The recent implementation of the energy storage market policy has marked a significant development in the industry. Earlier this year, the release of Document No. 136 caused a brief emotional rollercoaster for stakeholders in the sector. Initially, the halt of the “mandatory storage” policy led many accustomed to the era of strong allocations to feel uncertain about the future. However, the industry quickly recognized the deeper implications of the policy—an indication that the reform of the electricity market was beginning to unfold.
On April 29, the National Development and Reform Commission (NDRC) and the National Energy Administration jointly issued a notice to accelerate the construction of the electricity spot market (Document No. 394), officially initiating a countdown for the establishment of electricity spot markets in 20 provinces. The goal set by Document No. 394 is to achieve nationwide coverage of the electricity spot market by the end of 2025, enabling continuous settlement operations across the board. This target arises from the pressing need for energy structure transformation in China.
In recent years, the installed capacity of renewable energy sources such as wind and solar power has surged. However, their intermittent and volatile nature poses significant challenges to the stable operation of the power system. The traditional electricity market mechanisms are becoming inadequate to manage this complexity, while the electricity spot market can provide real-time price signals that accurately reflect supply and demand, leading to more efficient resource allocation.
The document outlines a detailed reform timeline for 20 provinces. Hubei, as a pioneer in reform, is required to transition its electricity spot market to formal operation by the end of June. The province is focusing on the collaborative development of hydropower, thermal power, and renewable energy, addressing the significant peak-valley difference caused by the integration of renewables. The spot market will guide electricity generation and consumption through price signals. Meanwhile, Zhejiang aims to complete its market transition by the end of the year, leveraging the high electricity demand from its manufacturing sector to optimize power supply and demand balance. Additionally, 16 provinces, including Fujian, Sichuan, and Liaoning, will commence trial operations for continuous settlement of the spot market by year-end, each exploring unique development paths based on their energy resources and industrial structures.
The introduction of Document No. 136 has been a turning point for the energy storage industry. By halting the “mandatory storage” requirement, it has allowed energy storage installations to return to a rational growth trajectory, preventing resource waste caused by blind construction. Furthermore, it mandates the full integration of renewable energy sources into the grid, effectively addressing the persistent issue of low utilization rates of storage stations. Previously, some regions required energy projects to integrate storage, but due to a lack of reasonable planning and market mechanisms, many storage stations remained idle for extended periods. With the implementation of Document No. 136, the construction of storage projects will increasingly focus on actual demand and economic viability.
Document No. 394 and Document No. 136 complement each other, forming a cohesive policy framework that drives the marketization of renewable energy. The core of the electricity spot market lies in real-time fluctuations of electricity prices, which creates significant profit opportunities for the energy storage sector. Power generation companies can dynamically adjust their output based on real-time prices, allowing storage systems to “buy low and sell high”—storing power during low-demand periods when prices drop and discharging during high-demand periods when prices rise. This not only absorbs excess electricity but also generates profit from price differentials, enhancing the efficient circulation of renewable energy and boosting market competitiveness.
For instance, the 250MW/500MWh energy storage station in Sheyang, Jiangsu, generated 40 million yuan in revenue over a 40-day peak summer period by participating in spot market transactions, with a single-day revenue surpassing one million yuan, setting a benchmark in the industry.
Currently, the energy storage industry is undergoing significant adjustments. Overcapacity has triggered a “price war,” driving prices of cells and systems close to cost levels, forcing some companies to halt projects. However, amidst this crisis lies opportunity: industry adjustments are prompting companies to enhance technological research and development, focusing on innovative energy storage technologies such as solid-state and sodium-ion batteries. The introduction of Document No. 394 has come as a timely boost; the comprehensive construction of the electricity spot market will leverage market pricing mechanisms to optimize the allocation of storage resources, accelerate the elimination of outdated capacities, and phase out inefficient enterprises.
Experiences from regions like Jiangsu and Jiangxi indicate that time-of-use pricing policies have expanded peak-valley price differences, thereby increasing profit potential for energy storage while also demanding higher performance from systems. Only those companies with strong technical capabilities and innovative abilities will thrive in this policy transformation, as low-quality and low-price competitive models gradually fade away.
From a long-term perspective, the synergy between the electricity spot market and the energy storage industry will provide robust support for building a new power system in China. Energy storage systems, due to their flexible charging and discharging characteristics, will not only excel in arbitrage during peak and valley price fluctuations but will also unleash greater value in auxiliary services such as frequency regulation and backup capacity assurance within the power system. In this process, innovations in energy storage technology will become the core driving force for industry development, with breakthroughs in new battery materials and intelligent management of storage systems further enhancing their performance and economic viability, allowing them to better adapt to the complex and dynamic operational demands of the electricity spot market.
Today, the energy storage industry in China has entered a deep-water zone of marketization. The cumulative effect of Document No. 136 and Document No. 394 is accelerating industry reshuffling and reversing the trend of “bad money driving out good.” After enduring the pain period, companies that possess technical strength, cost control capabilities, and compliance with safety standards will ultimately lead the industry from a phase of scale expansion to a new journey focused on quality enhancement.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/new-energy-storage-policies-propel-market-reforms-in-chinas-power-sector/
