According to the EnergyTrend research division of TrendForce, the integration between centralized generation and distributed smart grid is an inevitable trend in smart city initiatives. Global BESS installation capacity is expected to reach 3.2GWh in 2020, with a 22% CAGR from 2019 to 2024.
Duff Lu, senior research manager at TrendForce, indicates that the global development of large-scale centralized electricity generation systems has lasted over a century. However, the call for energy conservation and carbon reduction, combined with the continued cost reduction of renewable energy, means power plants and EVs alike are seeing a need to raise their energy efficiency through BESS adoption. As battery prices fell in 2018, the installation capacity of the BESS market began to rapidly increase. In particular, the Korean government began subsidizing ESS for power generators in 2018, spurring the growth of the Asian BESS market.
During the early stages of ESS commercialization, most companies’ safety standards were incomplete. After the 2018 rush to purchase ESS equipment, a string of safety-related incidents occurred, slowing down demand growth in the Korean ESS market. In comparison, the North American BESS market has had more time to develop and mature; thus, the demand for BESS is expected to slow down after 2020 following the first wave of smart grid construction. After 2020, BESS will see the greatest growth in emerging markets with a high demand for power quality improvement, such as China and India. As component prices drop rapidly, national governments in the emerging markets will start promoting ESS applications. As a result, the Asian market is expected to undergo greater growth than North American and European markets in the future.
The battery remains the most important aspect in terms of ESS component costs. Owing to the development of EVs, the production capacity of lithium-ion batteries is continuing to expand, subsequently driving more competitive battery prices and stimulating the energy storage market. Major global battery suppliers currently includes LG Chem, SDI, Tesla, Toshiba, and BYD.
In terms of scale, LG Chem holds the largest shares in both Korean and overseas markets. In addition to its long-term partnership with GM, LG has actively expanded its production in Europe in recent years, across EV and ESS industries. As well, SDI has been focusing on the European market and forming partnerships with European automakers. SDI’s development of cylindrical and prismatic batteries is comprehensive and mature. Its cylindrical battery development is second only to that of Panasonic. SDI serves as the main battery supplier of many system-end clients.
Tesla acquired some much-needed experience in automotive battery production from its early partnership with Panasonic. With the recent construction of U.S.-based Gigafactory, Tesla was able to integrate more of its own proprietary battery technologies and confer both safety and cost advantages to its battery products. At the moment, Tesla is also actively developing ESS sites; the company is expected to derive competitive advantages from its minimal ESS construction time.
Toshiba’s high quality products are used in many demonstration zones in Japan, Europe, and North America. This, along with the company’s lineup of SCiB Rechargeable Batteries, means Toshiba is now the gold standard in demonstration zone suppliers. As one of the early ESS developers, BYD is able to maximize its presence in the EV and ESS markets owing to the superior stability of its LFP batteries.
TrendForce believes that, as the production capacity of the abovementioned five battery manufacturers continues to expand, BESS applications and EVs will become two pillars supporting the lithium-ion battery industry. Continued technical development means lithium-ion batteries will contain less and less amounts of rare materials, such as cobalt, and uncertainties in lithium-ion battery components will clear up in the future as well. Unlike the increasingly popular EV, BESS is integrated into various electrical grid systems, such as smart grids, with a high level of product mix but low volumes. Therefore, TrendForce expects the BESS industry to yield higher margins than the EV industry in the next five years.
The coronavirus outbreak’s impact on the lithium-ion battery industry
With regards to the impact of the coronavirus outbreak, TrendForce bases its initial analysis on the industry’s production capacity concentration. Specifically, Wuhan does not have a high concentration of lithium-ion battery manufacturers, as most of the production capacity of battery cells for consumer electronics is located in South China. Because many consumer electronics batteries, compared to other battery types, are made according to product-specific dimensions, their production capacity is more concentrated as well. The production capacity of xEV battery cells is even more distributed in comparison, with factories spread throughout East, Central, and South China. Because xEV batteries have relatively standardized specs, it is easier for their supply chain to be distributed as well. On the whole, the coronavirus outbreak is expected to have a wide impact on the consumer electronics battery industry in the short term.
At the present, the overall Chinese battery industry is temporarily stagnant at both the upstream manufacturing end and the downstream systems assembly end because of the coronavirus outbreak. Battery brands are expected to readjust their 2020 sales target after performing supply chain and consumer confidence analyses following work resumption. In the short term, many 1H20 ESS installation plans will be disrupted because many key ESS modules are made in China, whereas distributed manufacturing remains the key to mid- and long-term success in the ESS industry.