Event:
On March 23, 2022, Guangdong Electric Power Trading Center issued a notice on publicly soliciting opinions on the implementation rules for the administration of power auxiliary services in the southern region (Draft for comments), which further clarified the use and income of Pumped Storage Power Station assets from the perspectives of call priority and inclusion of auxiliary service compensation conditions.
Comments:
Clarify the priority call order, and the utilization hours are expected to be further improved
The document proposes that the power dispatching organization should give priority to the use of pumped storage units to provide auxiliary services according to the needs of the system, and other auxiliary service resources can be used only when the capacity is exhausted. At the same time, the priority of the use of pumped storage units should be disclosed on a monthly basis. According to the data of prospective industry research institute, at present, the cumulative installed capacity of pumped storage in China accounts for nearly 90% of the energy storage market. At the same time, the new energy storage represented by electrochemical energy storage is still limited by safety problems and high construction costs. The clear priority of pumping and storage power stations is conducive to give full play to the operation characteristics of pumping and storage power stations in the power system, such as peak cutting and valley filling, low pumping and high generation, and maximize the value of pumping and storage power stations. In addition, from the perspective of revenue, with the large-scale grid connection of renewable energy with large output fluctuation, the demand for transferring energy storage to participate in auxiliary services and ensure the safe operation of the power grid is increasing. Clarifying the priority of pumping and storage power station is expected to improve the utilization hours of power generation, so as to increase the revenue of electricity price in the two-part electricity price.
Include auxiliary service compensation and increase the profit of pumping and storage power station
The document defines the conditions and standards for the pumping and storage power station to be included in the compensation for auxiliary services. In terms of compensation conditions, the cumulative utilization hours of pumped storage units in that year exceed 2700 × H1 hours and the cumulative utilization hours of pumping exceeds 1600 × After H2 hours, the excess can be included in the auxiliary service compensation. In terms of compensation standard, the document stipulates that after the utilization hours of the pumping and storage unit reach the specified value, the excess pumping capacity shall be compensated according to the standard of 3% R5 (yuan / megawatt hour). In addition, for other auxiliary services participated by the pumping and storage power station, if the compensation standard is not specified yet, it shall be implemented with reference to the hydropower unit. We believe that this affirms the value of the pumping and storage power station itself participating in auxiliary services, and further thickens the income of the pumping and storage power station on the basis of the two-part electricity price.
Calculation of electricity price profit elasticity brought by the increase of hours
According to the operation data of pumping and storage assets released by State Grid Xinyuan Holdings Co., Ltd., the average comprehensive utilization hours of pumping and storage power stations from 2018 to 2020 were 255176 hours, and there is still room for improvement from the cumulative utilization hours of 2700 hours mentioned in the document; At present, the average annual power generation utilization hours of pumping and storage units are about 1130 hours. Under the condition of unchanged utilization efficiency, if the comprehensive utilization hours reach 2700 hours, the power generation utilization hours of pumping and storage power stations are expected to increase to 1190 hours in the future. According to the "14th five year plan" proposed by China Southern Power Grid, the corresponding installed capacity of pumping and storage power stations in the South will reach 13.88gw by the end of 2025. It is estimated that the profit elasticity of electricity price brought by the increase of power generation utilization hours is about 5.3%.
Investment advice
The medium and long term development plan for pumped storage (20212035) and the opinions on further improving the price formation mechanism of pumped storage power stations (Document No. 633) have opened up growth space for the pumped storage industry from the perspective of installed capacity and income respectively. The detailed rules for the management and implementation of power auxiliary services in the South (Draft for comments) issued this time will enhance the profitability of pumping and storage power stations in the south by clarifying the priority of pumping and storage power stations and giving compensation for auxiliary services, which is expected to enhance the investment enthusiasm of pumping and storage power stations, promote the growth of installed capacity of pumping and storage power stations and give better play to the role of auxiliary services. In terms of specific targets, it is suggested to pay attention to [ Yunnan Wenshan Electric Power Co.Ltd(600995) ] for energy storage operation targets and [Southern Grid Technology] for energy storage EPC targets.
Risk tips: risks related to the establishment of pumping and storage power station project, uncertainty risk caused by the implementation of relevant policies, risk of price reduction, less than expected construction of power spot market, intensified industry competition, etc
