Anhui Province has proposed a capacity payment mechanism that would link grid-side independent energy storage revenue to discharge duration. According to Zhonghe Energy Storage, the draft uses a base rate of 165 yuan per kilowatt-year, adjusted by a ratio of 'full-power continuous discharge duration divided by six hours.' In simple terms, the longer a storage system can discharge at full power, the higher its capacity payment.

A duration multiplier for storage

The formula matters for long-duration energy storage. A two-hour battery would receive a fraction of the base rate, while a four- or six-hour system would receive a larger payment. The article's calculations suggest that four-to-six-hour flow battery projects would see significantly improved annualised revenue under the proposed mechanism.

How the calculation works

Under the proposal, a storage asset's capacity price is not a flat payment. It is scaled by its duration relative to a six-hour reference. That design attempts to value the capacity contribution of storage that can run for longer periods, rather than treating all megawatts as equal.

'Capacity price linked to duration: the longer the full-power discharge, the higher the capacity payment.' — Zhonghe Energy Storage

Implications for flow batteries

Flow batteries are naturally suited to longer durations because power and energy capacity are decoupled. A duration-linked capacity payment could improve their business case relative to shorter-duration lithium-ion systems in grid-side applications. The Anhui proposal is still a draft, and final rules may change. But it is one of the first Chinese provincial mechanisms to explicitly reward longer discharge duration through capacity remuneration.

If adopted, the model could be watched by other provinces designing storage payment schemes. For LDES developers, the key question is whether the multiplier is strong enough to cover the higher upfront cost of long-duration systems. The article's case studies suggest the answer may be yes for four-to-six-hour projects, though actual revenue will depend on final parameters and market rules.

This article was assisted by AI analysis. Please refer to the original source for official information.