China's ESS cells production in 2023 was approximately 183GWh, an increase of 81% year-on-year in 2022. In 2023, more demand came from front-of-meter energy storage, and the proportion of front-of-meter energy storage battery production has reached more than 80%.
In Q1 of 2023, domestic power plants are in the project planning period and the conventional 1230 grid connection node has passed. Coupled with the demand in overseas markets starting at the beginning of the year that is less than expected, ESS cells production is declining with demand and is in a state of destocking. At the end of the first quarter, with the end of the domestic Spring Festival holiday and the completion of legacy projects from last year and a small number of new projects this year, energy storage battery production gradually increased.
In Q2 of 2023, at the beginning of the quarter, due to the rapid decline in the prices of domestic lithium battery main materials and lithium carbonate, downstream procurement and installation demand were not expected to be urgent, the ESS cells production declined and the market entered a short-term destocking stage; at the end of the quarter, due to the mid-year grid connection node is approaching , the operating rate of ESS cells companies increased and re-entered the stage of slight accumulation.
In Q3 of 2023, the energy storage market has not improved after the completion of grid connection. The domestic large-scale storage market has a large inventory and a significant decrease in shipments, while the small-scale storage market continues to be weak. At the same time, ESS cells are still in the process of falling in price, and the declining battery prices have continued the wait-and-see attitude of downstream customers in picking up goods. Non-essential grid-connected projects will not pick up goods. The energy storage battery industry is in the process of reducing production and destocking this quarter. Orders from leading companies are less volatile, while tailing companies have significantly reduced their orders.
In Q4 of 2023, the energy storage battery industry is still in the process of reducing production and destocking. Although domestic integrators focus on system delivery in December, domestic shipments did not improve significantly in the fourth quarter due to high energy storage battery inventories in the early market. At the same time, overseas Europe continues to destock, and the installation of capacity in the United States is delayed. It is difficult for other emerging markets to contribute effective increases, and the overall overseas energy storage demand remains sluggish. In the fourth quarter, energy storage battery companies continued to reduce production and destock.
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