Power grid upgrades, storage expansion critical for renewables to go mainstream in Asia: experts

Renewable energy, despite the rapid scale-up in capacity in recent years and sharp cost reductions, is still unable to replace fossil fuels in Asia due to obsolete power grids and lack of storage solutions to cope with intermittency issues, experts said at the Ecosperity Week 2022 conference in Singapore.

The share of renewables in Asia's energy mix has grown steadily on the back of regulatory incentives and power generation costs that have reached parity with coal-fired and gas-fired electricity in many countries.

But the "threshold" of adoption for renewables is going to be reached, and any further absorption in the energy mix requires actions to overhaul the power grid and create a new ecosystem, Russell Tham, Joint Head of Strategic Development at Singapore's state-owned investment company Temasek, said.

"Creating an environment that allows innovation of the grid without disrupting the grid - this is a very, very critical policy position," he added.

A key component of this ecosystem is the energy storage business, and it is essential to generate enough returns for investors so that the overall storage capacity continues to increase to accommodate more renewables.

"Grid friendly renewables" has to be connected with energy storage, similar to European countries like Germany where storage has become a "must" to enable a high percentage of renewables in the power system, Alfred Wang, CEO with Alpha-ESS, one of China's largest energy storage service providers, said.

Market for storage services

In China, energy storage projects are financed by investors, but the storage infrastructure is controlled by state-owned power grid companies who also operate the power markets and influence downstream electricity prices.

This limits the return on investment in the storage business and prevents more funding from flowing into the sector. In an unregulated market, storage services can be sold to the highest bidder and prices respond to changes in demand and supply.

"The problem for China is that we do not have a very flexible energy market to regulate the energy storage projects. Energy storage actually does not bring any income for investors," Wang said.

If energy storage services can be traded in the energy market, projects are more likely to be profitable, and investors will be motivated to look for good products, he said.

As of 2021, over 20 provincial governments in China required solar and wind projects to be integrated with energy storage facilities, official data showed. Storage facilities need to equal about 10% of installed renewables capacity, and provide at least two hours of electricity back-up, Wang said.

On June 7, China's top economic planner National Development and Reform Commission, released a policy that allows independent energy storage service providers to participate in China's power market, and gave provincial governments the freedom to decide localized trading rules for storage services as well as set the barriers to regulate the market entry.

Despite these new rules, a lot more needs to be done to deregulate downstream power markets and make the system more accommodating for renewables.