Four Operational Modes of Distributed Energy Storage

Distributed energy storage is a type of energy supply method arranged on the user side, integrating energy production and consumption. It can provide users with various types of energy supply, including cooling, heating, and electricity. Characterized by local utilization, cleanliness and low carbon emissions, diverse interaction, and flexibility and efficiency, it is an indispensable part of the modern energy system.

As a necessary supplement to distributed energy systems, distributed energy storage systems have flexible access points, currently being widely used in medium and low voltage distribution networks, distributed generation and microgrids, and user-side applications.

Application scenarios of distributed energy storage systems

Distributed energy storage primarily applies to scenarios including the customer side, distributed power generation side, and distribution side; it can provide services for power grid companies, industrial and commercial enterprises with large electricity demands and energy needs, as well as regions and public buildings with high energy storage requirements.

Application Scenarios of Distributed Energy Storage Systems

Distributed energy storage can primarily be applied in three areas: the customer side, distributed power generation side, and distribution side; it can serve power grid companies, industrial and commercial enterprises with large electricity demands and high energy needs, as well as regions and public buildings requiring high-capacity energy storage.

Operational Model of Distributed Energy Storage

As the new electricity reforms advance, the connectionsAs the new electricity reforms advance, the connections in the distributed energy storage market the connections between various entities in the distributed energy storage market have become increasingly tight. For different market participants, energy storage equipment manufacturers, users, and third parties can collaborate fully, leveraging their respective technical advantages, capital strengths, and market experience. By utilizing distributed energy storage and corresponding charging and discharging strategies, they can achieve benefits in various aspects, meet individual needs, and guide energy storage systems to explore newer business models, forming commercial operation modes suitable for the Chinese market.

1. Independent Investment Model

The independent investment model primarily refers to large industrial and commercial users self-financing the configuration of energy storage systems. Under this model, users purchase the equipment outright, allowing them to adopt a strategy of low storage and high discharge to reduce their electricity expenses. Compared to conventional generator sets, energy storage has clear advantages in the field of ancillary services, capable of providing grid support services such as peak shaving, frequency regulation, emergency backup, and black start at millisecond speeds. According to the electricity market pricing mechanism, such as time-of-use tariffs and interruptible tariffs, users can set their energy storage system operation modes. Energy storage equipment can be maintained by users themselves or provided with after-sales operation and maintenance services by equipment manufacturers. For certain users equipped with distributed power sources, such as photovoltaic power generation devices, energy storage systems can be used to maximize the absorption of distributed power generation. In the electricity market environment, different users can also trade electricity using energy storage systems. Some users trade their stored electricity with other users in the same area, not only earning profits but also indirectly reducing grid pressure.

The independent investment model is suitable for scenarios where the return on investment for energy storage is relatively high. Due to the current high cost per kilowatt-hour of battery storage systems and the limited peak-valley price difference in China, the promotion and application of energy storage still require support from relevant subsidy policies. With the improvement of energy storage technology levels, cost reduction, and the perfection of related policies and pricing mechanisms, energy storage will gradually have the conditions for scaled application.

2. Joint Investment Model

As an essential part of the power system, the grid is the entity most capable and in need of configuring energy storage systems. Given the currently high cost of energy storage, users have the demand for purchasing energy storage but are often unable to bear the high cost. Meanwhile, the grid needs to sell equipment to recoup funds. A joint investment model between the grid and users can distribute the investment pressure on users and the sales pressure on the grid. Moreover, the grid's participation can provide technical background for equipment maintenance and recycling of obsolete equipment. Applying energy storage systems in a joint investment model allows for charging during off-peak periods and discharging during peak periods, achieving the goal of peak shaving and valley filling, thereby delaying grid investments. Comparing across different application scenarios, generation-side storage is generally used for smoothing renewable energy output or combined frequency regulation with thermal power and storage units, while user-side storage is typically used for arbitrage between peak and valley electricity prices and improving power quality.

In these cases, the value of energy storage is relatively singular. However, if energy storage stations can be built in the transmission and distribution links, the grid can fully utilize energy storage stations according to its multiple needs, maximizing the value of electrochemical energy storage. As the operator of energy storage, the grid can store surplus electricity in distributed energy storage during certain times and deliver it to users through the grid lines when needed, saving costs and earning profits.

3. Leasing Model

Against the backdrop of the new electricity reforms, energy storage equipment manufacturers, power selling companies, or third parties (such as professional investment companies) have gained greater development space. Among them, power selling companies represent social capital in the energy storage market. As intermediaries between the grid and users, power selling companies can arbitrage using energy storage systems' low storage and high discharge strategy or lease energy storage equipment to users, responsible for purchasing and maintaining the equipment. Users pay leasing fees, and the operation process of energy storage equipment is arranged by users without involvement from equipment manufacturers, power selling companies, or third parties, thereby tracking their agent users' load and reducing load forecast errors.

In the process of energy trading, power selling companies use energy storage to store electricity transmitted from the grid in some form (such as batteries) and then trade with users. This leasing model is gradually becoming popular in the current electricity market, acting as a more efficient and convenient mediator between the grid and users. Moreover, for users, leasing or installment payment methods can eliminate the barrier of high initial investment costs, lowering the threshold for applying energy storage equipment and promoting the scaled development of energy storage equipment.

4. Sharing Model

Under the independent investment model, users usually need long-term loans, which is not conducive to the rapid promotion and application of energy storage systems. The sharing model refers to financing the purchase of energy storage equipment through publicly announced project fundraising, adopting different modes such as leasing equipment to users, operating independently, or third-party operation. This model draws on the concept of the sharing economy, allowing distributed or centralized energy storage owners, through agreements, not only to serve themselves with energy storage equipment but also to transfer the equipment to third parties, permitting unified dispatch of energy storage equipment to provide ancillary services and charge capacity fees. In the context of currently high energy storage costs and long investment recovery periods, this business model is worth exploring.