Energy storage cells – specialization trend obvious and companies rise accelerating

Energy storage market is growing rapidly

Introduction to energy storage system

The energy storage system is mainly composed of energy storage cells, battery management system, converter, temperature control and other equipment. The energy storage system industry chain is mainly composed of upstream battery materials/accessories, midstream batteries, BMS, PCS and EMS, and downstream system integration.

The upstream of the industry chain is mainly composed of battery raw materials and accessories, among which lithium ion battery structure is basically compatible with the power battery industry chain. The midstream is mainly composed of cells/battery modules/PCS and other links. The downstream is mainly for system integration companies to deliver the integrated energy storage system to end customers.

Energy storage ushers in explosive growth driven by policy and economy

The global electrochemical energy storage market continues to grow. Relying on the advantages of short construction period, high energy conversion efficiency, and relatively mature industrial chain, electrochemical energy storage has shown a rapid development trend in recent years.

In 2021, the newly installed capacity of electrochemical energy storage in the world will reach 7.54GW, a year-on-year increase of 96%. According to relevant data, in the global electrochemical energy storage market in 2021, the power of lithium battery energy storage projects will account for 93.9%.

According to different application scenarios, energy storage can be divided into power-side energy storage, grid-side energy storage, user-side energy storage, etc. The energy storage on the power supply side mainly plays the role of smoothing new energy output fluctuations and frequency modulation. The energy storage on the grid side mainly provides system backup and delays the blockage of power transmission and transformation equipment.

User-side energy storage is mainly to improve power quality, frequency regulation, and participate in demand-side response. In 2021, the installed capacity of global electrochemical energy storage scenarios such as power supply side/power supply side auxiliary service/grid side/distributed and microgrid/user side will account for 30.9/32.1/26.6/4.2/6.2% respectively.

The business model is optimized to increase the economics of energy storage projects. Under the background of strong allocation policy, various local governments have proposed policy subsidies to optimize the economics of energy storage projects.

At the same time, the proposal of business models such as shared energy storage, through the service of multiple power generation projects, reduces the initial construction capital expenditure of new energy projects, improves resource utilization efficiency, and optimizes the economy of distribution and storage.

Energy storage cells are becoming specialized

Energy storage cells are the core equipment of energy storage systems, which mainly use chemical reactions for energy storage. In the field of electrochemical energy storage, lithium batteries are the most important energy storage technology. Among lithium batteries, energy storage is mainly based on lifepo4 battery, while NMC battery is mainly used as a power battery. In addition, lead-acid batteries, flow batteries, and sodium batteries are also used.

In 2021, the newly installed capacity of electrochemical energy storage in the world will reach 7.54GWh, +96% year-on-year; among them, the power of lithium battery projects will account for 93.9%. At the beginning of 2023, batteries will account for about 65% of the cost of lithium iron phosphate energy storage systems.

The shape and model of the energy storage cells have a certain matching relationship with the application scenario. According to the application scenarios, energy storage cells can be divided into power supply side/grid side energy storage cells, industrial and commercial energy storage cells, household energy storage cells and portable energy storage cells.

According to the shape of the battery cell, the energy storage cells can be divided into three types: prismatic, cylindrical, and pouch. The prismatic battery is cost-effective and has high material stability. Cylindrical cells have a high yield rate and high technology maturity. Pouch batteries have good safety and high energy density, but the process is difficult and the production line efficiency is low, so there are few battery companies that adopt this route.

Prismatic cells first started from commercial vehicles and were later promoted in the field of energy storage. The capacity of prismatic cells is relatively flexible, so it can be used in various energy storage scenarios; while the capacity of cylindrical cells and pouch cells is relatively limited, so they are mainly used in household energy storage and portable energy storage markets.

According to the charge capacity, energy storage cells can be divided into 20/50/100/200/280Ah and other models.

In terms of energy storage on the power supply side/grid side and industrial and commercial energy storage, products with large batteries above 200Ah are mostly used:

● Lower cost: Under the same capacity, the number of batteries is reduced, the number of PACK components is reduced, and the cost is further optimized.
● The assembly process of large cells is highly simplified in the field of back-end integration.
● BMS management is easier: the number of series-parallel cells is reduced, and the data collection and monitoring accuracy of BMS is improved.

In terms of household energy storage and portable energy storage, 10-100Ah battery products are mostly used, mainly:

● Small cell products are launched early and have high maturity.
● Strong flexibility: The small capacity of the battery cell can improve the adaptability and flexibility of the battery and other components, and the module form and charging capacity are also more diverse.
● Optimizing the discharge efficiency: A large number of cells can increase the system voltage through series connection, reduce the current, reduce the degree of interference to the system, and improve the discharge efficiency.

Energy storage cells market analysis – diversified performance requirements

In recent years, the energy storage cells market has grown rapidly. According to SNE Research data, global energy storage cells shipments will reach 122GWh in 2022, +177% year-on-year. It is estimated that the global energy storage lithium battery demand is expected to reach 256GWh in 2023, +110% year-on-year. The demand is expected to reach 1066GWh in 2026, with a compound annual growth rate of 72% from 2022 to 2026.

The main customers of energy storage cells companies are system integrators, and the downstream competition pattern is relatively scattered. System design, equipment integration, control strategy formulation, branding, and quality assurance involve battery equipment on the DC side and converter equipment for AC measurement, which play an important role in ensuring the safety and performance of the energy storage system.

The core barriers of the energy storage cells industry

● Certification barriers

The industry has barriers to entry, and it takes a long period for customers to verify products. There is no global uniform standard in the field of energy storage cells, and each country has its own unique certification standards for the electrical safety and performance of energy storage cells.

Only when energy storage cells companies obtain product certification in the corresponding region can they gain access to market segments. In addition, after obtaining the market access certification, the energy storage cells factory also needs to conduct product certification for customers such as integrators.

● Channel barriers

Concentrators have relatively concentrated resources and strong voice. In terms of the energy storage market, downstream customer resources are relatively concentrated, and energy storage cells companies bound to top customers are expected to gain a higher share.

In the household energy storage market, there are a large number of end household users and they do not have the ability to install independently, so they need to rely on local distributors and installers to provide installation and after-sales service. This requires battery and system manufacturers to establish cooperative relationships with target market installers and distributors, and the barriers to channel entry are high.

● Technical barriers

Safety/stability/consistency and other performance requirements are high, and household energy storage cells have strong customization attributes. In the energy storage market, the energy storage cells of end customers have a long service life, and they have high requirements for the stability, consistency, and safety of the battery cells, and put forward higher requirements for manufacturers.

In the household energy storage market, in addition to the stability, consistency, and safety of products, due to their strong consumption attributes, C-end customers have diverse needs for temperature operating range, rate performance, and cycle life. Therefore, battery factories are required to have a full range of customized service capabilities.

Energy storage cells industry trends

In recent years, there have been trends in the energy storage cells industry: tight structural supply, large-scale energy storage cells in front of the meter, and accelerated development of new technologies.

● Energy storage cells are becoming larger. The cost of large cells is lower, the management accuracy of BMS is higher, and the degree of assembly simplification is higher; therefore, large-scale has gradually become an important development trend of the pre-meter energy storage industry.

● High-quality production capacity is relatively scarce, and various battery companies have accelerated the deployment of energy storage links. Starting in 2023, production capacity will usher in a period of rapid release.

● Large cylindrical battery pack is expected to be rapidly applied in the field of energy storage. With the advantages of high production efficiency, high safety, and low production cost, large cylindrical batteries are expected to achieve rapid penetration in the field of household storage.

Outlook for the energy storage cells industry

In the short term, the price of lithium carbonate has dropped from nearly 600,000 RMB/ton in November 2022 to around 270,000 RMB/ton, and the unit cost of batteries is expected to decrease by about 0.2 RMB/Wh. In the energy storage market, most projects adopt the bidding system, and the price adjustment is slow.

Therefore, the price reduction of lithium salt is expected to increase the profitability of related battery cell companies. In the household energy storage market, the cost sensitivity of end customers is poor, and there is a longer time lag in cost transmission, and related battery cell companies are expected to benefit.

In the long run, leading companies are expected to maintain a stable market share by virtue of their scale, product performance and channel advantages of first release. In the future, companies that have technical differences in large-scale energy storage cells and sodium batteries and continue to accelerate their channel layout are expected to gain opportunities to increase their share.