In 2023, “internal competition and surplus” became the industry consensus for China’s new energy storage, dominated by lithium-ion battery storage. In 2024, as a flag that has not fully unfurled in the domestic new energy industry, where will the new energy storage industry go?
Recently, China’s professional research institution, GGII (Green Power Global Industrial Institute), released the top ten trend predictions for the 2024 Chinese new energy storage market. GGII believes that the global energy storage market has entered a reshuffling period from a rapid development phase, and this trend will continue for the next 1-2 years. Factors such as slowing growth, overcapacity, profit compression, market segmentation, technological iteration, capital cooling, safety incidents, and other multiple changes will accelerate the differentiation of companies.
GGII particularly points out that in 2024, the overall supply of the Chinese new energy storage market will exceed demand. The competition in system integration will be more fierce than in the battery cell segment. More than 50% of energy storage system companies (including large storage systems, industrial and commercial storage systems, household storage systems, etc.) will be eliminated, and the top ten energy storage system integrators will capture over 80% of the market share.
In 2023, the newly installed capacity of new energy storage is approximately three times that of 2022, “there is no limit, only more.”
At the 2024 China Energy Storage CEO Summit and the 8th International Energy Storage Innovation Competition pre-selection meeting held on January 8th, Yue Fen, the head of the Zhongguancun Energy Storage Industry Technology Alliance, pointed out that by the end of 2023, China’s cumulative installed energy storage capacity reached 86.5 GW, a year-on-year increase of 45%. Pumped storage accounts for less than 60%, and the proportion of new energy storage has increased from 21% in 2022 to nearly 40% in 2023.
By the end of December 2023, China’s cumulative installed capacity of new energy storage reached 34.5 GW/74.5 GWh, with year-on-year growth rates exceeding 150% for both power and capacity. In 2023, the newly added capacity of new energy storage was 21.5 GW/46.36 GWh, equivalent to three times that of 2022.
Represented by lithium-ion batteries, the rapid cost reduction of new energy storage is accelerating in specific application scenarios and penetrating emerging markets. According to preliminary statistics from GGII, more than 70,000 new energy storage companies were registered in 2023, with about 100 emerging as sizable energy storage system enterprises, and more companies are still entering the market.
In 2023, leading energy storage battery companies such as CATL, BYD, EVE Energy, Rui Proland Jun, Haisun Energy, and Honeycomb Energy secured multiple 10 GWh+ orders domestically and internationally, totaling over 200 GWh in scale. The latest data released by the China Power Battery Application Branch shows that the global energy storage battery shipments reached 173 GWh (calculated at the terminal), a year-on-year increase of 60%, with China’s energy storage battery shipments accounting for approximately 159 GWh, or 92%.
However, behind the encouraging industry data, there is both hope and challenge. Whether in power, industrial and commercial, or residential energy storage, both upstream materials and equipment and downstream components and integration face structural and stage overcapacity. With numerous companies entering the market, profit margins are compressed, and companies are confronted with crises in cash flow and layoffs.
In particular, compared to energy storage cell manufacturers, pure system integration companies have lower technical barriers, with many focusing on assembly production or contract manufacturing. Their core competitiveness lies in their ability to acquire orders.
At the end of last year, Zhu Gongshan, Chairman of the State Power Investment Corporation (SPIC) and Chairman of the Global Green Energy Council, admitted in a public speech that the energy storage industry “has no limit, only more. Prices in the supply chain continue to decline, and the bid price for energy storage has fallen by one-third in half a year. Product homogeneity is severe, and the price war is escalating, impacting performance, grabbing market share, and quoting below cost. Half spring, half cold stream, this is the current situation of our energy storage industry.” Zhu Gongshan said.
Wu Kai, Chief Scientist of the world’s leading battery manufacturer CATL, also stated at the 2023 World Energy Storage Conference, “The rapid development of the new energy storage industry is becoming a new growth pole. It’s a good thing that the industry is flourishing, but we must also see the risks of joining the rush. We hope that the industry will compete in safety technology and safety design rather than sacrificing quality and safety for low prices, shoddy work, and false promises.”
In 2024, the overall supply of the new energy storage market is expected to exceed demand, and economic challenges are expected to improve.
It is worth noting that in 2024, the first IPO on the A-share market is realized by the energy storage company AERON Energy.
On January 3rd, Zhejiang AERON Network Energy Technology Co., Ltd. (referred to as “AERON Energy”) successfully went public on the Sci-Tech Innovation Board. As of the A-share closing on January 8th, AERON Energy was trading at CNY 82.3 per share, with a total market value of approximately CNY 13.17 billion.
AERON Energy’s journey to listing took about two years, with the original plan to raise CNY 808 million and ultimately raising CNY 2.226 billion, exceeding the issuance plan by approximately 1.75 times. The funds raised will be used for the expansion of energy storage battery and inverter production projects, as well as the construction of the Smart Energy Research and Development Center.
Established in 2012, AERON Energy is a provider of photovoltaic energy storage systems and products, mainly supplying photovoltaic energy storage inverters, energy storage batteries, and grid-connected inverters to overseas customers. These are mainly applied in distributed photovoltaic energy storage and grid-connected areas. According to the prospectus, AERON Energy is one of the few companies in the industry with the integrated research and development capabilities of energy storage inverters and energy storage batteries and can mass-produce these products.
Market ranking and market share data disclosed in an IHS research report show that AERON Energy had a 4.1% share of the global household energy storage battery market in 2021 and a market share of approximately 1.4% in inverters (including energy storage inverters and grid-connected inverters). In the sub-segment of household energy storage inverters, its market share is about 5.1%.
The successful listing of AERON Energy can be seen as a shot in the arm for the A-share market, which has been quiet for a long time in the field of light and energy storage. So, under the positive affirmation from the capital market, what will be the outlook for the global new energy storage market in 2024, especially the Chinese new energy storage market? GGII has made ten predictions, including:
Prediction One: The global front-end newly installed capacity is expected to grow by 40% in 2024, the growth rate of energy storage systems/battery shipments is about 25%, and global shipments of energy storage systems will exceed 160 GWh.
From the demand side, global front-end energy storage demand is still strong. In 2023, China, the United States, and Europe successively announced an increase in renewable energy construction. In the future, China and the United States will remain the main global front-end energy storage markets. With technological innovation and continuous cost reduction driven by lithium-ion energy storage in China, the cost of lithium-ion energy storage is approaching that of pumped storage, and its application scale will continue to expand.
Influenced by the dual-carbon strategy and regional energy structure, front-end energy storage demand in Southeast Asia, the Middle East, South Asia, Australia, South Africa, South America, and other regions is also growing continuously. It is expected that the global front-end installed capacity in 2024 will still be higher than the shipment growth rate, and the installed capacity will exceed 130 GWh. Global shipments of energy storage systems (front-end and back-end) will exceed 160 GWh, and global shipments of energy storage batteries will exceed 200 GWh.
Prediction Two: In 2024, the overall supply of the new energy storage market will be greater than demand, and the competition in system integration will be more brutal than in the battery cell segment. Over 50% of energy storage system companies will be eliminated, with the top ten capturing over 80% of the market share.
GGII’s preliminary statistics show that there were about 100 energy storage system companies (including large storage systems, industrial and commercial storage systems, household storage systems, etc.) that had formed a scale by early 2023, and more companies are still entering the market. Compared to energy storage cell manufacturers, pure system integration companies have lower technical barriers, focusing mainly on assembly production or contract manufacturing. Their core competitiveness lies in their ability to acquire orders.
In 2024, energy storage capacity will continue to be over-supplied, and excess supply will be the main theme of the market. With the entry of subsidiaries of central SOEs (power generation groups, grid companies, local energy groups) into the energy storage market and the competition from integrated companies with core component supply capabilities, the market share of pure integration companies will be continuously squeezed, and the risk of being eliminated will be significantly increased. It is expected that over 50% of energy storage system companies will be eliminated. Meanwhile, the market share of the top ten system companies will continue to expand, capturing over 80% of the market.
Prediction Three: The price of energy storage battery cells will stabilize at around CNY 0.4/Wh. The price of energy storage systems (0.5C) is expected to stabilize at CNY 0.8/Wh, but disorderly competition below cost will still exist.
After destocking in the second half of 2023, battery manufacturers will return to rational expectations for market supply. Expectations of stable supply are driven by a return to lithium carbonate as a response to overcapacity. It is expected that the price of energy storage battery cells will bottom out at CNY 0.35-0.37/Wh (tax-inclusive price for second- and third-tier cells) in 2024, later rising to above CNY 0.4/Wh. Compared to 2023, prices will be more balanced throughout the year, with fluctuations not exceeding 20%.
The cost reduction of energy storage systems on the AC side will shift from main materials (battery cells, PCS) to auxiliary materials (fire protection, temperature control, etc.), starting with liquid cooling and fire protection systems. Compared to the gross margin of battery cells and PCS (less than 5% and 20% in 2023, respectively), the gross margin of liquid cooling and fire protection systems is over 30%. With the entry of new auxiliary material companies, it is expected that there will still be a 10-15% price reduction space for auxiliary systems in 2024.
Overall, the price of AC-side energy storage systems (0.5C) follows the fluctuation pattern of battery cells, with fluctuations not exceeding 20%. However, the competitive pressure in the energy storage system segment is significantly higher than that in the battery cell segment, and disorderly and malicious low-price competition will still exist.
Prediction Four: Energy storage new products equipped with 314Ah high-capacity battery cells will be mass-produced in the second quarter of 2024. Lithium-ion battery cells and PCS technology will undergo upgrades, but 280Ah high-capacity battery cells and system products will remain the mainstream products for power storage.
Battery cells with a single capacity of 314Ah are expected to become the mainstream energy storage cells of the next generation, and 5MWh system products equipped with 314Ah cells will be delivered successively in the second quarter of 2024. 300Ah+ cells that have been announced will enter mass production in the first quarter of 2024, but 280Ah and system products will still be the mainstream products for power storage in 2024.
High-temperature battery cells and high-efficiency (96%+) battery cells based on system-level efficiency will be released in 2024. The upgraded battery cells can effectively reduce the power consumption of auxiliary source equipment in the system, improving overall efficiency. The upgrade of PCS will focus on miniaturization and integration, and the application of silicon carbide devices will further enhance PCS performance.
Energy storage companies that master core component technology will improve product added value through technological and product iterations to avoid falling into price wars.
Prediction Five: The rules for spot trading and ancillary services in the domestic market are becoming more perfect, and energy storage is opening up new business models, with economic challenges expected to improve.
In 2023, there are still problems with cost guidance, low system utilization, and low capacity leasing and electricity market revenue for independent energy storage stations in China. The business model is weak. It is expected that more provinces and cities will introduce policies similar to Shandong and Shanxi, encouraging the construction of energy storage in conjunction with power generation, transforming into independent energy storage. Independent energy storage will enter the electricity spot market in a more flexible way, such as “reporting quantity and quoting price,” and the business model of energy storage will further expand.
In the future, more provinces, similar to Shandong, Xinjiang, Hunan, and other regions, will pilot capacity compensation, capacity market mechanisms, and improve capacity electricity price mechanisms and ancillary service categories.
Driven by the scale reduction in cost and the broadening of electricity market revenue, energy storage power stations will cross the investment-profitability line. The average daily number of full charge and discharge cycles will increase by 30% to 0.75 times, up from 0.58 times in the first half of 2023. In some provinces such as Shanxi, driven by the once frequency regulation market, it can reach more than 1 time. Investment will shift from policy-driven to market value-driven, especially in provinces with scarce Northwest, northern, and regulatory resources.
Prediction Six: Sodium-ion batteries and large cylindrical batteries are expected to be applied in residential energy storage, and 2024 will be the pivotal year for the large cylindrical battery scale-up.
Currently, there are more than 30 companies (including sodium battery companies) involved in the development of large cylindrical batteries. Except for the steel shell full-pole large cylindrical batteries that have not achieved large-scale production, other types of large cylindrical batteries have been mass-produced, primarily for energy storage and low-power applications (including lithium-ion lightweight vehicles).
Domestic lithium battery companies are still in the development and validation stage of large cylindrical battery products, with production line design and equipment purchases in progress. Combining the development and construction cycles of equipment, it is expected that 2024 will be a period of concentrated release of domestic large cylindrical battery production capacity.
At the same time, in 2024, sodium-ion batteries are expected to lead in commercial applications such as residential energy storage, electric two-wheelers, A00-level passenger vehicles, and station energy storage. With continuous improvement in scale and manufacturing processes, the price of sodium-ion batteries is expected to steadily decrease, driving their widespread use in industrial and commercial energy storage, among other areas.
Prediction Seven: In 2024, the shipment volume of an all-vanadium redox flow battery will exceed GW for the first time, and the system price will drop to 2 yuan/Wh.
Based on intrinsic safety and long-term energy storage considerations, in 2023, liquid flow batteries, hydrogen energy storage, and water-based batteries are gaining increasing attention and anticipation. From 2022 to 2023, all-vanadium redox flow batteries, with a cumulative bid capacity of over 3 GW, faced delays in delivery due to restricted battery capacity and electrolyte supply. With the release of industry chain capacity, it is expected that the shipment volume of liquid flow batteries will exceed 1 GW in 2024.
The production capacity of liquid flow batteries (all-vanadium, zinc-iron, chromium-iron, etc.) will expand to 10 GW, and the core material of its electrolyte, vanadium pentoxide, will release approximately 40,000 tons of capacity, including about 0.5 million tons from vanadium extracted from stone coal. The release of vanadium material capacity will further stabilize electrolyte and system prices. It is anticipated that the price of vanadium pentoxide (98%, flake) will be maintained at 90,000 CNY/ton throughout the year, and the price of all-vanadium redox flow batteries will be maintained at 2-2.2 CNY/Wh.