Looking back on 2016, the energy storage industry in China has had its positives and its negatives. Navigant Research believes that energy storage increasingly is valued based on the services that a system provides. Overall, China is an attractive market for energy storage, particularly lithium ion (Li-ion) batteries. Market activity in 2016 included increased sales of EVs throughout the country, electricity market reforms to spur grid-tied storage resources, and a multimillion-dollar increase in investment of national battery companies. The country is embracing a cleaner, more connected future going into 2017.
Long projected to be the largest global EV producer and market (despite reports of inflated plug-in EV sales figures being used to garner government subsidies), policies that promote the development of alternative fuel vehicles drive EV sales in China. The central government began giving out subsidies for EVs in 2013, and the value of subsidies has decreased annually since then. The 2016-2020 Notice on the Financial Support Policy for the Promotion of New Energy Vehicles from the country’s Ministry of Finance announced that, compared to the 2016 level of subsidy, the 2017-2018 level and the 2019-2020 level will be reduced by 20% and 40%, respectively. In addition to the subsidy, the central government has also waived the vehicle sales tax. Additional subsidies in China can be found predominantly at city governments. For example, Beijing and Shenzhen allow a 1:1 matching subsidy for consumers, effectively doubling the national EV purchase subsidy.
On the grid-tied storage front, Navigant Research anticipates that China will be the single largest country market for energy storage, reaching 5.5 GW of new capacity by 2025 across the utility-scale market alone. Though the country’s electricity market has long been government-run, recent market reforms have allowed non-state wholesale power producers to enter the market, opening up opportunities for independent power producers (IPPs) to provide ancillary services by way of energy storage resources. Compounded with the big push for new variable generation resources within China, storage greatly improves the business case for renewables by eliminating the need for new transmission and distribution resources.
Large battery manufacturers headquartered in China (such as BYD, CATL, Lishen, and Wanxiang A123) have deployed several systems in various EVs and stationary storage installations; these companies introduced several rounds of investment plans to further develop their respective technologies. In April 2016, China’s Ministry of Industry and Information Technology announced that any EVs applying for the Chinese government subsidy had to utilize a battery manufactured by a Chinese-owned company listed on the ministry’s so-called White List, effectively eliminating competition from other large global manufacturers like Panasonic and LG Chem. Chinese battery companies are also targeting other applications in foreign markets. For example, Neovoltaic, GCL Integrated Storage, and Pylontech have launched residential solar plus storage solutions ranging from 2.5 kWh to 8 kWh for residential customers in Australian, German, and American markets. Several other Chinese Li-ion battery providers are looking to establish partnerships with other systems integrators to further expand into other attractive storage markets.
The battery energy storage industry in China goes where the government steers it. Though the effect of policy and demand-side incentives varies by territory, the country seems to have a clear plan on what role storage will play in its clean energy future. As the industry matures, customer needs and grid needs will evolve and allow for EVs and energy storage systems to penetrate new markets. It remains to be seen whether China’s aggressive clean energy adoption strategy will be successful in the long term.