In order to enhance capacity and speed up market penetration,Chinese battery manufacturers have tried all their best recent years, keep busy with taking lands and building factories,due to the high boom growth of the EV market. However, in terms of the industry, battery manufacturers' aggressive expansion is not only concerned about the EV market, but also includes the rapidly expanding energy storage market.
According to research firm Mercom Capital, tens of billions of dollars of financing and M&A have been made around battery storage systems, smart grids and energy efficiency, with electrochemical energy storage companies raising $9.6 billion in the first half of 2021. But the data last year was only $716 million, which can be a sign of how fast the energy storage industry is exploding.
Brilliant Future of Energy Storage Market
As the heat of energy storage industry continues to rise in foreign countries, Chinese battery giants deeply engaged in the field of chemical industry are also moving to enter the field of electrochemical energy storage in order to seize the opportunity.
On November 4 2021, EVE the well-known power battery manufacturer, announced that they signed a Strategic Investment Agreement with the Government of Jingmen city, EVE and its subsidiaries plan to complete fixed asset investment of 30.521 billion RMB and land acquisition of about 2000 km² in Tuodao District of Jingmen City，to built the Jingmen Power Energy Storage Battery Industrial Park with an annual output of 152.61GWh, which once again set a new record for the scale of the previous investment projects in Sichuan. At the same time that EVE continues to expand production, CATL the industry leader, and other manufacturers such as BYD, GreatPower, Gotion High-tech are also involved in the industry to accelerate production expansion. From the current point of view, giants gathering in energy storage market is catalyzed by a series of factors .
On the one hand, as one of the new energy storage methods, electrochemical energy storage will play an important role in Chinese energy storage. Public information shows that energy storage is mainly divided into mechanical energy storage, electrochemical energy storage, and thermal energy storage. In the past, our energy storage was mainly based on pumped storage, but in recent years, the new energy storage industry began to get rapid development,including lithium battery, compressed air, liquid flow, flywheel, sodium battery, hydrogen storage, heat storage and other ways. Among these, sodium ion battery energy storage system has occupied a dominant position in the commercial field,whether globally or domestically, which is also the reason why many battery manufacturers have entered the energy storage market.
Among electrochemical energy storage batteries, sodium batteries are not mature enough for large-scale commercial use. In contrast, the mature lithium iron phosphate batteries are expected to obtain large-scale application in the field of electrochemical energy storage.
Besides, with the large-scale delivery of new energy power infrastructure, the problem of incompatibility between power generation and peak demand makes the position of energy storage in the whole energy cycle increasingly apparent. In recent years, as China vigorously promotes the development of new energy, the growth of green electricity is accelerating day by day. According to relevant industry statistics, in the past decade, the compound growth rate of green electricity in China once reached 32.1%, which is far faster than other industries.
However, compared with conventional energy, new energy power generation has small capacity, large quantity, scattered distribution, and is significantly affected by external factors such as season, weather,time. In addition, the transport and the demand of energy use is not in one place, such as northwest area is a green energy source, and the eastern region is the core of energy use area, the incompatibility of this kind of space makes the west may produce excess green electricity, and a lot of lack of demand in the east. To avoid waste of northwest green electricity output, you need to save the energy storage devices.
In addition, energy storage, as a key part of the China’s energy cycle, is also supported by various national policies. According to incomplete statistics, no less than 20 policies have been issued and implemented so far. Various policies of subsidies, promotion and support have also provided a good policy environment for the sustainable and healthy development of the industry.
CATL Taking the Lead
As the leader in the field of power battery, CATL has been regarded as the ace supplier in the field of automotive power battery, but in fact, CATL also has a layout in the field of energy storage. According to its published 2021 Financial Statement, the energy storage system’s contribution to the revenue last year, reached 15.457 billion RMB, a year-on-year increase of 601.01%, as "second growth pole". The reason why CATL is able to take the lead in the field of energy storage rapidly, is because of its long-term layout in this field.
First, CATL has begun to layout its energy storage technologies before the industry's opportunities have fully arrived. According to public information, as early as the beginning of creation, CATL had begun to layout energy storage business, then based on its accumulated rich experiences in the field of power battery, CATL improved and optimized power battery performance, and launched a full range of technical solutions according to the characteristics of the energy storage battery market .
For example, its product system includes cells, modules, cabinets, battery systems, and provides a comprehensive safety system designed on chemical safety, high voltage safety, mechanical safety, functional safety and other aspects. For example, conventional lithium iron phosphate batteries only have a cycle life of 3000-6000 times, which greatly limits the service time of energy storage batteries. CATL, after years of research, has successfully extended the life of lithium iron phosphate batteries to 12,000 cycles, far beyond the current market average.
Relying on these excellent technologies and product systems,CATL ushered in rapid growth after the explosion of Chinese energy storage industry. According to relevant industry statistics, by the end of 2018, China's electrochemical energy storage installed capacity reached 1036.03MW, with a year-on-year increase of 144.79%; by 2020, it was 3.27GW.
According to "White Paper on Energy Storage Industry Research 2021", CATL has become the energy storage technology service provider with the largest installed capacity in the field of electrochemical energy storage in 2020 by virtue of its rich products and advanced technologies. For example, on the power generation side, CATL provides a brand new solution for the safe operation of new energy stations and the consumption of new energy power; on the power grid side, CATL energy storage system realizes multiple functions, improves the flexibility of the power grid, and realizes the safe, stable, efficient and low-cost operation of the power grid.
Secondly, as an energy storage technology service provider, it has rich experience in energy storage project construction. As a technical service provider involved in energy storage projects very early, CATL has accumulated rich experience in the construction of energy storage projects. The Jinjiang energy storage power station is the epitomization of its energy storage technology and experience. The first phase of the project has reached 30MW/108MWh, which is almost the benchmark project in the industry. So far, the cumulative discharge of 68.52GWh has been achieved, which is equivalent to the total power supply for 150,000 households based on the annual consumption of 3,000 KWH for a family of three.
In short, with its advanced technology and project construction experience, as well as the extensive layout of the energy storage industry chain, CATL is able to take the lead in the energy storage industry.
EVE Coming on Strong
As a battery leader following CATL, EVE is also sparing no effort to catch up in the field of energy storage. According to its information, the company has laid out the energy storage field, covering communication energy storage, wind energy storage, distributed energy system, power energy storage and other fields. As an energy storage giant with such a wide coverage, electrochemical energy storage is relatively close to its main business, which naturally becomes the key field of its multi-way attack to expand production.
First, expand production capacity around major raw material markets and industrial clusters to reduce circulation costs up and down the industrial chain. At present, its expansion purposes are not the same. For example, its expansion in Jingmen City is because Jingmen is close to Wuhan of Hubei province, which is a large automobile industrial cluster in China, and the regional industrial cluster effect is good. Huizhou, located in the Guangdong-Hong Kong-Macao Greater Bay Area, is closer to its direct customer markets, for example, BYD is based in Shenzhen. And its capacity expansion in Sichuan and Yunnan is another idea.
Specifically, Sichuan, Yunnan and other places have a large number of phosphate rock resources, which plays an important role in the production of lithium iron phosphate batteries, the expansion of origin way can reduce the transportation cost of raw materials, and get the nearest raw materials, ensure the stability and continuity of supply , to obtain the multiple benefits of capacity and cost.
Second, it continuously transfused its power battery business to support its technology upgrading and capacity expansion by means of fixed increase and reduction. As early as April this year, EVE announced that it would reduce its 3.5% stake in SMOORE International to obtain liquidity, which was somewhat unexpected. After all, SMOORE International , buying with 400 million at the beginning , the market value now is 100 billion , and can generate a large amount of net profit and dividends every year. EVE "expands" at the cost of selling SMOORE International shares, somewhat is unexpected. In addition to reducing the "cash cow", EVE also issued a fundraising announcement of up to 9 billion for battery capacity expansion.
Third,EVE enhance its own advantages in the industry through the alliance between lithium industry chain companies. According to public information, the upstream companies of EVE cooperation include Dynanonic, BTR, HUAYOU COBALT , Zhongke Electric and other companies, and the links of industrial chain cooperation include cathode materials, anode materials, diaphragm, electrolyte, nickel, cobalt, lithium and other upstream materials. Through these cooperation, it can greatly reduce the decline in gross profit caused by the price increase of supply chain (mainly lithium or lithium salt), and consolidate its dominant position in the battery industry chain.
In a word, through the supply chain, industrial chain cooperation and capacity expansion, EVE is rapidly catching up with the CATL.
Difficulties to Break Through
The entry of industry giants such as CATL and EVE quickly ignited people's enthusiasm for the energy storage industry. Huawei, which has always been deeply engaged in ICT communication, also established a digital energy company to enter the energy storage industry... The layout of a number of giants seems to give people an illusion, as if the energy storage market is about to start war. In fact, this is a bit alarmist. From the perspective of the space and development stage of the industry, China's energy storage market is still in its initial stage, far from developing to the stage of competing with each other.
The first is that commercialisation has not yet fully taken hold. According to the data provided by the power station operated by State Grid System in Changsha, Hunan province, its first-phase construction scale of 60MW/120MWh energy storage power station needs an investment of 400 million RMB. Based on peak-valley electricity price and battery technology, the power station will be at a loss in the whole life cycle. Similarly, at present, many Chinese energy storage power stations are still heavily dependent on local government subsidies, and many energy storage power stations are still in deficit without subsidies.
Secondly, the price guarantee of battery raw materials also makes the development of energy storage industry face great external challenges. According to the current public industry data, in the current new energy storage batteries, lithium ion batteries account for more than 90% of the total, which means that lithium ion batteries will play a huge role in the energy storage industry. Due to the rapid development of new energy in China in the past two years, the price of lithium ore in China has risen sharply, and the price of processed lithium resources has also risen exponentially, which undoubtedly brings great external challenges to the energy storage industry which is developing rapidly.
In the long run, in order to develop energy storage well, on the one hand, we should continue to strengthen the control ability of supply chain, and on the other hand, we should accelerate the commercialization of energy storage industry. From this point of view, the layout of giants including CATL and EVE, may be a huge opportunity for the industry which is still in the initial stage of development. After all, it has a great confidence to change the industry pattern and promote industry innovation, due to its strong appeal and influence or its superior technology research and development level.