China's National Development and Reform Commission, the top economic planner, issued a document Thursday to optimize the electricity pricing mechanism, including increasing the price gap between peak hours and idle hours. In the view of analysts, this is expected to boost the development of the energy storage industry.

The mechanism emphasizes that cities should reasonably determine the price difference between electricity prices and identify hours with high marginal power supply costs as peak hours and hours with low marginal power supply costs as low hours to guide customers to adjust their loads.

The document encourages cities to implement a peak tariff mechanism based on peak and idle hour tariffs when tariffs can be increased by no less than 20 percent.

It also encourages commercial customers to reduce the cost of electricity by using energy storage and other means to reduce peak hour load and increase idle hour power consumption on the grid, and to reduce electricity costs by changing the hours of use.

According to Guosheng Securities, this is expected to further boost customer demand for installed energy storage, which is expected to have a payback period of 5.14 years for customers' energy storage projects.

"The economic modeling of investments in energy storage projects is expected to be validated, and demand for customer-side energy storage is expected to grow at a high rate," Guosheng Securities said.

With the improvement of the price difference between peak hour and idle hour tariffs, the economics of customer-side energy storage systems with arbitrage as the main revenue is expected to improve significantly, the team said.

China issues guidance to promote development of energy storage industry

China's new power pricing mechanism expected to give energy storage industry boost-CnEVPost

(Photo source: Unsplash)