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2 November 2022

China wants over 100 GW energy storage by 2025

According to the data tracking of China’s International Energy Network the combined targets for pumped hydropower and battery energy storage announced from China’s provinces now run to 98 GW for 2025. Because many provinces have yet to announce targets, one can estimate that the combined targets could grow to perhaps 200 GW, and then actual development could be even higher than that. Rethink Energy’s forecast for energy storage for China is 108 GW by 2025.

For general energy storage (batteries plus miscellaneous) the announced targets sum to 54.85 GW, coming from twenty provinces – up from 39.7 GW from twelve provinces back in May. The biggest targets are found in Qinghai and Gansu, well-placed to hold solar power from the desert periphery.

Pumped hydro targets has reached 43 GW from ten provinces – and pumped hydro development is viable across most of China’s central provinces thanks to their lakes and rivers. China has 34 assorted provinces and province-level units, and the targets are for the 14th Five-Year Plan period, which runs from 2021 until 2025.

From the start of the 14th Five Year Plan, or January 2021, 35 pumped hydro projects were approved across the country with a total capacity of 45.1 GW and a projected investment cost of $47.4 billion – up to October 21st, according to the China Society for Hydropower Engineering. Eleven of these projects were approved in 2021, meaning approvals more than doubled this year, and the typical project size switched from 1200 MW to 1800 MW apiece. The Association expects another 5 GW to be approved in the last two months of 2022.

While China does not appear to have a central target for general energy storage, in September 2021 the National Energy Administration published a plan for 62 GW of pumped hydro to be operational come 2025, double the 2021 figure. However Ding Yanzhang, Chairman of the state-owned POWERCHINA proposes development of fully 270 GW in the same period, a concept he calls the “double 200” for having 200 projects across 200 cities and counties.

Previously China was lagging far behind its targets for pumped hydro – it was supposed to build 110 GW by 2020, per a 2009 target. Instead it has 42 GW, of which 6 GW was built by August this year. Perhaps it has decided to completely change its attitude because of global energy insecurity and the rapidly growing presence of intermittent renewables on its grid. China’s hydropower resources are threatened by climate change but the same can’t be said for pumped hydro – because it tends to be a closed loop, so the less water there is, the more value to using hydropower only as a dispatchable resource for firming.

As for batteries, EPC contracts rose to 13.82 GW / 27.7 GWh in the first eight months of 2022 – a year-on-year increase of almost 500%. A similar rate of increase can be seen by comparing those contract figures to actual installations, which were only 1.3 GWh through to August this year, with another 8.77 GWh under construction. China had 5.73 GWh installed as of ended 2021.

Having said that, there are caveats about how fast investment and construction are really going to get underway. The National Energy Administration’s target for 2025 is only 30 GWh, which it calls “only the basic goal.”

Actual construction progress on grid battery installations is strongest in certain provinces – Shandong, Hubei, Shanxi, Ningxia, Zhejiang, Hebei, Hunan and a few others – which have been running pilot project schemes with clear deadlines. Elsewhere, construction progress significantly lags behind announcements and the industry remains in a state of “potential”.

The main question mark over actual construction is the profit model for selling electricity, with various liberal market reforms having begun in trial form but not rolled out at scale. “New energy capacity leasing” plus either “peak-shaving” and the spot market, such as that exists, are the two main approaches. As of the latest pricing systems published for November, the widest time-of-day pricing differential in China is $178 per MWh, while most of the nation is operating with less than half that figure. Little wonder then that battery energy storage project developers are suspending orders – in the context of the battery shortage and rising prices, they cannot pay as much as overseas grid projects or the EV sector.

Chinese renewable projects are increasingly required to have co-located battery capacity. These requirements vary by province, but are typically two-hour duration, with capacity requirements ranging from 5% to 20% of generating capacity. If we were to take a 15% figure and apply it to a notional 140 GW of renewables to be built this year, we’d reach 21 GW / 42 GWh. That scale will be seen in the next couple of years – but in 2022 China’s actual battery development is only a fraction of those numbers because the requirements are recent, growing, and not applied retroactively. So far in 2022, through to end August, China has commissioned 1.29 GWh, with a further 8.77 GWh under construction, counting only projects larger than 0.5 MW. That’s according to the China Electricity Council (CEC)’s new statistical publication, “Electrochemical Energy Storage Power Station Industry Statistics.”

China’s grid remains largely traditional, running primarily on benchmark coal prices and hydropower, but there are virtual power plants and a long-standing carbon credit trading system too – it’s just that these have not yet been brought into the limelight, not yet fully unleashed with new regulations.

The country has a ready-made VPP industry waiting to go, but for now its activities appear limited to Shenzhen, Shanghai and other coastal metropolises. Shenzhen city, just ashore from Hong Kong, has just this week brought in a subsidy of $27.5 per MWh for battery projects over 1 MW in size – and is encouraging their development at data centers, 5G stations, and industrial parks among other locations.

On the manufacturing side – according to industry news, China’s announced battery factories combine to over 2,000 GWh as of last week, with an investment cost of $116 billion. Only a fraction of this will serve grid projects – of China’s 324 GWh battery output in 2021, only 48 GWh was destined for grid storage, almost all overseas.

By no means is this all about lithium-ion. China’s provincial governments and state-owned enterprises are fostering just about any energy storage they can think of, including things as strange as gravity storage with a 2 GW project courtesy of Switzerland’s Energy Vault, and grid-powered molten salt which has its own article this week. In China demonstration projects can easily come in a fleet of several GW – eight provinces have announced a 12.9 GW, 20.3 GWh fleet of 167 projects, among which lithium iron phosphate was only the majority.

Compressed Air technology is now estimated to have an energy efficiency of 70% and an investment cost of between $135 and $165 per kWh, according to Cheng Haisheng of the China Energy Research Association. A 350 MW project began construction in September in Shandong and another 590 MW, 2.76 GWh is planned across seven projects in Qinhai province. Tianfeng Securities Research estimates that 6.76 GW will have been built by 2025 and 43.15 GW by 2030 countrywide.

Other more direct competitors to lithium-ion are also on the take-off strip – such as flow battery technologies which can be more affordably scaled to longer durations.

Vanadium flow appears to be foremost among these. A recent 5.5 GWh tender assigned 1 GWh to vanadium redox flow, 2.7 GWh to liquid-cooled lithium-iron diphosphate, and 1.8 GWh to air-cooled lithium-iron triphosphate, all three being distributed across projects ranging from a few MW to 100 MW. Vanadium also had a 500 MW, 2 GWh factory commissioned in Henan province in early October, while Yunnan Province’s Chuxiong Prefecture intends to “build a national all-vanadium flow battery highland” from an announcement a week ago. Already this year vanadium battery projects amounting to 300 MW / 1104 MWh have been commissioned.

Sodium-ion is represented with a 30 MW segment of an overall 300 MW two-hour lithium iron phosphate project in Anhui Province. This battery type had its first GWh-scale factory commissioned in September, and may have a price advantage once it is more fully commercialized at scale. CATL has taken an interest.

A 250 kW two-hour iron-chromium liquid flow battery began construction on September 18th.

All of these technologies are being fostered by the world’s biggest government and some will fall by the wayside, but we’re looking at a whole swathe of technologies which have forcibly been granted scale, supply chains, commercialization, expertise, and demonstration projects. If these technologies are financially competitive in the wider world, and certainly some will be – thank you China.