SHANGHAI, Sep 13 (SMM) – Since 2022, the global energy storage market has experienced a massive outbreak, with new entrants continuously joining the race. The prices of energy storage cells have also seen a rapid increase due to the rising costs of lithium salts. However, in the first half of 2023, the European residential energy storage market cooled down, and China's demand growth was not significant due to seasonal factors. Additionally, with raw material prices declining, the global energy storage market has slowed down in terms of growth, leading to an oversupply of market capacity.
Based on long-term research on the energy storage market, SMM would discuss global energy storage market policies and demand, introduce key players in the energy storage industry, analyze market prices, examine technological advancements in energy storage, and explore supply chain management in the energy storage market.
Energy Storage Policies
There have been new energy compulsory energy storage policies implemented in multiple regions nationwide, making the 2-hour and above energy storage market a market necessity. Various regions have also introduced investment subsidies for energy storage projects, with a focus on promoting the development of energy storage on the generation side.
The National Development and Reform Commission and the National Energy Administration jointly issued the Guidance on Accelerating the Development of New Energy Storage which set a target of achieving a newly installed capacity of over 30 million kw for new energy storage systems by 2025. This target represented nearly a tenfold increase compared to the current capacity.
Nearly 30 provinces across the country have issued new energy configuration and energy storage policies, with a cumulative installed capacity reaching 60 million kw. The target for new energy configuration and energy storage was set at 10%-20% of the installed capacity ratio. The demand for energy storage systems with a duration of 2 hours or more have become a market necessity. In addition to this, the independent energy storage and commercial and industrial energy storage demand in China was increasing. It was estimated that by 2025, the energy storage capacity could exceed 150 GWh.
Various regions have introduced investment subsidies for energy storage projects. For example, in Zhejiang Province, for photovoltaic power projects with an installed capacity greater than 1000 kW, there was a one-time subsidy of 0.3 yuan/W for the installed capacity, as well as a one-time subsidy of 0.3 yuan/W for energy storage capacity. User-side typical scenario energy storage projects with a capacity of 1 MW or more, which have demonstrative significance, are eligible for a one-time subsidy of 10% of the actual equipment investment amount, with a maximum limit of 5 million yuan. In addition, Beijing, Guangdong, Sichuan, and other regions have also introduced corresponding subsidy policies to collectively promote the development of the generation side (new energy configuration and energy storage) market.
The United States: With the implementation of the IRA and ITC policies, various states have introduced energy storage installation targets and subsidy plans, promoting the comprehensive development of the solar-plus-storage market, independent energy storage, and household energy storage markets.
The IRA have stimulated the rapid development of energy storage projects by expanding the scope of subsidies.
1. In addition to PV paired storage, both standalone utility-scale storage and residential storage systems are eligible for tax credits. Furthermore, the baseline percentage of tax credits have been increased to 30%.
2. Extension of subsidy period: The ITC tax credit have been extended until 2033. Storage duration requirements for paired storage: A minimum storage duration of 4 hours or more is considered necessary.
State Policies:
Nine states have established energy storage installation targets, while nearly 17 states have implemented explicit energy storage subsidy programs. Among them, the SGIP in California provided the most robust support and have the longest duration. It is expected to rapidly become the driving force behind the growth of energy storage installations in the United States.
Europe:
RE PowerEU: The European Union have set a target of achieving a 45% share of renewable energy capacity by 2030 and have launched a €10 billion funding support program. This initiative aimed to accelerate the deployment of large-scale energy storage projects in Europe. Concurrently, the European Association for Storage of Energy (EASE) have released a roadmap stating the need to deploy 187 GW of energy storage by 2030 and 600 GW by 2050.
UK Market:
Development Support Policies for Large-Scale Energy Storage:
• Smart Systems and Flexibility Plan 2021: £100 million of innovation funding will be allocated to support large-scale energy storage and flexibility innovation projects.
• Removal of Storage Deployment Capacity Thresholds: £10 million (equivalent to $12.53 million) in grants is provided to support energy storage deployment.
German Market:
• Germany is rapidly developing its residential energy storage market through government subsidies and low-interest loans.
1. Draft Amendment to the Renewable Energy Sources Act (2021): The draft raises the upper limit of installed capacity for residential energy storage systems eligible for tax payment exemption from 10 kW to 30 kW.
2. Annual Tax Law (2022): Starting from 2023, the purchavee of residential solar plus storage systems is exempted from value-added tax (approximately 19%), including the import, purchavee, and installation of small-scale rooftop photovoltaic and energy storage systems.
Global energy storage market demand
China:
• 2022-2025: With the implementation of the compulsory energy storage policy under China's 14th Five-Year Plan and local subsidies for investment projects (20-30% subsidy rate), coupled with the improved economic viability of energy storage systems (continuous decline in prices of main materials like lithium carbonate, improved cycling performance of battery cells), the energy storage market in China continues to experience a surge.
United States:
• 2022-2025: The extension of the ITC subsidy policy and the IRA stimulates the rapid development of PV+ energy storage projects. The integration of enterprises leads to cost reduction trends and decreased financing costs. As a result, the North American energy storage market is experiencing rapid growth.
Europe:
• 2022-2025: Due to the European power structure (high unit price of natural gas) and continued government subsidies, such as tax exemptions and subsidies exceeding 50%, the residential energy storage market in Europe continues to surge. In the UK, large-scale energy storage systems are expected to receive subsidies in 2024, and the growth rate of the overall market remains high.
• In 2023, the energy storage market will experience a major boom, driven by the "carbon peak" policies and commercialization efforts in both China and the United States. It is estimated that the total shipment volume for large-scale energy storage systems will exceed 1000 GWh by 2030.
• China Market: Multiple regions have set energy storage development targets for the 14th Five-Year Plan period (2021-2025). The cumulative energy storage construction scale is expected to reach nearly 54 GW by 2025. The independent energy storage business model is gradually becoming clearer, and with the expected decline in lithium carbonate prices, the willingness to deploy energy storage will be enhanced.
• US Market: With the clear implementation of the IRA policy and the maturity of commercial models, energy storage projects are becoming more economically viable. This, coupled with the increasing demand for electricity storage systems, has led to a continuous upward trend in the market.
• Starting from 2023, there will be a surge in the commercial and industrial energy storage sector, with demand expected to exceed 100 GWh by 2030.
• China Market: With electricity price adjustments and improved economic viability of commercial and industrial energy storage systems, coupled with policy support, the use of such systems as a time-of-use electricity price management solution is increasing.
• Europe Market: To address energy shortages and combat high electricity prices, farms and estates are adopting commercial and industrial energy storage systems as backup capacity and for time-of-use electricity price management.
The energy storage market exhibits clear seasonality, with the first half of the year being primarily focused on project development and lower-than-expected demand for residential energy storage in Europe. As a result, the total shipment volume amounted to 87 GWh.
China: In Q1, due to a rapid decline in lithium carbonate prices, downstream buyers were cautious in their procurement. However, as we enter Q2 and see a delayed recovery in lithium carbonate prices coupled with the 630 installation deadline, demand is expected to increase by approximately 40% quarter-on-quarter.
United States: The uncertainty surrounding the IRA policy details combined with the first half of the year being primarily focused on project development, resulted in dealing with the backlog from the end of 2022.
Europe: Due to a shortage of installation workers, adjustments in electricity prices, subsidy reductions, and other factors, there have been an excess inventory in the energy storage market in the first half of the year. This led to lower-than-expected demand, primarily catering to the immediate needs of countries like Germany for residential energy storage.
In the second half of the year, it is expected to enter the installation phase of projects, leading to a rapid growth in demand.
China: In Q3, manufacturers were primarily focused on delivering remaining orders as the rush to install energy storage systems just ended. As a result, the growth rate slowed down. However, with the approaching Q4 1230 installation deadline, demand is anticipated to increase by over 40% quarter-on-quarter.
United States: The clarity of the IRA policy combined with project delays in the first half of the year have led to an expectation of a recovery in demand for energy storage in the second half of the year.
Europe: The energy shortage in Europe persisted, and as the weather turned colder, it drove the demand for residential energy storage systems. It was predicted that the European market would experience an upward trend in demand in the second half of the year.
Currently, the large energy storage cell market continued to maintain a high inventory level. However, in the domestic market, the rush to install energy storage systems have passed, leading to some demand adjustment. Additionally, in the overseas market, demand have not met expectations due to changes in interest rates, policy shifts, and other factors. It was anticipated that the overall shipment volume would decline in August. Nevertheless, some manufacturers were maintaining a high production rate as they work to fulfill existing orders and build up inventory for Q4.
The sales volume of small energy storage systems was still weak, and many companies maintained a low production rate due to market performance not meeting expectations or delayed expansion plans. Currently, the inventory of small energy storage cells remained high. However, as the weather turned colder, energy shortages in the European market were expected to become more apparent, and it was predicted that the sales volume of small energy storage systems would increase somewhat in Q4.
Introductions to key players in the global energy storage industry
Currently, the leading players in the global energy storage systems market did not yet show a clear oligopoly effect (CR3=30%), and the top companies mainly relied on integration, price advantages, brand effects, and other factors to increase their global market share. Smaller companies tended to focus on selling their products domestically, making it difficult for them to increase their market share.
Energy Storage Market Prices and Future Trends:
In November 2022, the prices of 280 energy storage cells and lithium carbonate reached their peak. However, in December, the price of lithium carbonate declined, leading to a subsequent decrease in the prices of energy storage cells. This downward trend continued until mid-April, although the overall decrease in energy storage cell prices was lower than that of lithium carbonate.
The main reason for the price fluctuations of energy storage cells was their linkage to the price of lithium carbonate, but this linkage was primarily on a monthly or quarterly basis. As a result, the overall price trend of energy storage cells closely followed that of lithium carbonate but with lower volatility.
Starting from May, the pricing mechanism in the energy storage market have been changing due to the long-term fluctuations in lithium carbonate prices and reduced bargaining power of energy storage cell companies. Most domestic companies have abandoned the linkage to lithium carbonate prices, and instead, domestic projects were mostly priced at a fixed rate. This have resulted in subsequent price increases for lithium carbonate while the prices of energy storage cells remained stable.
Currently, due to an oversupply in the energy storage cell market, many battery companies adopt a strategy of aggressively bidding at low prices. Additionally, starting from July, the price of lithium carbonate began to decline, leading to a continuous decrease in energy storage cell prices. Currently, many companies were quoting prices below 0.5 yuan/Wh, and even ultra-low prices of 0.45 yuan/Wh have appeared. If lithium carbonate prices did not experience significant increases in the future, it was expected that the prices of energy storage cells would continue to be below 0.5 yuan/Wh.
As of Q2 2023, the main materials for 280 energy storage cells included lithium carbonate, electrolyte, negative electrode materials, and copper foil. Even with a decline in prices, lithium carbonate remained the largest component, accounting for 30% of the total cost. The proportions for electrolyte, negative electrode materials, and copper foil were between 6-7%, and their contribution to the overall cost was relatively stable.
Introductions to SMM Energy Storage Price Data:
