A shared storage capacity leasing model turns battery storage from a project-specific compliance asset into a tradable, system-facing flexibility resource. In this structure, an independent storage operator can buy electricity when market prices are low, sell electricity when prices are high, and receive compensation for maintaining dependable discharge capacity. At the same time, charging electricity can be exempted from selected grid-related charges, including transmission, distribution, and certain government surcharges, which improves operating economics and makes market-based dispatch more viable.  

The leasing element allows storage capacity to be registered centrally and contracted across an entire province, enabling renewable generators or other eligible counterparties to lease capacity instead of building dedicated batteries at each site. This matters because it stacks multiple value streams into a single business model – energy arbitrage, capacity compensation, and leasing revenue – while widening access to storage services beyond the owner of the asset.  

Strategically, the model supports a more efficient build-out of flexibility: storage can be deployed where it is most valuable to the power system and  then shared through market arrangements rather than duplicated project by project. As electricity systems absorb more variable renewable generation, this kind of market design helps align storage investment with both commercial incentives and system reliability needs. 

Main outcomes of the solution 

• Affordability: Shared storage lowers total system cost by allowing multiple users to access a single storage asset instead of building separate project-specific systems. Exempting certain charging-related grid costs and combining leasing, market trading, and capacity payments also improves asset utilization and reduces the cost of deploying flexibility at scale.  
• Reliability & Flexibility: The model increases dispatchable flexibility by enabling storage to respond to spot market conditions and by compensating available capacity. This supports balancing of variable wind and solar generation, peak demand management, and overall system operability.  
• Institutional Efficiency & Transparency: Central registration and province-wide leasing through the electricity trading center create a structured framework for sharing storage. Defined participation and transaction rules support a more transparent and organized market for storage services. 

Key implementation and scaling factors 

1. Allow storage to participate directly in electricity markets as an independent asset class. 
2. Combine spot market revenues, capacity payments, and leasing income to improve commercial viability. 
3. Establish central registration and province-wide leasing mechanisms to enable efficient sharing of storage capacity. 
4. Exempt charging electricity from selected transmission, distribution, and surcharge components to improve project economics. 
5. Align storage deployment with renewable expansion and system flexibility needs to support efficient scaling. 

Case study 

Shandong Provincial Development and Reform Commission, Shandong Provincial Energy Administration, and the National Energy Administration’s Shandong Regulatory Office (2022), China 

In Shandong Province, China, the shared storage capacity leasing model was introduced through a provincial policy framework issued by the Shandong Provincial Development and Reform Commission, the Shandong Provincial Energy Administration, and the National Energy Administration’s Shandong Regulatory Office.  

The framework allows independent energy storage to participate directly in electricity markets by purchasing electricity to charge and selling electricity back to the grid when discharging. It introduced a two-part compensation structure combining energy market revenues with capacity payments and requires storage capacity to be centrally registered through the provincial electricity trading center for leasing across the province by renewable energy companies.  

For designated demonstration projects, monthly available-capacity compensation was set at up to twice the standard level applied under prevailing market rules. The policy also exempts eligible charging electricity from selected transmission, distribution, and government surcharge costs. 

In practice, this framework establishes a structured approach for transitioning storage from a project-specific asset to a shared provincial flexibility resource with multiple revenue streams and formal market participation.  

Solution and insights developed with contributions from CNESA. 

References: 

1. Shandong Introduced China's First Energy Storage Support Policy in Electricity Spot Market — China Energy Storage Alliance