On Thursday, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) jointly issued a notice, "Notice on Deepening the Market-oriented Reform of New Energy Grid-connected Tariffs to Promote the High-Quality Development of New Energy," saying that solar and wind farms no longer need to be equipped with energy storage systems. The policy caused broad reaction and industry debate as soon as it was promulgated.

Short-term Impact: Adverse to Market Supply and Investment, But There Are Short-Term Positive Impacts

 

Short term, the policy shift has a two-edged sword effect on the new energy market. One the one hand, abolishing the obligatory energy storage requirement may cause some developers and investors to overlook the function of energy storage devices, especially in regions with inadequate grid dispatch capacity. This would increase the fluctuation of power output and add more pressure on the grid. On the contrary, during the period of policy transition, especially before June 1, ongoing projects are still entitled to enjoy prevailing policies, with some companies rushing to grid connect, which might result in an increase in market turnover in the short term.

 

Apart from that, since energy storage technology and products are still relatively costly, removal of compulsory energy storage can have the impact that certain companies will reduce investment in energy storage and thus affect development of the entire industry chain. But as market growth matures and business models become more clear, this should reverse.

 

Medium-term Impact: Promoting Healthy Market Development

 

In the medium term, the policy change will allow the market to develop more effectively. Before, energy storage, as a required component of many new energy projects, would be a constraint on project economics due to its cost. Now, project parties can make independent decisions as to whether to install energy storage based on actual needs, enhancing project feasibility and financial returns. This flexibility is particularly useful for those regions with smoother grid loads or longer energy storage payback durations.

 

In addition, the introduction of a market-oriented trading mechanism has enhanced the activity of the electricity trading market, which provides greater incentives for new energy companies and investors to research better market operation models. Through bidding and trading, firms can make more profits, and the industry will develop healthily.

 

 Long-term Impact: Supporting the Upgrade of the Energy Storage Industry

 

In the long run, though energy storage is no longer needed, it will not disappear from the market. On the contrary, with the further expansion of the new energy market and technology improvement, the energy storage market will still grow, especially in regions with grid volatility or at peak electricity demand periods. The energy storage market will shift from "mandatory requirements" to market-based decisions, stimulating technological innovation and advancement.

 

In the coming future, with the gradual reduction of energy storage technology cost and application.

Tags:

• New Energy Policy