1.1. Background
In December 2023, at the twenty-eighth Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) (referred to as “COP28”), the “Global inventory text” was released, which attracted worldwide attention, calling on countries to triple the installed capacity of global renewable energy by 2030 to scientifically achieve the goal of net zero emissions by 2050 [
1]. With the acceleration of the process of “carbon neutrality”, the trend of developing clean and low-carbon energy represented by photovoltaic on a global scale remains unchanged. At present, photovoltaic power generation has fully entered the stage of large-scale development, and the global new photovoltaic installed capacity continues to increase. According to the International Energy Agency (IEA) data, the cumulative installed capacity of global photovoltaic power exceeded 1100 GW in 2022, and the new installed capacity of global photovoltaic power generation increased from 30.2 GW in 2011 to 197 GW in 2022, of which there is 87.41 GW of new PV installed capacity in China. Driven by China’s long-term policy guidance and market support [
2], photovoltaic will become the main force in building a new power system, and China has proposed that the total installed capacity of wind power and solar power will reach more than 1.2 billion kilowatts by 2030. After years of rapid development, China’s photovoltaic industry ranks among the top in the world in terms of technology level and manufacturing scale [
3].
In recent years, the continuous reduction in the cost of photovoltaic components and policy-driven initiatives have rapidly improved the economic viability of photovoltaic (PV) power plant operations [
4]. The International Renewable Energy Agency (IRENA) released the “2021 Renewable Energy Electricity Cost Report”, which revealed that from 2010 to 2022, the global solar PV cost experienced the fastest decline in cost, with the average levelized cost of electricity (LCOE) decreasing from 0.445 US dollars per kilowatt-hour (kWh) to 0.049 US dollars per kWh, a reduction of 89%. However, with the rapid increase in the penetration rate of PV power generation in China, the power system is facing a shortage of flexibility resources, and the issue of curtailed power due to the variability of PV power generation is becoming increasingly prominent [
5]. To enhance the flexibility of PV power plants and reduce curtailed power, Chinese provinces and cities have introduced the “Compulsory Storage” policy, which mandates the integration of energy storage as a precondition for connecting new energy sources to the grid or obtaining approval. For example, in 2021, Jiangxi Province, China, issued a notice regarding the selection of competitive and preferred projects for new PV power generation in 2021, which stated that “in 2021, new PV power generation projects selected for competitive optimization in the province can voluntarily choose the integrated construction model of solar and storage, with the energy storage capacity not less than 10% of the installed capacity of the PV power station per hour, and the energy storage power station is generally built no later than the synchronous completion of the PV power station”. Driven by policy, photovoltaic energy storage (PV-ES) integration projects have begun to enter the market as an efficient solution. PV-ES integration refers to the addition of energy storage inverters, energy storage batteries, and other energy storage system equipment in the PV power generation system, effectively addressing the shortcomings of intermittent, fluctuating, and low controllable PV power generation, resolving the contradiction between continuous power generation and intermittent power consumption, and achieving stable operation of electricity on the generation side, grid side, and user side. However, the current challenge faced by PV projects with storage is the high cost, which makes the economic viability difficult to demonstrate and significantly increases project investment risks. Without a rapid reduction in costs or the endorsement of new support policies, it is challenging to stimulate investor enthusiasm and to truly realize the profit mode of solar-storage integration projects. Although solar-storage integration projects are facing the high-cost pressure of storage, China’s many regions have simultaneously introduced corresponding energy storage subsidy policies while promoting the compulsory allocation of new energy sources. For example, in December 2022, the People’s Government of Inner Mongolia Autonomous Region issued a document stating that energy storage power stations included in the region’s demonstration projects will enjoy capacity subsidies, with a subsidy of 0.35 yuan per kilowatt-hour for actual discharges, and the subsidy period will not exceed ten years”.
The valuation of PV-ES integration projects places greater emphasis on economic viability, wherein the contribution of energy storage is a crucial component of the project’s revenue, aiming to prevent distortions in the original intention of PV-ES integration due to profitability challenges associated with storage configuration. Therefore, assessing whether PV-ES integration projects can achieve expected returns under the consideration of energy storage subsidies is pivotal in evaluating project feasibility. Due to the incorporation of energy storage, both the cost and revenue composition of PV-ES integration projects undergo changes, with factors involved in the system dynamically evolving and mutually influencing throughout the entire lifecycle. This renders it difficult to accurately assess the cost and revenue levels of PV-ES integration projects. Hence, it is of practical significance to comprehensively consider the cost and revenue composition of PV-ES integration projects throughout their entire lifecycle and construct a dynamic measurement model for the LCOE-NPV of such projects, facilitating informed decision making and the formulation of corresponding energy storage policies.
1.2. Literature Review
The integration of energy storage with photovoltaic (PV) systems forms a PV-energy storage system, enabling the bidirectional flow of electric current. This system concurrently possesses the functionality of energy storage batteries and a highly reliable power supply source [
6]. It can enhance the reliability and quality of the power system, as well as improve the grid’s capacity to accommodate renewable energy sources [
7]. Presently, research in China on PV-energy storage systems predominantly focuses on energy management and control strategies [
8,
9,
10], system design [
11,
12], and development forecasting [
13], with relatively limited attention to economic studies. In recent years, as PV has rapidly developed and energy storage has been extensively promoted, the economic issues related to PV-configured energy storage projects have garnered significant attention. Both domestic and international research efforts have predominantly concentrated on the analysis of costs associated with PV and energy storage systems, as well as the investment benefits of PV-energy storage system integration.
The investment costs of photovoltaic (PV) and energy storage systems significantly influence the economic viability of projects. A comprehensive life-cycle cost assessment model is established for user PV system generation projects in [
14]. Through an analysis of various user types in Spain, it was discovered that the initial investment cost of PV generation systems is the primary factor affecting overall PV station costs. Aimed at minimizing life-cycle costs, an optimization model is constructed using a hybrid particle swarm and generalized pattern search algorithm in [
15]. A minimal generation premium model is proposed to effectively schedule intermittently available, low-cost solar energy in [
16]. A case study conducted in Minnesota demonstrated that reducing investment costs and, when necessary and appropriate, decreasing PV generation can minimize unit premiums. Literature [
17] addressed three large-scale energy storage applications: pumped hydro storage, compressed air energy storage, and lithium iron phosphate battery storage. By integrating a life-cycle analysis of energy storage systems and calculating their total life-cycle costs, this study provided an objective and unified standard for cost assessments of various energy storage schemes, ensuring optimal economic benefits throughout the entire life cycle of energy storage systems.
As photovoltaic (PV) technology matures, the evaluation of its economic feasibility, particularly when compared to other power generation technologies, often employs the Levelized Cost of Electricity (LCOE). The LCOE model and the economic evaluation index were used to analyze distributed PV systems and found that the maturity of PV technology and the decline in investment costs have contributed to the fact that distributed PV can quickly achieve the goal of parity [
18]. The literature [
19], by summarizing and synthesizing policies and influencing factors related to distributed PV projects, coupled with the LCOE model and Net Present Value, conducted an economic study on distributed PV. Based on the LCOE model, the literature [
20] calculated the costs of PV electricity generation, simulating the impacts of reductions in total plant costs, construction investment costs on PV electricity costs. The findings highlighted the significant influence of construction investment on costs within the LCOE model.
The Levelized Cost of Electricity is constructed considering factors such as PV system costs, operational costs, and tax costs in [
21]. By employing the LCOE model to forecast centralized and distributed PV costs in 2025, the study revealed that the prioritization of centralized and distributed PV costs differs when considering transmission costs. The technical and economic impacts of energy storage system design on the feasibility of PV power plants are explored in [
22]. The study found that although the molten chloride double-tank energy storage system has the lowest storage cost, integration with PV leads to a higher LCOE compared to other research designs. The Levelized Cost of Storage (LCOS) is predicted for different energy storage technologies from 2015 to 2050 based on trends in investment cost reductions and current performance parameters [
23]. The research indicated that by 2030 and 2050, the LCOS of various storage technologies in simulated applications would decrease by one-third to one-half. Starting from 2030, lithium-ion may become the most cost-effective energy storage technology in almost all fixed applications.
In the aspect of investment and profitability analysis of photovoltaic energy storage systems, literature [
24] constructs a cost-benefit model based on the structure of distributed photovoltaic energy storage systems to evaluate and compare the net income and cost-profit ratio of different user types under different electricity price models. The research indicates that the costs of photovoltaic and storage, load characteristics, and user electricity price models significantly influence the economic viability of the system. The cost-benefit model are established for distributed photovoltaics with and without storage systems under different operating modes in [
25]. Through case analysis of different users, the study suggests that the economic feasibility of installing storage systems is lower for residential users, while the economic advantage of installing storage systems is relatively significant for business users. Literature [
26] focuses on distributed photovoltaic energy storage systems and establishes cost-benefit models for investment economics, carbon emissions over the lifecycle, and energy analysis. By evaluating the economic, carbon emission, and energy benefits of a distributed photovoltaic and energy storage project in Jiaozhou, Shandong, China, it is concluded that adding storage systems to photovoltaic systems reduces investment profitability. The cost-minimization economic model is established for distributed photovoltaic and storage systems with and without energy storage management methods based on the structural characteristics of grid-connected distributed photovoltaic storage systems in [
27]. By comparing the economic efficiency of the two modes, the study suggests that configuring storage systems can not only improve the utilization of photovoltaic power generation but also enhance grid stability.
With the development of renewable energy sources, subsidy policies have helped to improve the financial situation of power producers, and many articles have identified incentive policies as an important factor influencing the effectiveness of renewable energy investments. The experience of the last three decades of solar and wind energy development in Europe shows that end-product subsidy schemes play an important role in the transition to renewable energy. An exemplary subsidization path to empower large-scale growth in a market for green hydrogen is defined in [
28], and the subsidization schemes from other renewable markets are provided. A method for policymakers to more accurately study the financial performance of residential solar photovoltaics from the perspective of consumers is proposed in [
29]. Taking Ireland as a case study, a series of prospective policy scenarios are modeled, comparing policy mechanisms such as compensating homeowners for electricity generation, reducing upfront costs, and assisting with financing. The research indicates that more generous financial incentive programs can accelerate the investment payback period. A mathematical model for the performance of distributed photovoltaic energy storage systems is established in [
30]. By comparing the investment payback periods of distributed photovoltaic energy storage systems with and without incentive policies, the effectiveness of incentive policies for different locations and building types is evaluated. The research shows that current incentive policies can shorten the investment payback period of projects. China is not mature enough to develop incentives for renewable energy development, so a study of incentives for photovoltaic storage energy development in China is necessary [
31].
In summary, there is already a certain research foundation on the economic feasibility of photovoltaic combined with storage systems both domestically and internationally. However, studies regarding system costs mostly analyze investment costs of photovoltaic systems and storage systems, with less emphasis on the generation costs of photovoltaic storage systems. Moreover, the cost–benefit estimation methods commonly used in existing research are mostly static, which may result in lower accuracy of LCOE (levelized cost of electricity) models due to the dynamic and interrelated nature of variables such as storage equipment replacement costs and revenues over the lifecycle of PV-ES integration projects. Furthermore, while the Chinese government has introduced new energy storage policies and corresponding subsidies to promote renewable energy consumption, few scholars have considered the economic effects of energy storage subsidies on “new energy + storage” projects. Given the current substantial efforts in China to promote energy storage, neglecting this aspect in LCOE calculations for PV-ES integration projects may lead to significant deviations in the analysis results. It is hoped that this study can fill this gap and provide more detailed information for the policy system of China’s photovoltaic storage market.
Therefore, this research thoroughly analyzes the composition elements and causal relationships of costs and benefits throughout the lifecycle of PV-ES integration projects, constructs a dynamic LOCE-NPV (levelized cost of energy-net present value) system model, and takes a specific photovoltaic storage project as an example to simulate the development trend of PV-ES integration projects under different storage configuration ratios and subsidy mechanisms. It also analyzes the effectiveness of relevant energy storage subsidy policies to provide reference for optimizing energy storage subsidy policies and further promoting the development and application of PV-ES integration projects in China. The work of this paper provides a dynamic solution for evaluating the economic feasibility of PV-ES integration projects, which can be applied to compare different configurations of photovoltaic and storage systems and help determine their competitiveness with other competing options. This research helps policymakers better understand the impact of energy storage subsidies on investment decisions for PV-ES integration projects, thereby designing and optimizing corresponding policies more accurately to achieve greater social benefits. It also aims to provide valuable references for enterprises investing in and operating photovoltaic storage power stations, enabling them to analyze the economic feasibility of PV-ES integration projects by considering government subsidy factors and make more rational decisions to promote the development and application of PV-ES integration projects more effectively. These points represent the major contributions of this paper.