China will become the largest energy storage market in the Asia Pacific region by 2024, global energy consultancy Wood Mackenzie said in a statement late Tuesday.
According to Wood Mackenzie calculations, China’s cumulative energy storage capacity is projected to skyrocket from 489 megawatts (MW), or 843 megawatt-hours (MWh), in 2017 to 12.5 gigawatts (GW) or 32.1 gigawatt-hours (GWh) by 2024.
"This represents an increase in the installed base of 25 times," the consultancy said.
Policy incentives have been the main drivers behind China’s rapid growth in storage deployments in 2018, already pushing the country to become the second largest market behind South Korea in terms of annual deployment, WoodMac explained.
The statement reads that China's energy storage market deployed 580 MW (1.14 GWh), reaching a cumulative market size of 1.07 GW (1.98GWh) last year. Front-of-the-meter (FTM) storage led growth, up five-fold in terms of installed power capacity compared to 2017.
Furthermore, the State Grid Corporation of China, a state-owned utility company, has deployed 452 MWh of grid-connected FTM pilot projects, which accounted for 83% of FTM market growth nationwide last year. These pilot projects were supported by government research grants.
Commenting on the data, Le Xu, senior analyst at Wood Mackenzie, said that based on current project economics and without policy support, utilities have limited incentive to scale-up investment in FTM storage as part of grid infrastructure.
However, he said this situation is set to change next year.
"According to China’s National Energy Administration, the ancillary services market will be transitioning from a basic compensation mechanism to a market integrated with spot energy prices by 2020. That, along with maturity in technology and subsequent cost reduction, are key factors that will contribute to the exponential growth in the nation’s energy storage market through to 2024," he explained.
He added that although China’s energy storage market is still in its infancy, it is expected that strong growth will continue driven by battery cost reduction, policy incentives and power market reform.
"By 2024, global cumulative capex [capital expenditure] investment in the energy storage sector could grow to $71 billion. China will account for about 14% or just over $10 billion," he concluded.
By Gulsen Cagatay