China's energy storage installations in May saw significant year-on-year growth, with clear support for annual installation demand. According to incomplete statistics from the CNESA Global Energy Storage Database, from January to May 2024, the scale of new energy storage installations in China reached 4.99 GW/14.66 GWh, representing year-on-year increases of 23% and 75%, respectively. In May alone, new installations amounted to 1.38 GW/2.97 GWh, reflecting year-on-year increases of 82% and 102%. By application scenario, grid-side energy storage accounted for 77%, predominantly driven by independent storage projects with intrinsic demand. Power-side and user-side storage accounted for 13% and 10%, respectively. We believe that considering the current high growth in bidding volume, increased storage ratios, accelerated project construction, and streamlined electricity pricing mechanisms, China’s large-scale energy storage installations are likely to maintain a growth rate of around 100% on a high base from 2023.
Figure : China's Newly Installed New Energy Storage Scale (GW/GWh), Jan-May 2024
In May, China’s energy storage bidding reached 11 GWh, a year-on-year increase of 19%. According to the tracking statistics of XunEntropy Research Institute and Energy Storage & Power Market, 61 energy storage procurement projects were completed in May, totaling 3.08 GW/11 GWh, representing month-on-month decreases of 39% and 30.8%, but year-on-year changes of -16.4% and +18.9%. By project type, independent energy storage/centralized procurement projects/renewable energy storage projects/user-side storage projects accounted for 53.7%, 36.2%, 9.2%, and 0.9%, respectively. In terms of pricing, the average bid price for a 2-hour energy storage system was 0.66 RMB/Wh, down 41% year-on-year and 21% month-on-month, continuing to reach new lows.
Figure: Monthly tender size for energy storage projects (GW/GWh)
Chart: 2-hour average energy storage system and EPC quotes(￥/Wh)
Germany's residential storage installations in May decreased by 36% year-on-year, and interest rate cuts in Europe may accelerate demand recovery. According to ISEA & RWTH Aachen University, Germany's new energy storage installations in April reached 320.9 MWh, a year-on-year decrease of 33%. Of this, residential storage installations were 294 MWh, representing year-on-year and month-on-month decreases of 36% and 6.7%, respectively. Falling electricity prices and negative electricity prices have negatively impacted end-user demand. On June 6, the European Central Bank cut interest rates by 25 basis points for the first time in five years, potentially boosting project yields and stimulating residential storage installations. Large-scale energy storage in Germany saw new installations of 14.3 MWh, reflecting year-on-year and month-on-month changes of +58% and -59%, respectively, due to low base figures causing significant monthly fluctuations. From January to May, new large-scale energy storage installations in Germany reached 180.1 MWh, a year-on-year increase of 56%. The end of the year is typically the peak season for large-scale energy storage installations in Germany, indicating early signs of high growth.
Large-scale energy storage is in a rapid development phase. In 2023, energy storage in both China and the United States was affected by external factors. The decline in lithium carbonate prices impacted the pace of large-scale energy storage construction and the profitability of system integrators in China. In the United States, fluctuations in interest rates and grid connection queues also disrupted the construction pace of large-scale energy storage. Looking ahead to 2024, the competitive allocation of guaranteed grid connection projects, the increased proportion of market-based grid connections, and the requirement for some existing projects to include storage will drive the proportion of energy storage configurations higher in China, supporting significant growth in the scale of energy storage. Prices in the PCS segment have remained relatively stable, and volume growth is expected to enhance economies of scale. Centralized large projects are likely to increase the proportion of liquid cooling. The United States is expected to enter a rate-cutting cycle, coupled with eased grid connection policies and the impact of the ITC policy, leading to the implementation of postponed projects.
Source: Huatai Securities