Key takeaways:
On the one hand, the current distributed PV has entered a strange circle: module costs have decreased→ LCOE have decreased, theoretical benefits have increased→ non-technical costs have increased, and the cost of electrochemical energy storage has increased→ actual total cost has basically remained unchanged→ actual LCOE and project benefits have basically remained unchanged. That is, the results of technological progress flow into non-technical costs.
On the other hand, more than 10 provinces will implement valley power at noon during the noon period of sales electricity prices in some months, and distributed photovoltaics face the risk of declining comprehensive electricity prices in the future.
Therefore, it is necessary to support distributed PV to participate in electricity market-based transactions as soon as possible, find the most economical and flexible resources through the market instead of simple distribution and storage, and release the demand-side potential through the electricity price mechanism.
In the process of entering the market, we should pay attention to two issues:
1) New and old divisions: distinguish between existing power stations and incremental power stations, new policies for new projects, and old policies for old projects;
2) Classified policies: 220V/380V household photovoltaic projects invested by natural persons involve people's livelihood and should be considered under the same conditions as residential electricity consumption, and the purchase and feed-in tariff are still covered by the power grid company.
3) Improve the supporting mechanism.
By the end of 2023, the installed capacity of distributed photovoltaic in China has reached 254GW, accounting for 9% of the country's total installed power capacity; In some provinces, such as Zhejiang, Anhui, Henan, Jiangsu, etc., the installed capacity of distributed photovoltaic has accounted for 20% of the total installed power capacity of the province! With the continuous improvement of the scale and proportion of distributed photovoltaic projects, the voice of distributed photovoltaic entering the power market is getting louder and louder!
Personally, I believe that the entry of distributed photovoltaic into the power trading market is "ready to fly"!
1. "Distribution and storage + non-technical costs" or "market-oriented transactions"?
1. The benefits of module cost reduction are eaten up by non-technical costs!
Since the second half of 2023, domestic PV module prices have dropped sharply. According to statistics from Infolink, a third-party consulting agency, the current PV module price has decreased by 1.08 yuan/W compared with the same period in 2022; Compared with the same period in 2023, it will decrease by 0.84 yuan/W. The details are shown in the figure below.
Source: Infolink
Chart: 2022.1~2024.3 PV module price chart
According to common sense, the sharp drop in module prices will inevitably lead to a significant decrease in the LCOE of PV and an increase in project revenue. However, this is not the case.
1) Increase in market development costs
The improvement of the theoretical income of the project has led to extremely fierce market competition! In order to obtain projects, investors have to pay higher market development fees and accept more stringent conditions. According to a company, due to the price reduction of photovoltaic modules, the development fee of household photovoltaic projects has increased from 0.6~0.7 yuan/W at the beginning of the year to 1~1.5 yuan/W.
2) Increased demands from local governments
In addition to market development fees, local governments will also put forward various requirements such as investment support, payment of rural revitalization funds, and revenue sharing of electricity charges when bidding for distributed photovoltaic projects. For example, a 200MW distributed photovoltaic bidding in a certain place requires the winning enterprise to introduce 300 million yuan of industrial projects and the county government's participation in the project (including "carbon emission reduction" trading, etc.).
The end result is that due to the increase in these non-technical costs, the cost of the PV system has decreased, and the project has not been brought to the project general contracting; Most of the technological progress in the PV industry flows into non-technical costs. This is very detrimental to the healthy development of the industry.
2. The call for distributed photovoltaic distribution and storage is getting louder!
With the increase in the proportion of distributed photovoltaics, the power grid lacks flexible adjustment resources, and in order to improve the penetration rate of distributed photovoltaics, the call for distribution and storage is increasing! (For details, see "Summary of 15 Distributed Photovoltaic Distribution and Storage Policies")
1) Distribution and storage continue to eat into the revenue of module price reduction
At present, almost all ground-mounted photovoltaic power stations in all provinces across the country need to be equipped with electrochemical energy storage, and the proportion of energy storage is also increasing. From the initial 10% and 2 hours to the current requirement of 50% and 2 hours, the cost pressure brought by distribution and storage is increasing, and it also eats up most of the benefits brought by the decline in module prices.
Since 2023, at least 14 provinces across the country have issued nearly 30 provincial, county-level and city-level distributed photovoltaic management measures, and most of them mention "configuring electrochemical energy storage". At present, all provinces are encouraged to allocate and have not yet been compulsory. However, once distributed PV distribution and storage is distributed, it will definitely face the same problem as the distribution and storage of ground power stations, that is, the distribution and storage ratio will become higher and higher, swallowing up most of the benefits brought by the decline in module prices!
2) There are more problems with distributed distribution and storage
In addition, distributed PV distribution and storage also faces some additional problems. For example:
The scale of distributed photovoltaic is small, the scale of energy storage is small, the cost is high, and it is difficult to dispatch; The layout is scattered, which is difficult to operate and manage; Due to the difficulty of scheduling and operation and maintenance management, it is difficult to really play a role in peak regulation and frequency regulation in the later stage.
On the other hand, is distributed photovoltaic distribution and storage on the 380V side or 10kV side? Who invests? Who will operate and manage it in the later stage? There are many problems.
At the same time, in the practice of distributed distribution and storage in many places, it is found that the current small-scale industrial and commercial energy storage cannot sell electricity to the grid due to the lack of standards. That is, the energy storage can be used for its own use, but it cannot be sold to the grid! For energy storage projects in industrial and commercial parks, it is still possible to use itself, but for household photovoltaic projects, the energy storage power cannot be connected to the Internet, so it is impossible to truly implement distribution and storage!
3) There are more distributed adjustment means
In fact, there is more to the flexibility of resources that can help distributed consumption than just electrochemical energy storage. Compared with ground-mounted power stations, distributed photovoltaics can make better use of the response from the user side. Distributed PV is on the load side, and the demand adjustment on the load side is more flexible. As long as there is a reasonable electricity price mechanism, electric vehicle charging, washing machine start-stop, etc., can become the "peak shaving resource" of distributed photovoltaics!
Shandong has been implementing the noon valley electricity price since January 2023, and after a year of practice, it has been found that a large number of flexible loads have been transferred to noon. According to a report by Dazhong Daily, in 2023, 633,300 industrial and commercial users in Shandong will implement dynamic time-of-use electricity prices, and the new energy consumption space will increase by about 3.5 million kilowatts at noon, and the electricity load will be transferred by about 2 million kilowatts during the evening peak, saving a maximum of 18 million yuan in electricity costs for a single enterprise.
The policy has achieved the effect of "three benefits".
One benefit, conducive to the consumption of new energy: through the price signal to guide users to cut the peak and fill the valley, the noon new energy consumption space of photovoltaic Dafa increased by about 3.5 million kilowatts.
Second, reduce reserve capacity: During the evening peak hours (high electricity price period), the electricity load is reduced by about 2 million kilowatts, and the peak shifting effect is very obvious, which is equivalent to two Taishan pumped storage power stations.
Three benefits, users save electricity bills: the electricity consumption of photovoltaic Dafa at noon (low electricity price period) increases, and the electricity consumption decreases during the evening peak hour (high electricity price period), saving a maximum of 18 million yuan in electricity costs for a single enterprise.
(For details, see "Shandong: 3.5GW of new photovoltaic consumption space at noon!") 》）
3 Summary
From the above analysis, it can be seen that distributed PV has entered a strange circle:
The cost of modules decreased→ LCOE decreased, the theoretical revenue increased→ the non-technical cost increased, the cost of configuring electrochemical energy storage increased→ total cost basically returned to the level before the module price reduction→ the actual LCOE remained unchanged
In the era of subsidies, it is often through the dispatch of electricity subsidies to balance the increase in revenue brought about by the decline in costs, breaking the strange circle;
In the era of grid parity, distributed PV needs to enter the electricity market and achieve this goal through real transaction prices.
Second, most of the photovoltaic electricity has actually entered the market
1. The proportion of ground-mounted photovoltaic power stations participating in transactions is already very high
According to the data of the State Grid and the National Energy Administration, the proportion of new energy electricity participating in market-based transactions in the country has grown rapidly, reaching 47.3% in 2023, as shown in the table below.
The above-mentioned transactions are all large-scale wind power and photovoltaic projects. It can be seen that the proportion of ground-mounted photovoltaic power stations participating in market-oriented transactions has been very high.
2. Industrial and commercial distributed photovoltaics have in fact entered the market
In the past two years, domestic industrial and commercial distributed photovoltaics have basically adopted the mode of "self-generation and self-consumption, surplus electricity grid", and more than 80% of the power generation is self-consumption. Therefore, the electricity price of industrial and commercial distributed photovoltaic projects is basically bound to the electricity price of electricity users.
Since 2022, all large-scale industrial, industrial and commercial projects in mainland China have participated in market-based transactions, that is, the electricity price of users is the price after market-based transactions. Therefore, the electricity price of industrial and commercial projects bound to the user's electricity price is actually passively involved in market-oriented transactions.
Therefore, the implementation of peak-to-valley electricity prices by users in many provinces, especially at noon, has a great impact on the revenue of distributed photovoltaic projects. From this point of view, industrial and commercial distributed photovoltaics have in fact entered the market.
3. Distributed photovoltaic projects have the basis for participating in market-oriented transactions
Since the distributed photovoltaic project is on the user side, the target is the electricity price of the user, that is, the sales price of the power grid.
In addition to the "feed-in tariff" purchased by the power grid from power generation enterprises, the sales price also includes the transmission and distribution cost of the power grid company, the capacity electricity price apportionment, the government fund, the amortization of auxiliary service fees, and the reasonable profit of the power grid, which is generally more than 3 cents. Taking Shandong as an example, even the price of electricity in the deep valley is more than 3 cents.
At the module price of 1 yuan/W, the cost of distributed photovoltaic projects can be controlled between 2.5 yuan/W ~ 3 yuan/W if non-technical costs and distribution and storage costs are not considered.
The total investment is between 2.5 yuan/W~3 yuan/W, according to 30% capital, 5% financing cost, and 1100~1300 hours of power generation, in order to obtain a return rate of 6% of the total investment, the reverse calculation of the electricity price is about 0.18~0.24 yuan/kWh.
Therefore, if non-technical costs are not considered, under the existing cost, photovoltaic power generation is competitive to participate in market-based transactions.
The four residential PV markets are the least involved and the most affected
At present, the mainland's household PV basically adopts the method of full grid access, and the grid purchases at the local coal power benchmark price, which is the lowest degree of participation in market-oriented transactions among all kinds of photovoltaic projects, and it is also the most affected type of project after full marketization.
Therefore, different policies should be adopted for different types of residential projects.
220V/380V household photovoltaic projects invested by natural persons involve people's livelihood and should be considered under the same conditions as residential electricity consumption, and the purchase and feed-in tariff are still covered by the power grid company; to reduce the impact on the market.
III. Conclusion
1 The main conclusions of the previous analysis
1. Distributed photovoltaics account for a high proportion in many provinces, and the power system needs to be matched by the rapid growth of flexible resources. Compared with the allocation of electrochemical energy storage, participating in market-based transactions is an effective measure to explore the most economical and flexible resources.
2. The decline in module prices makes photovoltaic projects bear higher and higher non-technical costs, and discovering the real power value through market-oriented means is an important way to eliminate higher and higher non-technical costs, which is conducive to the return of the market to rationality.
3. Industrial and commercial distributed photovoltaics have been affected by market-oriented transactions, and have actually passively participated in transactions; Distributed into the market in an all-round way, the most affected are residential photovoltaic projects.
2. Two problems of distributed photovoltaic entering the market
1) The problem of stock and increment
For the stock power station, the previous electricity price document issued by the National Development and Reform Commission unanimously emphasized: in principle, the electricity price will remain unchanged for 20 years!
Moreover, the LCOE of PV is basically determined by the initial investment. If the policy is suddenly changed during the implementation of the project, it is easy to affect the credibility of the government's policy, resulting in the collapse of industry confidence, which is very unfavorable to the development of the industry.
Therefore, it is recommended to adopt a minimum electricity price for existing power stations. Once the average market-based electricity price of a province is lower than the benchmark price of coal-fired power, the difference will be subsidized by off-site funds (such as green certificate income), or apportioned in the electricity charges of large industries, industrial and commercial enterprises in the following month.
In accordance with the rhythm of all new energy entering the market before 2030, the time of 5~7 years will be used to gradually reduce the number of supporting hours of the stock power station, ensure that the project enters the market after the payback period, and minimize the impact of the market entry on the stock power station.
2) Different policies are adopted for different types of projects
For industrial and commercial distributed photovoltaic projects, the investors are enterprises, with strong anti-risk ability, and can gradually enter the market according to the situation of each province;
220V/380V household photovoltaic projects invested by natural persons involve people's livelihood and should be considered under the same conditions as residential electricity consumption, and the purchase and feed-in tariff are still covered by the power grid company.
Many provinces have managed household PV projects in accordance with industrial and commercial distributed projects, and can also adopt the same market entry policies as industrial and commercial PV.
3) The construction of supporting mechanisms
The premise for distributed photovoltaics to enter the power market is that there are supporting measures to adapt to it. One of the most important things is how to realize green value.
In the future, the obtained electricity price of distributed PV = electricity energy price (transaction electricity price) + green electricity value - system cost (ancillary service fee, etc.)
However, since the second half of 2017, the mainland has sold a total of 61.35 million green certificates, which is equivalent to 61.3 billion kilowatt-hours of electricity, which is an order of magnitude different from the power generation of new energy, and more than 95% of the sales revenue of green without green certificates. How to ensure that all green power involved in the transaction realizes green value is an important guarantee for distributed photovoltaic to enter the market!
Article source: Zhihui Solar