(Yicai) April 13 -- As 10 Chinese provinces have scrapped the time-of-use electricity pricing method, the peak-valley arbitrage model the energy storage industry has been relying on has collapsed, prompting firms to switch to different models.

The cancellation of time-of-use rates will directly impact the peak-valley arbitrage model for industrial and commercial energy storage in the short term, said Liu Yang, deputy general manager of Poweroad Renewable Energy Technology. Fixed price accounting will become ineffective, and market participants lacking the ability to predict fluctuations in electricity prices and loads will be greatly affected, and those incapable of adapting will likely face a high probability of elimination, he noted.

Anhui, Henan, Hubei, Liaoning, Shaanxi, and five other Chinese provinces have recently announced that market participants directly involved in electricity trading will no longer be subject to fixed time-of-use pricing levels and periods from the beginning of April. This decision aligns with the new rules for the electricity market issued by the National Development and Reform Commission and other government departments last December, which took effect in March.

Fixed time-of-use electricity pricing divides the day into peak, flat, and valley periods, and sets different rates each period to encourage users to consume less electricity during peak hours and more during low-load periods. This method creates an arbitrage opportunity for industrial and commercial energy storage, which charges during valley periods and discharges during peak periods.

Energy storage can participate in the electricity ancillary services market to obtain revenue from peak shaving and backup services, according to Xinnuo New Energy Technology. Moreover, it can provide an uninterrupted power supply and voltage support services for key users, such as data centers and high-end manufacturing, thereby earning 'reliability insurance' income.

"Using energy storage to transfer low-cost electricity from photovoltaics during specific periods may become a common demand in the industry in the future," said Yang Xiaoguang, deputy general manager of Hoenergy Power Technology. Energy storage can be bundled with renewable energy power plants, smoothing out the unstable output from wind and solar energy, thereby supporting the absorption of renewable energy, he added.

As the electricity market matures and price signals fully reflect the supply and demand relationship, the Chinese energy storage market is expected to experience more rapid growth within the next two to three years, Liu predicted.

Editor: Futura Costaglione