2023 energy storage installation outlook: China, US, and Europe

As of the first half of 2023, the world added 27.3 GWh of installed energy storage capacity on the utility-scale power generation side plus the C&I sector and 7.3 GWh in the residential sector, totaling 34.6 GWh, equaling 80% of the 44 GWh addition last year. Despite a global installation boom, regional markets develop at varying paces. Factoring installations in the latter half of this year in, China, the U.S., and Europe will take up 43%, 25.5%, and 17% of the global market share, respectively. In the following paragraphs, InfoLink looks into the three major markets, projecting installations in the second half of 2023. 
 

China

In the first half of 2023, China added 17.7 GWh of installed energy storage capacity, accounting for nearly 50% of the global addition and surpassing the 15.8 GWh in 2022 with an over 200% growth. The rapid increase can be attributed to the mandatory energy storage integration policy, as well as the country’s advantage as a lithium manufacturing hub with access to cheaper cells and faster delivery. Additionally, administrative reviews are less interfered in China, taking four to six months at their fastest and no more than a year at the slowest. Finally, the ongoing decline in PV system costs allows higher project IRR for developers to invest in energy storage. 

In the summer of 2023, Chinese coastal areas saw the peak-to-valley spread experience both month-on-month and year-on-year increases, boosting the C&I energy storage market. Currently, FTM utility-scale energy storage still dominates the Chinese market, accounting for 90% of the total capacity addition throughout the year. On the back of rising EV and energy storage demand, some cell manufacturers will complete construction of previous production expansion projects and commission capacities in the second half of 2023. Surging amid shortages before, prices for lithium carbonate lingered around RMB 300,000/MT in June and July, then dropped to RMB 200,000/MT in mid-September. As the short supply of cells and raw materials abated, cell prices will decline slowly and consistently in this half of the year. Increasing production capacity and lower prices will speed up inventory draws and installations compared with the prior six months. InfoLink expects China to add 39 GWh of energy storage capacity in 2023.
 

The U.S.

The U.S. added 8.2 GWh of installed energy storage capacity in the first half of 2023, far behind anticipations. Constructions under the IRA face delays worse than expected. Apart from belabored administrative procedures that can take up to one to two years, the tardy grid connection progress results from delayed construction of utility-scale PV power plants that affects energy storage development due to stricter customs inspections on polysilicon and the prolonged labor shortage. Despite the unsatisfactory grid-connected capacity in the first half of this year, there is plenty of potential demand for peak shaving and frequency control, for existing grid facilities are outdated and require renovation urgently.

Besides the inelastic demand, generous subsidies the IRA provides expedite development of the local energy storage supply chain of the U.S. Large-scale cell manufacturers, such as CATL, EVE, and Gotion, have deployed in the U.S. market via collaborations, while others have yet to produce specific expansion plans due to given policy uncertainties. However, the trend of localizing supply chains is undeniable, with short supply to domestic demand being a short-term issue. While installations of utility-scale projects in the first half fall short of expectations, installed capacity in C&I and residential sectors sustain steady growth. Previous data suggest the latter part of a year is the high season of the energy storage industry. Therefore, in an optimistic scenario, where lengthy administrative processes and labor shortage are improved, developers will start grid connection for utility-scale projects. An optimistic forecast shows the U.S. adding 25.5 GWh of installed energy storage capacity in 2023, with 82% of which, namely 21 GWh, being utility-scale projects, remaining the major driving force behind the U.S. energy storage market. 
 

Europe

Europe added around 7.3 GWh of installed energy storage capacity in the first half of 2023, with 4.6 GWh in the residential sector. Germany and Italy were the top performers. Currently, Europe still focuses on the BTM market. In the first half of 2023, the residential sector was vigorous. Theoretically, the increase in installed capacity will be higher during autumn and winter. However, that increase will stabilize this year, given sufficient natural gas Europe had stored for winter in the first half of this year and electricity price declines that affects the profitability of peak-valley arbitrage.

During 2022 and 2023, the energy crisis led European distributors and installers to remain optimistic about residential energy storage, thus hoarding energy storage systems. However, installation fails to catch up. As a result, Europe has been depleting inventory throughout the first half of 2023. On the other side of the coin, abundant residential energy storage systems and modular installation methods accelerate project construction. In the utility-scale energy storage sector, Europe added 2.2 GWh of installed energy storage capacity in the first half, with the UK and Ireland topping others thanks to their comprehensive market systems. France and Germany launched tenders successively. In 2023, Europe may add 17 GWh of installed energy storage capacity, with 9 GWh in the residential sector.

Overall, China, the U.S., and Europe saw installed capacities growing at varying paces in the first half of 2023. China and Europe posted better-than-expected growth in utility-scale and residential sectors, respectively. Meanwhile, the U.S. underperformed due to extensive administrative processes, despite generous incentives under the IRA. 

In the second half of 2023, China, as the world’s biggest cell manufacturing country, will remain the fastest-growing energy storage market, as cell production capacities come online, and prices for lithium carbon decline, reaching RMB 200,000/MT in early September. In 2023, China will add 39 GWh of installed energy storage capacity. The U.S. may add 25.5 GWh, with utility-scale projects connecting to the grid in the second half, given enormous domestic demand and strong policy supports, despite installation progress taking up to a year or more time. In Europe, inventory issues will continue affecting demand in the second half. Europe will add 17 GWh of installed energy storage capacity this year, with similar gauges of additions in the first and second part of the year. InfoLink expects the world to add 100 GWh of installed energy storage capacity this year, with 78 GWh being mid and utility-scale projects and 22 GWh C&I and residential projects.