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SMM, January 24:
According to SMM's assessment, global ESS battery cell production exceeded 360 GWh in 2024; among which, China's ESS battery cell production exceeded 340 GWh, marking a YoY increase of over 80% compared to 2023. In 2024, global ESS market demand continued to grow. Supply side, due to safety and technical considerations, China remained the dominant player in global ESS battery cell production and sales, while the share of ternary ESS battery cells further declined.
2024 Review of China's ESS Battery Cell Production:
Q1 2024: At the end of 2023, the ESS sector's battery cell inventory was already at a high level. Coupled with China's transition into a project planning phase after concentrated grid connections at the end of 2023, ESS battery cell orders saw a slight decline. Overseas, Q1 coincided with winter, where low temperatures led to reduced operating rates for installation workers. Overall, the European market was still digesting inventory, the US market experienced delays in installation progress, and other emerging markets contributed limited demand. As a result, overseas ESS demand remained sluggish. These factors impacted the ESS battery cell production side, leading to reduced actual orders. Combined with the need for destocking, ESS battery cell production and sales in Q1 were at their lowest point of the year.
Q2 2024: The domestic ESS market performed strongly. Reflecting on 2023, the ESS market's tender volume exceeded expectations, indicating that mid-year grid connection processes in 2024 would drive significant demand for ESS battery cells, thereby rapidly increasing domestic electricity ESS orders in Q2. Additionally, the decline in ESS battery cell prices and the implementation of subsidies for industrial, commercial, and standalone ESS across various regions further supported steady growth in industrial and commercial ESS orders in H1 2024. In overseas markets, according to SMM's observations, new installations in the US rose significantly from late Q1 to early Q2, primarily benefiting from optimized grid connection processes, enabling previously delayed projects to achieve grid connection. However, parts of Europe faced challenges from gradually phasing out subsidy policies and low electricity prices, resulting in relatively stable demand in the household ESS market without significant policy support. Overall, the surge in ESS demand in Q2 drove ESS battery cell production and sales to a new high for H1.
Q3 2024: At the beginning of Q3, the mid-year grid connection period in the domestic ESS market had passed, leading to a slight pullback in ESS battery cell demand and a subsequent decline in sales. In overseas markets, while household ESS demand remained stable without strong policy incentives, large-scale ESS demand, led by the US, steadily increased. Meanwhile, the accelerated iteration of 314 battery cells prompted some companies to clear 280 battery cell inventory during this period, resulting in a decline in ESS battery cell production in the first half of Q3. However, from mid-Q3 onwards, as market demand gradually recovered and demand for 314 battery cells increased alongside product maturity, battery cell enterprises transitioned their production lines. Additionally, they began stockpiling for subsequent concentrated grid connections, driving a gradual rebound in ESS battery cell production and sales.
Q4 2024: As year-end approached, the domestic market entered a peak period for battery cell procurement for grid connections, with demand for electricity ESS battery cells reaching a new high. Furthermore, policy changes following the US elections and year-end stockpiling demand in overseas markets also drove continuous growth in ESS battery cell demand. Supported by increased actual orders and year-end production targets from some ESS battery cell manufacturers, ESS battery cell production and sales maintained a growth trajectory.
In 2024, competition in China's ESS battery cell industry intensified, with significant changes in the competitive landscape and a slight decline in market concentration. According to SMM's assessment, at the beginning of 2024, the production concentration ratio of the top 5 ESS battery cell enterprises (CR5) was 80%, and the top 10 (CR10) was 91%. By December 2024, these ratios had declined to 72% and 89%, respectively. In addition to established ESS battery cell enterprises continuously increasing their investments, new entrants from the power battery cell and PV sectors actively expanded their businesses by leveraging their technological and resource advantages, leading to accelerated industry restructuring and a slight decline in market concentration.
In 2024, driven by market demand, China's ESS battery cell production and sales continued to grow. However, the surplus caused by rapid capacity expansion in previous years remained unresolved, prompting enterprises to slow down capacity expansion and focus more on improving the operating rates of existing production lines. As a result, capacity growth lagged behind production and sales growth. In 2024, China's ESS battery cell capacity exceeded 600 GWh. In the medium to short term, the ESS sector is in an adjustment phase, with a clear trend of slowing overall capacity growth. During this phase, enterprises with technological and product quality advantages are expected to lead expansion, while those lacking order support or with outdated product portfolios may face the risk of elimination.
2024 Review of China's ESS Battery Cell Prices:
In 2024, cut-throat competition intensified in China's ESS battery cell industry, and prices continued to decline rapidly. By the end of December 2024, the price of 280Ah prismatic LFP battery cells had dropped by over 40% compared to the beginning of the year; 314Ah prismatic LFP battery cells by over 60%; 50Ah prismatic LFP battery cells by nearly 10%; and 100Ah prismatic LFP battery cells by over 10%.
Core Factors Behind the Decline in ESS Battery Cell Prices:
First, the overall surplus in the lithium battery industry chain persisted, with prices of key battery raw materials falling rapidly due to a reversal in the supply-demand relationship, which in turn drove down ESS battery cell costs. Cost side, the continuous decline in cathode prices and the transmission of price drops in other main materials led to a sustained decrease in battery cell costs. According to SMM's assessment, by the end of December 2024, the theoretical cost of 280Ah prismatic LFP ESS battery cells had decreased by 14% compared to January 2024.
Second, the urgent need for cost reduction in end-use products, combined with the surplus in the ESS battery cell industry, forced battery cell enterprises to compress their own costs to maintain market share.
However, breaking down by product type, current ESS demand is primarily concentrated in the electricity ESS sector, where 280Ah and 314Ah battery cells dominate. From the perspective of electricity ESS owners, cost sensitivity is high. Additionally, the low industry entry barriers for these two battery cells have made them the main competitive focus for emerging ESS enterprises, leading to an oversupply of 280Ah battery cells in the early stages and triggering intense price wars. Moreover, under the strong cost-reduction trend in the ESS sector, 314Ah battery cells, as the iterative product of 280Ah, saw rapid volume growth starting in Q3, resulting in a sharp price decline. Currently, the application scenarios for 100Ah and 50Ah ESS battery cells are relatively limited, mainly focusing on household ESS, industrial and commercial ESS, and communication sectors. However, due to weak household ESS demand in the European market and insufficient driving factors for domestic household ESS, overall household ESS industry demand remained mediocre. Although industrial and commercial ESS and the communication sector are developing rapidly, their relatively small base means current demand is not enough to support the entire industry's needs. Additionally, unlike the rapid surplus in large battery cells, small battery cells face higher entry barriers and technical requirements, resulting in slower capacity expansion. This year, small battery cell prices have been more aligned with cost adjustments, leading to a slower rate of price decline for these two battery cells.
Looking ahead to 2025, 314Ah battery cells are expected to achieve a full transition during this phase. The decline in key battery material costs and improvements in product maturity will further reduce their average costs. Additionally, ESS battery cell manufacturers may continue price wars in the large battery cell market, driving down 314Ah battery cell prices. Meanwhile, 280Ah battery cells, having already reached low price levels, are expected to stabilize as industry capacity gradually shifts from 280Ah to 314Ah.
2024 Review of China's ESS Battery Cell Iteration:
As China's individual ESS project scale transitions from the MWh era to the GWh era, large-capacity batteries are considered a key direction for industry upgrades. In 2024, 300Ah+ large-capacity ESS battery cells accelerated their scale-up and application. The main reasons for the iteration of large-capacity battery cells are as follows:
1. Increased Capacity: Compared to 280Ah battery cells, 314Ah battery cells offer a significant capacity increase without changing dimensions. This improvement allows 314Ah battery cells to perfectly fit mainstream 20-foot ESS container cabinets, optimizing single-cabinet capacity to the ideal state of 5 MWh.
2. Simplified Integration and Assembly Processes: Due to their larger capacity, 314Ah battery cells reduce the number of cells required when building ESS systems, thereby simplifying integration and assembly processes.
3. Reduced Equipment and Labor Costs: By simplifying integration and assembly processes, using 314Ah battery cells can save on equipment and labor costs. According to SMM, the theoretical cost per watt-hour of 314Ah battery cells can be 0.01-0.02 yuan lower than that of 280Ah battery cells. Furthermore, larger-capacity battery cells mean fewer cells are needed for the same ESS demand, further reducing costs.
4. Enhanced Economic Efficiency: Large-capacity battery cells increase the energy density of container systems, saving on land and transportation construction costs. Additionally, larger single-cabin capacities reduce land usage, driving down transportation, installation, and construction costs, ultimately lowering ESS terminal costs. These factors collectively enhance the economic efficiency of ESS projects. In summary, transitioning from 280Ah to 314Ah not only improves ESS system performance but also reduces costs and enhances economic efficiency, which is particularly crucial in the current cost-driven ESS market.
Despite the numerous advantages of 314Ah battery cells, their mass production in H1 2024 fell short of expectations. The primary reason was that 314Ah battery cells were still in the downstream validation phase during this period, with actual demand not fully transitioning from 280Ah to 314Ah battery cells. Some downstream customers remained cautious, resulting in slower-than-expected mass production progress in H1. However, starting from late Q2, 314Ah battery cell production increased rapidly, driven by the clear adoption of 314Ah battery cells in numerous projects in H2 and the completion of validation processes by most battery cell enterprises, enabling mass production and accelerating their iteration in H2. Looking ahead to 2025, 314Ah battery cells are expected to replace 280Ah battery cells and become the mainstream product in the ESS market.
In recent years, ESS products launched by various enterprises have shown a trend toward larger capacities, with battery cell capacities increasing from 300Ah+ to 500Ah+, 600Ah+, and even over 1,000Ah. Correspondingly, battery cell dimensions have also changed: most 300Ah+ battery cells currently adopt the "71173" size specification, while 500Ah+ battery cells have achieved breakthroughs in dimensions.This change has introduced new requirements for the integration process, gradually ushering the entire system into the 6MWh+ era. In addition to pursuing larger capacities, battery companies are continuously improving the performance of 300Ah battery cells through technological innovation. Many companies have made improvements in energy density, cycle life, and safety based on 314Ah battery cells.
Meanwhile, the market is increasingly focusing on the safety of ESS batteries. Several companies are innovating in battery materials, structure, and processes to address safety issues inherent to the batteries themselves. At the system level, a series of solutions, including electrical design, intelligent monitoring, and fire protection design, are being implemented to comprehensively ensure the safety of ESS power stations.
SMM New Energy Industry Research Department
Cong Wang 021-51666838
Xiaodan Yu 021-20707870
Rui Ma 021-51595780
Ying Xu 021-51666707
Disheng Feng 021-51666714
Yujun Liu 021-20707895
Yanlin Lü 021-20707875
Ye Yuan 021-51595792
Chensi Lin 021-51666836
Zhicheng Zhou 021-51666711
Haohan Zhang 021-51666752
Zihan Wang 021-51666914
Xiaoxuan Ren 021-20707866
Yushuo Liang 021-20707892
Jie Wang 021-51595902
Yang Xu 021-51666760
