Energy Storage Knowledge Class | Global C&l Energy Storage Revenue Models

According to data released by the China Chemical and Physical Power Industry Association, the global commercial and industrial (C&I) energy storage market is expected to see an additional installed capacity of 11.5 GW by 2025. By then, the cumulative market size for global C&I energy storage is projected to reach RMB?19 to 24 billion yuan. However, in 2023, the newly added capacity for global C&I energy storage was only 1.8 GW. This indicates that the global C&I energy storage market will continue to experience explosive growth over the next two years.

For instance, in Europe, according to the TD Times Energy Storage Database's?"2024 Global Energy Storage Industry Trend Forecast Report,"?the number of C&I enterprises exceeded 23 million in 2022. Assuming that 25% of these enterprises can install photovoltaic (PV) rooftops, the penetration rate of C&I PV storage is only 0.53%, and the penetration rate of C&I energy storage is even lower at 0.08%. This highlights the vast market potential for C&I energy storage in Europe.

The rapid development of?C&I?energy storage cannot be separated from its increasingly evident advantageous revenue models. It also requires active exploration by enterprise users and social capital to discover broader profit avenues, continuously enhancing the efficiency and benefits of C&I energy storage.

Currently, considering the major markets for global?C&I energy storage, which include China, the United States, Japan, and Europe (with Germany as a representative), the primary revenue models for C&I energy storage are as follows:

01 Direct Subsidies

The revenue model of direct subsidies exists in several countries. For instance, in China, 10 provinces and 31 regions have introduced subsidy policies for C&I energy storage.

These subsidies are primarily based on discharge volume, capacity, and investment. Additionally, in April 2023, the United States implemented the IRA Act, which includes the ITC (Investment Tax Credit) policy, providing significant subsidies for C&I energy storage.

02?Peak-load Shifting

Peak-load Shifting?is the most common profit model for C&I energy storage, especially prevalent in many Chinese installations where it serves as the primary revenue source.

This model involves commercial and industrial users charging energy storage systems at lower off-peak electricity rates, storing electricity for later use. During peak or high-demand periods, the stored energy is discharged to supply the load, thereby reducing electricity costs, mitigating potential power interruptions due to grid constraints such as load shedding.

03 Demand-side Management

Demand-side management is also a common profit model in China's C&I?energy storage sector.

Demand-side management controls the need for loads, ensuring that the maximum power required by a business does not exceed the contracted electricity capacity. Currently, the two-part tariff system includes electricity charges and basic fees. Basic fees are calculated in two ways: one based on the capacity of operational transformers, and the other based on the maximum demand recorded monthly by the electricity meter. Installing energy storage systems can reduce peak loads for customers, lower demand values, and thereby reduce capacity-related electricity charges for customers.

04 Energy Shifting

Photovoltaic (PV) combined with energy storage represents a typical scenario of energy shifting, widely applied in markets across China, the UK, Germany, and various parts of Europe.

Energy shifting in C&I?energy storage refers to the process of storing electricity generated from renewable sources like solar and wind in storage systems and releasing it when needed to supply specific loads or the grid.

Due to the intermittent nature of solar photovoltaic (PV) generation, which depends on weather conditions, its electricity production fluctuates. When a PV system generates more electricity than is needed by C&I users, the excess electricity is sold to the grid at lower prices. Conversely, when sunlight is insufficient, businesses must purchase electricity from the grid at higher prices, leading to fluctuating energy costs.

By deploying energy storage systems, C&I?users can store surplus electricity during periods of high PV output that exceeds their immediate needs. This stored energy can then be discharged from the battery storage system during times of insufficient PV generation to meet electricity demand. In this way, energy storage acts like an intelligent scheduler, smoothing out the supply and demand of electricity, increasing PV generation and integration rates, and ultimately maximizing cost savings on electricity consumption.

05?Demand Response

In the United States, the electricity market environment is highly open, currently leading globally in the number and variety of demand response programs implemented. In Northern Europe, specifically Sweden and Finland, ancillary services are primarily provided by hydroelectric power. As the share of renewable energy in the energy mix continues to increase, there is growing demand for fast-response services. In this context, energy storage technologies have significant advantages over hydro assets in demand response due to their quicker response times and lower costs.

Demand response refers to the grid's timely adjustment of electricity supply based on fluctuations in electricity demand to ensure the stable operation of the power system.

Under demand response modes, C&I?users can participate in grid load regulation by installing energy storage devices. As per the needs, users can adjust their electricity consumption levels promptly. When there is either a tight (or surplus) power supply or periods of inadequate (or excessive) electricity supply, grid operators invite users capable of load adjustment to actively reduce (or increase) their electricity consumption during specific agreed-upon periods.?This approach helps alleviate electricity supply-demand imbalances during peak consumption periods without disrupting normal production operations. It promotes the efficient utilization of electricity resources and enables users to receive corresponding economic incentives or subsidies.

06 Electricity Spot Trading

The European Union (EU) has been a pioneer in electricity market liberalization reforms, achieving a high level of marketization over the past 20 years. In these liberalized electricity markets, energy storage resources can participate in multiple electricity markets such as the spot market and ancillary services market to generate revenue.

In the future, as the electricity market matures, C&I?energy storage can participate in Electricity spot trading?through aggregation via virtual power plants (VPPs).

A virtual power plant aggregates and controls a large number of distributed energy resources using advanced communication and control technologies. This aggregation scales distributed resources and enables them to qualify and participate in the operational scheduling of the power system. The term "virtual" indicates that these resources are not actual power plants but an aggregation of distributed resources. The term "power plant" signifies their capability to provide electrical energy and ancillary services to the power system similar to conventional power plants.

C&I?energy storage can be part of a virtual power plant, subject to control and scheduling by the VPP platform. They can charge and discharge according to the needs of the grid, providing electrical energy or ancillary services, and thereby generating revenue in the electricity market.