Qinghai Province has released the inaugural list of projects eligible for reliable capacity compensation on the generation side.

This list includes a total of 14 power stations, comprising 4 coal-fired projects, 1 gas-fired project, 8 solar thermal projects, and one energy storage project—the Golmud Hongchuyuan 100 MW shared energy storage station.

This marks the first time new energy storage has been incorporated into Qinghai's capacity compensation framework.

According to the "Qinghai Province Generation-Side Reliable Capacity Compensation Mechanism" issued by the provincial development and reform commission, qualified power sources will receive an annual fixed electricity fee to offset the fixed costs associated with supporting the grid during peak demand periods.

This payment is not subject to electricity price fluctuations, effectively serving as a guaranteed base income for these regulating power sources.

The compensation for the Golmud Hongchuyuan project is calculable: Annual Capacity Fee = Declared Reliable Capacity (22,400 kW) × Capacity Supply-Demand Coefficient (0.92) × Compensation Standard (185 yuan/kW·year) = 3.81248 million yuan.

The published data also reveals that this 100 MW plant has a certified reliable capacity of only 22.4 MW.

Under Qinghai's conversion rules, a 2-hour storage system facing an 8-hour grid peak demand sees its effective capacity discounted, with 100 MW recognized as only 22.4 MW.

Li Zhenhua, a development manager for energy storage projects in the northwest region, noted that while energy storage has gained "admission," short-duration storage is not favored under Qinghai's new rules.

The policy explicitly excludes storage projects paired with new energy installations, limiting eligibility to independent shared storage, which may force a reassessment of the value of numerous paired storage assets.

Understanding the 8-Hour Calculation

The Golmud Hongchuyuan project, connected to the grid in 2023 and located in the Golmud Photovoltaic Park, was jointly developed by China Power International, Hyperstrong, and Xinyuan Zhichu.

With a full-power discharge duration of 2 hours, it represents the mainstream configuration for shared energy storage in northwest China in recent years.

A Qinghai provincial official explained the rationale behind the 22.4 MW figure, stating the conversion rules are based on the objective reality that Qinghai's grid faces its most critical electricity shortage from 8 PM to 4 AM—a continuous 8-hour period.

During these hours, solar photovoltaic output is zero, wind power is intermittent, and the system requires sustained support from various regulating power sources.

A 2-hour storage system can only cover a quarter of this period, unable to meet the grid's full peak demand.

Consequently, the policy established a quantitative conversion formula: Reliable Capacity Coefficient = (1 - Comprehensive Auxiliary Power Consumption Rate) × Min (Full-Power Discharge Duration ÷ System Net Load Peak Duration, 100%).

Applying the Golmud project's data—with a 10.39% auxiliary power rate (the provincial average for independent storage stations) and an 8-hour system peak duration against a 2-hour discharge—the reliable capacity coefficient calculates to 0.224, meaning 100 MW of installed capacity converts to 22.4 MW of reliable capacity.

The official also clarified a market misconception, noting that the industry belief that 4-hour storage receives full capacity conversion is incorrect.

A 4-hour storage system corresponds to a conversion coefficient of only 44.8%, while an 8-hour system can reach 89.61%. The policy's logic bases核定 on the storage's actual peak support duration.

This conversion rule applies uniformly to all energy storage. Future plants with 4-hour storage would have a 44.8% coefficient, and those with 8-hour storage could achieve 89.61%. Compensation benefits are linearly and positively correlated with discharge duration.

The official also explained the setting of two key parameters. The 185 yuan/kW·year compensation standard was determined by adding approximately 12% to the national coal power capacity cost recovery floor of 165 yuan, accounting for higher costs for storage and solar thermal equipment temperature control, civil engineering, and maintenance in Qinghai's high-altitude regions.

The provincial capacity supply-demand coefficient of 0.92 was calculated based on the province's peak net load and the total reliable capacity available from various power sources over the past three years, reflecting a current supply slightly exceeding peak demand.

The eligibility list will be dynamically managed. The official stated that any independent shared storage station connected to the grid independently, not bound to a new energy project, and with complete grid connection filing procedures can apply in batches.

Several 4-hour and 6-hour storage projects currently under construction and filed in the province will be included in the compensation list once they meet the conditions.

Integrated Compensation Framework

Within Qinghai's list of 14 projects, energy storage is calculated alongside coal power, gas power, and solar thermal.

Qinghai's new energy installed capacity exceeds 85%, making it one of the provinces with the highest renewable energy penetration nationally.

While there is a power surplus during daytime peak solar hours, an 8-hour gap without solar output persists nightly. Historically, this gap has been filled by thermal power and solar thermal.

Including independent storage in capacity compensation signifies official policy recognition that electrochemical storage, like traditional power sources, possesses system security capacity value.

The provincial official outlined multi-faceted considerations for including independent storage: first, to meet Qinghai's power system needs by providing fixed base income to realize storage's system security value; second, to achieve "equal pay for equal work" among regulating power sources, breaking down institutional barriers that previously favored only thermal and solar thermal power; third, to guide the market toward longer-duration storage through differentiated conversion mechanisms, preventing disorderly concentration of 2-hour storage projects.

However, capacity compensation is not without门槛. The policy explicitly excludes storage paired with new energy projects, limiting applications to independent shared storage.

The official explained that independent shared storage connects to the grid as an independent market entity, with its dispatch rights managed uniformly by the provincial grid to serve the province's overall load gap.

In contrast, paired storage is primarily intended to smooth output fluctuations of its associated renewable energy project, serving a single project, with its costs already分摊 through the renewable project's pricing mechanism. Their different functions and beneficiaries necessitate separate eligibility to prevent double-dipping of policy benefits.

Furthermore, compensation is not granted unconditionally. The mechanism includes peak output assessment clauses. During the grid-announced 8-hour system peak periods, compensated storage must discharge fully as per dispatch instructions.

If actual peak output falls below the certified reliable capacity, the corresponding portion of the capacity fee will be proportionally deducted. Stations without a real-time online state-of-charge monitoring system will forfeit all annual compensation eligibility.

Li Zhenhua mentioned that his company holds three shared storage projects in Gansu and Ningxia, two of which are 2-hour configurations, and they are currently evaluating whether to apply for Qinghai's compensation list.

He stated that after Qinghai's rules were announced, they conducted internal calculations. For a 2-hour storage project entering the scheme, the annual compensation received would be nearly three-quarters less than initially expected.

However, he is more concerned about whether Gansu and Ningxia will adopt similar duration-based conversion logic. If northwestern provinces普遍 adopt an 8-hour benchmark, the entire industry's investment models would require adjustment.

Previously, financial projections focused on peak-valley price differentials and expected frequency of peak-shaving services, with capacity compensation viewed as an additional bonus.

Now, Qinghai has presented the incentive but attached a condition: to obtain the full amount, one must configure for 8 hours. This implies that future storage value lies not in larger scale but in longer duration.

He also noted the clause excluding paired storage. For instance, his company also has several storage stations built alongside renewable projects, which are ineligible for application in Qinghai under this policy.

If other provinces enact similar rules, these assets would not receive capacity income. This may lead the industry to reconsider whether future projects should be "private garages" or "public parking lots."

Li predicts the advantages of independent shared storage will be further amplified.

Public information indicates Qinghai is the first province to implement a provincial-level capacity compensation scheme simultaneously covering coal power, gas power, solar thermal, and independent storage.

The provincial official stated that for the energy storage industry, the impact of these rules is structural. Existing 2-hour storage projects in Qinghai will see significantly lower capacity compensation收益 than previously anticipated by the market.

Future new projects seeking higher compensation will need to configure 4-hour or even 8-plus-hour durations. The differentiation in compensation eligibility between independent shared storage and paired storage may also accelerate the evolution of storage assets from auxiliary construction to independent operation.

Following the conclusion of the public comment period on July 17, the list will take正式 effect. For the Golmud Hongchuyuan project, the 3.81 million yuan annual capacity compensation will provide a predictable, fixed cash flow in addition to existing leasing and ancillary service revenues.

For the broader energy storage industry, this represents merely the first provincial implementation sample of the national capacity pricing reform, with detailed rules from更多 provinces on the way.