A battery of ideas to tackle China's grid-curtailment issue

In a Beijing industrial park, Chinese manufacturer Goldwind is testing four kinds of batteries that can store the power produced by the 2.5MW turbine and 500kW of solar panels installed on its campus.

The micro-grid project is in its early days, but the young engineers in charge say they are already making savings by switching to stored energy during the daytime, when electricity sold by the municipal grid hits peak prices.

The results are promising for all of China’s wind companies.

Energy storage could be one of the solutions to the biggest obstacle facing expansion of the country’s wind industry — grid curtailment.

Curtailment — when a grid operator orders a wind farm to shut down turbines — has hit extreme levels in recent years, hurting developers and equipment makers alike.

In eastern Inner Mongolia, 25% of the wind energy available last year was wasted because of curtailment. In Gansu, the number was even higher, at 27%, according to the State Electricity Regulatory Commission.

The problem is estimated to have caused losses of 5bn yuan ($792m) in 2011, halving the sector’s profits, according to a report by Greenpeace, the Global Wind Energy Council and the Chinese Renewable Energy Industries Association. Curtailment was blamed by all major wind developers for weaker profits in the first half of this year.

In response, the National Energy Administration has ordered a halt to expansion of wind development in regions with curtailment levels of more than 20%, knocking demand for turbines.

China’s wind capacity has exploded too rapidly — from almost zero in 2006 to 62GW last year — for transmission lines to keep up. Most of the wind farms are in regions with limited demand, creating a surplus of power not easily distributed to faraway load centres.

“The speed was ridiculous, with a doubling of wind in some places every year for the past six years,” says one analyst. “There are better roads and airports in these places than there is grid.”

Industry has complained that State Grid, a powerful monopoly, has been reluctant to absorb intermittent energy sources such as wind. The grid operator says it needs compensation to invest in infrastructure to support wind.

The situation could change with a new law, still being drafted, that will require grid companies to absorb a certain percentage of renewable energy. But building transmission lines takes time, and developers are reluctant to slow their expansion.

Preliminary research by consultants at Azure International in Beijing compares China’s wind farm pipeline with the planned transmission lines.

“The expectation is that new transmission lines will solve the problem within three to five years,” says Kevin Popper, a research consultant at Azure. “But if you look at the wind pipeline in certain areas, it almost matches the export capacity of the new lines going in.” This means the surplus capacity currently being curtailed will not be addressed and the problem will remain, he explains.

In addition, the network of ultra-high-voltage ( UHV) transmission lines is behind schedule. UHV lines can export large amounts of power over long distances and are seen as a way of getting power generated in the west to the load centres in the east.

But the scale of the planned UHV investment in China has triggered controversy. And on UHV lines installed so far — targeting hydropower in southern China, not wind — the power flows and utilisation rates are below expectations, says Popper.

He believes that energy storage could significantly ease the curtailment problem if incentivised in the right way. But much work is needed before it can be used in commercial projects. For a start, the technology is still not mature, and China is far behind the US and Japan in understanding how to use it.

State Grid launched its first demonstration project last year in Zhangbei, Hebei province, to test 20MW of energy storage with 100MW of wind and 40MW of solar. The project is the biggest in the world in terms of energy capacity. Lithium-ion batteries from four providers — BYD, China Aviation, Wanxiang and ATL — were installed in December and a 2MW electrochemical “vanadium redox flow” battery from Prudent Energy is also being trialled.

Unconfirmed preliminary reports emerging from the project suggest that at least one of the lithium-ion batteries is not working properly. That is not a surprise to some experts.

“Using large-scale batteries on the grid is sufficiently complicated that it needs lots of technical experience,” says Anders Hove, clean-tech energy research manager at Azure.

China may have greater needs for storage than any other market, however, stimulating support for more demonstration projects to build up experience.

But the projects also need to take into account the economics of storage.

Zhuo Zhang, a research associate at Lux Research, says the lithium-ion batteries cost about $500 per kWh, suggesting that State Grid is losing a large amount of money on the project.

The economics are critical because energy storage cannot resolve curtailment “in a conventional sense”, explains Popper.

Curtailment itself is highly seasonal, influenced by demand for heating as well as fluctuations in wind resources.

To solve China’s curtailment problem, “you would need a relatively large storage system to sit unused for long periods of time, and in some regions you might only use it for four months of the year,” says Popper.

The high cost of batteries or other forms of storage makes this low utilisation uneconomic.

However, storage would have real value if it is used for other areas too, such as helping with power forecasting.

“If you look at storage only for curtailment, it’s not economic. But if you look at what a wind plant and storage can offer, then you can go a long way to offering higher-quality and more reliable power,” Popper adds.

“With storage, you can smooth out wind-power fluctuations and cut power forecasting error to close to 0%. This allows the grid to schedule less back-up generation so that more wind power can be absorbed and local generation can be operated more efficiently.”

Like Goldwind, China’s “big five” power companies are aware of the potential and are beginning to trial some storage technologies. Longyuan will test a 5MW/10MWh vanadium flow battery made by local firm Rongke Power at a 50MW project in Liaoning province. Shenhua has signed an agreement with Nevada-based Altairnano to test its lithium-titanate battery technology.

But the key question remains: who will pay for investing in batteries?

The technology needs policy incentives to boost demand and bring down costs through economies of scale, says Louis Liu, Asia general manager at Texas-based energy-storage company Xtreme Power.

Incentives could include offering a certain premium to projects generating high-quality electricity thanks to integrated storage.

China’s grid operators are considering requiring 10% energy storage for all wind farms in certain regions. But there are no details on performance criteria or compensation.

“If you make this a grid-connection requirement, developers will find the cheapest system possible without caring about its performance. This is very dangerous if it leads to more capacity, but inefficient use,” says Liu.

Popper, like others, believes the integration of storage will be driven by developers, which have the most to lose from curtailment, as it reduces the returns on their investments.

Yet a more efficient approach, particularly in areas with many wind farms, would be to install storage on the grid, rather than at each wind farm, he says.

Providing a higher feed-in-tariff (FIT) for a wind farm with storage would also benefit all parties. FITs would need to be 20-40% higher to support this type of application, he estimates. “That is still less than China’s solar FIT.”

Liu says, however, that policymakers could be waiting for local suppliers to get their technology ready before they issue new incentives. “I think it will take two to three years before this market gets going,” he says.

Issues caused by windiest areas having the lowest energy demand

China has insufficient transmission capacity in many areas with the best wind resources because these are also the most sparsely populated and least developed parts of the country.

Arid provinces such as Gansu and Xinjiang, and the grassland-covered Inner Mongolia, have few inhabitants and little heavy industry. They do not have the same demand for power as the endless factories and sprawling cities of the eastern coast. So excess power trying to access the grid is simply curtailed.

Yet the mismatch between installed wind capacity and power demand is only set to increase. China recently approved another 3GW of wind farms in Gansu and a 1.4GW mega-project in Inner Mongolia, both provinces with among the worst curtailment problems.

The gap between installed wind capacity and peak power demand is expected to grow in other areas too, with curtailment expected to affect new regions, predict researchers at Azure International in Beijing.

China’s energy mix compounds the problem. The country has plentiful coal but comparatively little natural gas, especially in the northwest. Coal is needed to generate heat in the northern provinces, where temperatures can drop to minus 40°C in the winter.

Coal plants are also highly inflexible.

With coal contributing the bulk of power in Inner Mongolia, thermal power plants come into direct conflict with wind farms.

“People think it’s all about the wind, but I think it’s more about the thermal. The wind problem is overplayed,” says one observer who does not wish to be named.

If 1GW of coal power plants are operating at 80% capacity next to a 100MW wind project operating at 20-30% capacity then wind is the first to be turned off in the energy pecking order, he explains.