The Economic Impact of Energy Storage Co-Deployment on Renewable Energy in China

Given the pillar role of renewable energy in the low-carbon energy transition and the balancing role of energy storage, many supporting policies have been promulgated worldwide to promote their development. To achieve the ambitious goal of no less than 1200 GW of wind and solar by 2030, China has also introduced policies to encourage the deployment of energy storage for the grid integration of renewable energy. The national policy is conducive to enhancing system flexibility for renewable integration, but it will also add the costs of renewable energy, especially when counting the regional differences. This paper adopts an improved levelized cost of electricity model to examine the total costs of renewable power co-deployed with energy storage in different provinces of China. The results show that the nationally unified energy storage co-deployment requirement, namely, 15% capacity ratio of renewable installation and 4 h duration, will negatively affect the economics of renewable generation, leading to an average cost increase in 15% and 21% for wind and photovoltaic generation, respectively. The economics of co-deploying energy storage under current market mechanism is inferior, but it can be effectively improved when energy storage participates in ancillary services market. With the revenue of frequency regulation, the cost of renewable co-deployed with energy storage can be even less than that without co-deployment in most provinces, except for Hebei, Jiangxi, and Gansu. An independent market entity status is thus conducive to encourage the co-deployment. Our finding also implies for a province-specific energy storage co-deployment policy.