Should battery storage solutions for China’s energy grid be policy or market driven?

With its commitments to reach carbon neutrality by 2060, China is focused on building a renewably-sourced power system. A major limitation to a sustainable and reliable grid is storage, as current options are relatively expensive and have not yet been demonstrated at a macroeconomic level.

To advance battery storage capacity, different provinces in China have required a certain share of battery storage must be added to any utility-scale projects. Some think this mandate will add substantial cost and may not benefit renewable energy development over the long-term. To examine whether this is the right strategy, Liu et al. studied how such mandatory policies could affect battery storage development in the long term.

The authors compared differences in market-driven and policy-driven approaches using system dynamics simulations. The simulations allowed the authors to model the interaction between policy and development based on revenue, cost, investment willingness, and installed capacity growth from 2021 to 2030. The results showed that policy-driven approaches can be phased out as technology advances and power market designs improve.

“We found that mandatory policy is the determinant of early deployment — before 2024,” said author Jaihai Yuan. “Without it, the development cannot be kicked off. But its impact would be worn off by 2028 with advancement in technologies.”

However, the authors also note that rising material prices and unforeseen factors could affect how long policy-driven approaches are needed. As cost was a driving factor, the authors recommend a strategy that includes expanding funding to promote storage technology advances. They hope their findings can be used by policymakers to adjust energy policies for battery storage according to changing situations.

Source: “The development of battery storage co-located with renewable energy in China: A policy-driven system dynamics approach,” by Yuanxin Liu, Chentong Ke, Liyan Yang, Hui Liu, Yalan Chen, and Jiahai Yuan, Journal of Renewable and Sustainable Energy (2023). The article can be accessed at https://doi.org/10.1063/5.0131367 .