The demand for installed energy storage is experiencing a significant boom, leading to a maturation of the industry chain. Energy storage systems serve as the “reservoir” for a new type of power system. These systems enable the transformation of electricity, which is difficult to store, into other forms that can be stored and released when needed. They also enhance the flexibility and stability of the power grid, as well as increase the consumption capacity of green power. As a result, energy storage effectively addresses the challenges associated with grid connection of renewable energy sources like wind and solar power. The global renewable energy installation capacity is substantial, which fuels the rapid development of energy storage. In 2022, the worldwide energy storage installation capacity reached 20.4 GW, representing a doubling of growth compared to the previous year. Each application scenario of energy storage has specific requirements, leading to variations in market share, product forms, and business models among participants.
Large-scale energy storage is witnessing a surge in demand, accompanied by technological diversification and fierce competition in the supply. The majority of large-scale storage deployments are concentrated in China, the United States, and other major regions with significant renewable energy installations. Projections indicate that the installed capacity of large-scale storage (specifically the new type of energy storage) in China and the US is expected to reach 42 GWh (up 164% YoY) and 25 GWh (up 142% YoY) respectively in 2023. The industry is witnessing diverse new technologies, with lithium battery energy storage dominating global installations. The industry chain encompasses energy storage batteries, PCS (Power Conversion Systems), system integration, and more. As large-scale energy storage matures, fierce market competition is expected. Over time, improved business models for large-scale storage power plants in different countries will highlight the significance of core performance factors such as efficiency and safety. Consequently, barriers related to technology and brand will emerge in each production link, gradually improving the competition landscape.
Household storage represents a market with significant untapped potential. Developed regions such as Europe and the United States, characterized by high electricity prices, are the primary markets for global household storage. Users' demand to save electricity and enhance its stability, along with policy subsidies, are driving strong growth in the household storage market in these regions. Although natural gas prices have decreased in Europe, residential electricity prices remain unchanged. The household storage market holds immense potential due to economic factors, user consumption habits, and policy incentives. The new California NEM 3.0 policy is propelling excellent growth momentum in the US market as well. Estimates suggest that the new installed capacity of household storage in Europe and the US will reach 12.7 GWh (up 81% YoY) and 4.4 GWh (up 205% YoY) respectively in 2023. The global household storage market is dominated by various companies, with local enterprises exhibiting particular strength. While short-term demand in the household storage market may be uncertain, the overall global market offers vast opportunities. Therefore, it is advisable to focus on enterprises with strong brand presence and established distribution channels.
Commercial and Industrial Energy Storage: High Economic Potential Sparks Market Growth
Commercial and industrial energy storage is witnessing a significant upswing, marking the first year of explosive market growth. China's policy initiatives have created a substantial gap in electricity prices between peak and off-peak times. This has incentivized commercial and industrial users to adopt energy storage systems for self-regulation of their power consumption during peak and off-peak periods. Currently, the economic viability of commercial and industrial energy storage systems in several provinces is quite promising. Provinces with high electricity consumption in the eastern and central regions, such as Zhejiang, Guangdong, and Hunan, exhibit a price difference of more than 1.2 yuan per kWh between charging and discharging during a single day. The theoretical internal rate of return (IRR) for industrial and commercial energy storage projects exceeds 15%, indicating an excellent return on investment. As a result, the commercial and industrial energy storage market is on the verge of explosive growth.
We predict that the national installation capacity of commercial and industrial energy storage will reach 7.3 GWh in 2023, with the global installation capacity expected to surpass 20 GWh. The commercial and industrial energy storage market is still in its early stages of development, with products that have not yet achieved standardization and an immature competitive landscape. This presents an opportunity for companies to seize the potential within this emerging industry. It is recommended to focus on companies offering industrial and commercial energy storage products or those involved in power plant-related businesses.