China solar market at a glance
China has been a major driving force behind the rapid growth of global solar market in recent years. The nation is not only the largest solar market in the world, but dominates manufacturing throughout the solar supply chain. Over 80% of global solar supply comes from China.
The Chinese market has entered the grid parity stage this year. As for policy, the “14th Five-Year Plan” has rolled out plans for renewables, aiming to bring the share of renewables in the energy mix to 20% by the end of 2025 and 25% by 2030. The plan also set a goal of 1200 GW of cumulative installed wind and solar capacity.
It’s expected that the Chinese market will install more than 80 GW of solar capacity this year and continues to grow robustly, reaching beyond 170 GW of annual demand by 2025. Examining this year’s 83 GW of China demand, the distributed generation sector is estimated to contribute 43 GW, of which 25 GW will come from rooftop projects. Overall, distribute generation projects are likely to account for 52% of total installations. In fact, the share of distributed generation projects exceeded that of ground-mounted ones for the first time last year, an evidence of distributed generation sector’s growth.
Ground-mounted projects, on the other hand, are expected to add 40 GW of installations this year, a historic high. As China’s energy storage policy focuses more on ground-mounted projects, the energy storage industry is expected to grow vigorously against the backdrop of rising demand. At present, Chinese provinces including Hebei, Qinghai, Inner Mongolia, Ningxia, and Xinjiang are the five largest domestic markets for ground-mounted PV. And with Phase 1 100 GW of the 400 GW wind-plus-solar projects in the desert starting construction, there’s great potential for storage application in ground-mounted PV.
Stronger solar-plus-storage policy
China started to actively promote front-of-the-meter (FTM) solar-plus-storage policy since 2021, to be in line with the rapidly growing solar market. As of August 2021, 20 provinces and cities have introduced policy for solar-plus-storage, mandating newly built PV plants install at least 5% to 20% of storage. There are two kinds of policies – priority-based incentive and mandatory, with most of the provinces adopting incentive policy first and encouraging 10% of storage installation back then. As of June this year, more provinces have issued similar policies, while some shifted from priority-based incentive to mandatory, and raised the required energy storage ratio. This indicates China’s determination to develop energy storage on the generation side.
Policy-driven energy storage demand in 2021
China installed nearly 55 GW of solar capacity in 2021. InfoLink’s research found that provinces with solar-plus-storage policy contributed 45 GW, of which 22 GW came from ground-mounted PV, accounting for a share of 48.4%. Energy storage added 2.4 GW of installation the same year, with FTM market representing nearly 80%, at 1.85 GW. Of which, energy storage integrated with solar systems accounted for less than 30%, meaning that the FTM solar-plus-storage market was only 0.5 GW in size.
Last year saw around 1.38 GW of solar-plus-storage demand, a significant gap from the real installation volume of 0.5 GW. Factors causing the difference are that there’s a time gap between policy introduction and actual construction, as China is still in the early phase of development and policy optimization, and the impact of surging raw materials prices and cell shortage. Yet, the size of energy storage market still grew markedly by 100% in 2021 compared with 2020. Demand estimated based on the ground-mounted PV installation volume and solar-plus-storage policy implemented in 2021 suggests China’s FTM-storage market is worth anticipating.
Policy-driven energy storage demand in 2022
This year saw governments across the globe more active in implementing policies for renewables. Moreover, the market outlook is brighter as the pandemic wanes. InfoLink expects China’s solar installation to reach 83 GW this year, increasing more than 50% from the 2021 level. Provinces with solar-plus-storage policy are forecast to add 75 GW of solar installation, with 36 GW coming from ground-mounted PV, accounting for 48%.
The Chinese energy storage market is projected to grow more than 100% this year, reaching beyond 5 GW in size. The FTM market will reach nearly 4 GW, staying at around 75% of market share. Estimated based on 2021’s 30% ratio of storage coupled with solar in the FTM market, InfoLink expects the ratio to exceed 40% and real installation of solar-plus-storage to come in at 2 GW this year.
If estimating the solar-plus-storage market demand based on the projected ground-mounted solar installation and solar-plus-storage policy in 2022, demand could reach 3.9 GW. Although there’s quite a gap between this figure and the projected real installation, the annual growth rate hits 300%. This demonstrates that policy, indeed, can help drive the market significantly, and the market needs longer time to adapt and adjust amid a strong policy.
Solar-plus-storage growth amid China’s “3060 Target”
China’s solar market grew from 55 GW to 83 GW over the 2021-2022 period, while the FTM-solar-plus-storage market will increase from 0.5 GW to 2 GW. Against the backdrop of current policies, InfoLink’s calculation in an ideal scenario suggests solar-plus-storage demand will grow from 1.4 GW to 3.9 GW.
China’s demand for storage applications will rise amid the rapidly growing solar market. In response, the central government as well as provincial authorities will continue to update and strengthen policies for energy storage. China issued a notice on the “Accelerating the Development of New Energy Storage and Participation in the Electricity Market and Power Conditioning” on June 7, a measure that allows energy storage to participate in ancillary services in addition to applying to the solar market, thereby improving payback and economic value of the industry. With rapidly growing solar market and energy storage policies complementing each other, InfoLink optimistically predicts that the country’s energy storage market will grow from 2.4 GWh in 2020 to 32 GWh in 2025, reaching nearly 100 GWh in cumulative term and a compound growth rate of almost 70%.