CHINA’S top province for solar power will increase payments for battery storage plants to incentivise investment in the technology to provide clean electricity around the clock.

Shandong, which has more solar panels than France and Spain combined, will start giving battery storage systems so-called capacity payments for being available to help balance the grid, in addition to the rates they receive for selling power, according to a policy paper published by the local government on Monday (Nov 13). Shandong wants to boost its storage ratio to 30 per cent of its solar capacity, from current levels around 7 per cent.

Skyrocketing installations of solar panels in China are starting to run up against grid resistance in some parts of the country, as too much electricity is being generated in the middle of the day and not enough during peak evening hours. While China plans to use its massive fleet of coal power plants to balance out intermittent renewable generation, more energy storage is seen as the long-term answer as the country decarbonises.

Falling battery prices are helping to spur some investment. China nearly doubled grid-scale battery storage capacity in the first half of this year to about 14.3 gigawatts, according to data released by the China Electricity Council.

There are still several problems. In many parts of China, power rates are the same at all times of the day, giving little economic incentive for storage systems to operate. The average battery system operates only four hours a day, or 34 per cent of designed capacity, according to the council.

Safety is also an issue. Of about 700 systems installed so far, nearly 100 have been suspended for safety problems, according to the council.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Shandong is also one of several provinces experimenting with pilot power markets that allow prices to move up and down throughout the day based on supply and demand, with midday prices regularly falling below zero as solar floods the grid. The policy paper recommended widening the gulf between highest and lowest prices to give storage systems more opportunity to profit.

China is also expanding its fleet of pumped hydro storage facilities, with about 200 gigawatt of projects approved in addition to about 50 gigawatt operating at the end of 2022, according to the electricity council. BLOOMBERG