Distributed energy storage business models - analysis and prospect

Compared with centralized energy storage, the site selection and installation of distributed energy storage is more flexible and convenient, and it is easier to realize the rapid on-site consumption of distributed energy.

Distributed energy storage commercial value analysis

Distributed energy storage capacity is generally less than 10MWh. Compared with centralized energy storage, distributed energy storage has a shorter construction period, flexible construction locations, and lower investment costs.

The above characteristics determine that distributed energy storage has more application space on the user side, distribution network side and distributed power supply side. The following will analyze the main value points of distributed energy storage from the user side, distribution network side, and distributed power supply side.

User side
In the field of user side, the current main value points of distributed energy storage technology include peak-valley price difference arbitrage, demand electricity fee management, and demand response compensation.

The realization of peak-valley price difference arbitrage is mainly obtained by users adjusting their own electricity consumption plans, which is the main profit method for users to install energy storage.

For power users who need to pay more capacity fees, installing energy storage equipment can save capacity fees and achieve demand electricity fee management. Demand response compensation means that energy storage users obtain compensation benefits by participating in demand-side response projects.

Distribution side
On the distribution network side, the current main value of energy storage technology is to alleviate grid congestion, delay investment in distribution network upgrades, and improve power supply reliability on the distribution network side.

Taking advantage of the flexible and fast characteristics of energy storage devices, configuring energy storage devices in congested areas can not only effectively alleviate the problem of heavy and overloaded lines, but also delay network upgrades and reduce waste of resources.

Distributed power supply side
The value of distributed energy storage technology on the distributed power generation side is mainly to reduce the randomness and volatility of distributed power generation and ensure the smooth output of renewable energy.

During the peak period of wind power and photovoltaic supply, in order to ensure the stable operation of the system, we have to choose to abandon energy.

When the system load is at its peak, wind power and photovoltaics may cause insufficient power generation due to natural conditions. Such problems can be effectively solved by configuring energy storage on the distributed power generation side.

Distributed energy storage business operation model

Although the commercial value of distributed energy storage has gradually become clear, it still needs to participate in the electricity market through a reliable business operation model to obtain benefits.

Next, we will discuss and summarize the more mature lease models, sharing models, virtual power plant models and community energy storage models of distributed energy storage.

Lease model
At present, the business model of financial leasing is the most common business model for energy storage, and it is also the business operation model with the widest range of applications for distributed energy storage in the world.

The successful development of the financial leasing business model is rooted in its unique characteristics:
①The risk of leasing mode is smaller
②The leasing mode is more flexible.

In the industrial and commercial user market, some companies pioneered the energy storage battery leasing model. This operation mode is mainly for the power company to lease the batteries required for the energy storage power station from the battery manufacturer.

Shared mode
The shared energy storage model breaks through the original “one-to-one” model. Release energy storage resources to the entire power system, from serving one party to serving multiple parties, greatly improving the utilization of resources.

The sharing model can not only realize the diversification of energy storage service objects, but also realize the diversification of investment subjects and complete the sharing of investment returns.

Shared energy storage can effectively reduce construction and operation costs through large-scale investment, construction, and management, and reduce the cost and management investment of self-provisioned energy storage.

Compared with the self-provided energy storage method of renewable energy, shared energy storage has more obvious advantages in terms of safety, quality and economic benefits.

Virtual power plant mode
The virtual power plant integrates relatively scattered resources by means of control and communication technologies to form a special power plant to participate in power system operation and power market management.

Energy storage can play a central role in virtual power plants thanks to its strong initiative. Its unique bidirectional charging and discharging functions make up for the shortcomings of only one-way load and power supply in virtual power plants.

The virtual power plant is a relatively rich system, and its scenarios should be fully extended. For example, with the rapid rise of electric vehicles in recent years, virtual power plants should fully analyze battery swapping and consider whether it can be well incorporated into the virtual power plant system.

Community energy storage model
In the community energy storage mode, community users pay a fee lower than the current electricity price to use community energy storage devices to meet their own electricity demand.

The income of project developers in this mode mainly includes three aspects: ① Electricity fee income; ② service grid income; ③ heat supply income.

However, the project is mainly concerned with the management of peak demand, and does not provide ancillary services such as frequency regulation and voltage support for the grid. The community energy storage model is based on community users, and creates other benefits on the premise of satisfying community users.

Compared with other business models, the community energy storage model has a more stable user group. When promoting the community energy storage model, it is necessary to conduct sufficient research in the early stage, fully explain the benefits of the project, and provide customers with sufficient after-sales services.

Other modes
In addition to the above four business models, there are other business models for energy storage. Most of these business models are formed by integrating the four models of leasing, sharing, virtual power plants, and community energy storage.

This requires developers to integrate multiple business models according to different market conditions and customer needs to achieve sustainable development of this model in the market.

Prospects for the future business model of distributed energy storage

Combining the physical characteristics of distributed energy storage, the prediction of the future distributed energy storage business model can be divided into two categories:

one is that distributed energy storage participates in the market alone; the other is that distributed energy storage aggregates and participates in the market , that is, the two general directions of dispersion and aggregation.

The following analyzes the future business models of distributed energy storage in different application scenarios.

User side
In the case of a relatively high degree of market mechanism improvement in the future, the utilization of user-side distributed energy storage resources will be carried out more in an aggregated mode.

Distributed energy storage has a small scale and scattered resources, so it is difficult for it to enter the market alone, but if the scattered resources are aggregated as a whole, the difficulty of entering the market will be reduced.

Distribution side
In the future, new electricity retail companies need to use energy storage to provide differentiated value-added services to improve competition.

The profits of new electricity sales companies will not only be obtained through the purchase and sale of electricity, but also by subdividing the types of customers and providing different differentiated value-added services according to the needs of various customers.

Distributed power supply side
For distributed power generation on the power generation side, its resources are relatively scattered, which determines that it is more suitable for local consumption.

Distributed power generation equipped with energy storage can achieve smooth output, but energy storage will not completely overcome the randomness and volatility of distributed power generation, so the problem of ancillary service fees still needs to be resolved.

Improvement of the business operation model of distributed energy storage

(1) Expand the market participation scope of distributed energy storage and lower the threshold for distributed energy storage to participate in the market.

At present, the threshold for energy storage to participate in the market is relatively high, and the entry threshold should be lowered to fully mobilize the enthusiasm of idle energy storage resources on the user side and distributed generation side to participate in the market.

(2) The investment cost and profit model of distributed energy storage should be diversified. Now, the high construction cost and operating cost of energy storage projects still affect the enthusiasm of developers to invest in them.

Therefore, it is necessary to integrate multiple resources to realize a diversified investment model for energy storage projects. At the same time, it is necessary to innovate the profit model of distributed energy storage to achieve multiple benefits.

(3) Flexible arrangements for the “aggregation” and “decentralization” states of distributed energy storage. Recently, the threshold for energy storage to participate in the market is relatively high.

If you want to make full use of distributed energy storage, which is a small and scattered resource, you should first consider the aggregation model and participate in the market with a unified identity.

Summary

Distributed energy storage itself has the characteristics of convenient installation, small footprint, safety and reliability.

Under the condition that digitalization fully empowers the new power system, new development opportunities can be ushered in.

A suitable business model needs to meet the needs of the market externally, bring sustainable benefits to energy storage developers internally, and ultimately achieve a reasonable allocation of resources for the entire society.

No matter what kind of business model it is, it is necessary to test whether it is feasible through practice under the premise of full understanding.