In 2023, amidst a fierce price war among suppliers and a fragmented competitive landscape, the domestic energy storage companies find themselves heavily reliant on mandatory policy installations. Concerns about future development loom large among market participants, prompting a swift pivot towards overseas expansion.
But why the sudden surge in interest in foreign markets? The answer lies in the fact that domestic companies are encountering developmental roadblocks, compelling leading manufacturers to prioritize expansion abroad. In this article, TrendForce will delve into the challenges and opportunities facing China's energy storage industry as it ventures into the lucrative U.S. market, shedding light on the strategies and hurdles involved in this global endeavor.
Lithium-battery Industrial Chain Highlights in China
China stands out in the global lithium-ion battery supply chain, boasting distinct advantages. From cathodes and anodes to electrolytes, diaphragms, and batteries, China boasts a comprehensive industry chain for lithium-ion batteries.
Conversely, the United States grapples with insufficient local battery supply, relying heavily on the global supply chain to meet its energy storage system needs over the long term. As local demand surges, the United States has emerged as a primary destination for battery manufacturers to export their products.
Since the IRA Act came into effect, storage battery companies worldwide have ramped up their efforts to build new battery capacity in the United States. However, Japanese and Korean companies predominantly focus on producing ternary batteries. Many of their lithium-ion battery plants in the U.S., either under construction or already operational, specialize in ternary power batteries.
As mentioned earlier, China boasts a complete industrial chain. However, due to its advanced supply chain and fierce market competition, the average price of China's ESS is lower than that in Europe and the U.S. Consequently, in the United States, expanding local battery capacity in the short term poses challenges. Nonetheless, aided by U.S. subsidy policies and transport cost considerations, China's energy storage system products remain highly competitive in the U.S. market.
Wood Mackenzie anticipates that the capacity of energy storage batteries in the United States falls short of meeting the demands of its energy storage market. Moreover, the IRA Act mandates certain requirements, such as localizing key minerals and battery modules, to qualify for electric vehicle subsidies. However, there are no specific provisions regarding the ESS supply chain in the IRA Act. As a result, in the short term, ESS systems reliant on lithium iron phosphate will heavily depend on the global supply chain, particularly on China's supply of lithium iron phosphate batteries.
Chinese battery manufacturers continue to lead the way in global energy storage battery shipments. According to data released by SNE Research, an international battery market research institution, on March 11, 2024, Chinese companies maintained their dominance in global energy storage battery shipments throughout 2023. The data reveals that global energy storage battery shipments in 2023 totaled 185GWh, with the top five spots occupied by Chinese companies: CATL, BYD, EVE Battery, REPT, and Hithium.
In 2023, the global energy storage market continued to be dominated by China, North America, and Europe. Demand for energy storage batteries in North America and Europe reached 55GWh and 23GWh respectively, accounting for 30% and 12% of the market share. Meanwhile, the Chinese market saw demand soar to 84GWh, securing a commanding 45% market share.
Currently, Electrochemical Storage Systems (ESS) remain unaffected by the Foreign Entity of Concern (FEOC) regulations in the IRA Act. This implies that the U.S. has yet to impose restrictions on imports of energy storage batteries from China. Consequently, Chinese manufacturers still hold sway in both the U.S. and European markets. With the U.S. electrochemical energy storage market witnessing robust growth and China's lithium-ion battery industry boasting superior scale and technological prowess globally, manufacturers stand to gain significantly by tapping into high-value segments of the industry chain and leveraging advanced technologies.
Regarding ESS, according to data from CNESA, the top five companies in global ESS shipments for 2023 are Sungrow, CRRC Zhuzhou, Hyperstrong, Narada Power, and Envision Energy. Chinese energy storage system integrators are rapidly expanding into overseas markets, aiming to cater to diverse scenarios and enhance their presence across multiple global markets.
As capacity continues to grow, Chinese energy storage enterprises are increasingly targeting overseas markets. Energy transformation and green development represent inevitable trends in global economic progress, with the new energy industry in various countries and regions experiencing rapid expansion. Consequently, the potential for growth in overseas markets is virtually limitless.
Furthermore, Chinese battery companies lead the way in technology, production capacity, scale, and various other aspects. Their integrated industry chain and cost advantage serve as crucial assets, with relevant enterprises actively promoting research and development in battery technologies and strategic planning. Consequently, their competitiveness in the international market is steadily increasing.
Looking ahead, China, the United States, and Europe will remain the world's most significant regional markets for energy storage. Leveraging advantages such as the introduction of new technologies, cost efficiency, diverse product application scenarios, and expanding overseas markets, Chinese energy storage enterprises can enhance their global competitiveness.