China’s prospects for accomplishing its clean energy and climate change prevention goals will greatly depend on its ability to overcome internal political and infrastructural inconsistencies. However, should the country prevail in its energy goals—transforming successful local energy systems into a blueprint for a comprehensive integrated national grid—China will usher in an innovative future for global energy. The successful integration of renewables could offer a new foundation of technologies and standards for a globally integrated grid—enabling humanity to move one step closer toward achieving a healthier future for the planet.

This article was originally posted here on David Solomon’s China Rising blog and is reposted with permission from the author.

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