Energy storage trends and analysis: 2H23 market outlook

While the world strives for energy transition, the war-induced power shortages and energy crisis in Europe in 2022, the mandatory energy storage integration policy in China, and the IRA of the U.S. accentuate the importance and the urgent need for energy storage. Seemingly creating a crisis, lithium price swings catalyzed the industry, prompting manufacturers to hoard cells and place capital more actively, bringing the energy storage industry to new heights. Over this past year, various market trends emerged as the market grew rapidly thanks to increasing business investments, including residential ESS, standalone ESS, sodium-ion batteries, supply chain reshoring, and large-capacity cells.

InfoLink selects some of the major topics in the second half of this year for further analysis:
 

Prices step on a downward trend as lithium and cell capacity increase

Cell shortage eased in the first half of the year. According to InfoLink’s statistical analysis, by the end of 2023, the global cell capacity will reach 2,500 GWh, with 15-20% of the capacity going to the energy storage industry, easily exceeding the annual energy storage cell shipment prediction of 210 GWh. Besides the competition among Tier-1 cell manufacturers, their Tier-2 peers will muscle for market share through further price cuts, waging a more intensive price war. For example, recent EPC tenders in China saw bidding prices lower than RMB 1.3/Wh. Furthermore, the abundant lithium carbonate supply leaves its price little momentum to rise further after rebounding and stabilizing at RMB 300,000/MT in May. The “Global Lithium-Ion Battery Supply Chain Database 2023,” published by InfoLink, shows the shipment of energy storage cells reaching 94.6 GWh in the first half of this year, with 80% and 20% going to utility-scale, C&I ESS and residential, telecom ESS, respectively. Meantime, the market share of CATL declined from last year’s 40% to around 30%. In the short term, leading manufacturers will face a bigger market pressure.
 

Emerging markets continue booming but require discreet assessment

In more mature markets, business models and supply chains come to fruition, raising barriers to entry and escalating industry competition. Therefore, businesses aim at emerging markets, such as Southeast Asia, the Middle East, South America, and Africa. The PV industry keeps the energy storage demand robust, with the BTM C&I market attracting more attention this year.

Emerging markets could fall further behind, as they have inferior policy and procedure planning, supply chain development, renewable installation progress, grid construction, and infrastructure resources than mature markets, thus needing more time to bring capacity online and face more variables affecting the progress. For instance, policies that emerging markets have announced generally aim to encourage the deployment of renewable energy. There is no clear direction for boosting demand or development of the energy storage industry. The table below shows the target share of renewable energy in North African and Middle Eastern countries.

In China, installed C&I ESS capacity added in June only accounted for 1% of the total addition of installed ESS capacity, indicating the necessity of discreet assessment despite the strong demand and market sentiment.

Source: data compiled by InfoLink
 

Technology

The lithium-ion battery industry witnessed several technological innovations in the first half of this year, including blade battery, blade-like battery, large-capacity cells, big (4XXX) cylindrical battery, system integration optimization, CTC, liquid cooling, immersion cooling, and high-temperature batteries. These technologies will continue advancing in the second half. The most noteworthy ones include:  

1. The application of 280-Ah batteries and big (4XXX) cylindrical batteries in residential ESS.

2. Distinct disparity between business models of blade cells and large-capacity cells with energy charge of 320 Ah or higher, due to system integration technology development and the localization of production in the U.S.

3. The rapid development of system integration using batteries with high energy density and technologies allowing cross-scenario system application.

European residential energy storage market

After distributors depleted inventory in the first half of this year, shipments to the residential energy storage market will increase steadily during the high season of renewables in the second half. InfoLink expects the world to ship 35 GWh of cells for residential ESS this year.

Furthermore, the Federal Ministry for Economic Affairs and Climate Action (BMWK) of Germany published a draft of the Solarpaket I, increasing the threshold for balcony PV systems to apply for simplified grid connection procedures from an output of 600 W to 800 W and setting out goals to add 9 GW, 13 GW, 18 GW, and 22 GW of installed PV capacity each year during 2023 and 2026. The draft has increased confidence and created inelastic demand for the European PV market. As for the energy storage market, the new threshold will boost the demand for small-capacity ESS by 1-3 kWh.
 

Digitization and intellectualization

The poor utilization rates of ESS in China highlights efficiency issues, while the backlash against the mandatory energy storage policy reflects profit concerns, both indicating the monotony of current business operation and profit models, which fail to satisfy markets. Thanks to the development of standalone ESS, solar-powered ESS, and the collaboration between traditional and clean electricity grids, the operation of ESS will diversify. Still, it is essential to improve system efficiency through digitization and intellectualization, such as BMS, EMS, VPP, etc., which receive more attention amid recent AI trends.

To get a head start, energy storage enterprises funnel investment into the industry at an impressive pace. However, in developing markets, it is wiser to align business decisions with both industry trends and the progress of each market. Strengthening technological innovation and seeking product differentiation are the only ways to gain a solid footing in the dog-eat-dog competition of the energy storage industry.