Excessive inventory posed a significant challenge for the European residential battery storage market in 2023. According to EESA statistics, new installations in Europe's residential battery storage sector amounted to 5.1GWh in the first half of 2023, indicating that the 5.2GWh inventory accumulated by the end of 2022 had been depleted. In the first half of 2023 alone, an additional 6.3GWh of installations were made, equivalent to eight months’ worth of installations in Europe's residential energy storage systems (ESS) markets.
The inventory has now stabilized at a normal level.
In 2023, the residential ESS market in Europe reached approximately 9.5GWh. During the second half of 2023, installations consumed 4.4GWh of inventory, and in the first quarter of 2024, consumption stood at around 1.9GWh.
The relationship between Chinese inverter exports to Europe and the cumulative inventory of European residential battery storage is noteworthy. In the first half of 2023, Chinese exports amounted to 3.827 billion USD, coinciding with the addition of 6.3GWh of new installations. Similarly, in the second half of 2023, exports totaled 1.762 billion USD, aligning with 2.9GWh of new installations. Additionally, exports amounted to 615 million USD in the first quarter of 2023, corresponding to 1.01GWh of newly added installations.
In summary, 1.5GWh were installed in the second half of 2023, with an additional 0.9GWh installed in the first quarter of 2024. This leaves approximately 4GWh remaining, equivalent to installations over a span of five to six months, indicating a normal inventory level.
Export Amount of Inverters From China to Europe Unit: USD Million
Insights from leading companies in the residential inverter sector offer valuable perspectives on the European inventory landscape.
Company D: Having entered the European market relatively late, Company D remains unaffected by cumulative inventory. It forecasts a remarkable 30% growth rate for the European ESS market in 2024.
Company Y: Although Company Y holds a modest market share in Europe, its overseas subsidiary still retains inventory, with consumption ongoing. Forecasts indicate that Company Y's inventory will normalize by the latter half of 2024.
Company A: Benefiting from flourishing markets, Company A's customers are rapidly consuming their installation inventory in Germany, the U.K., and Italy. Most distributors completed destocking by the fourth quarter of 2023. While some inventory remains, particularly in Poland, aggressive price reductions are anticipated to fully deplete it by the first quarter of 2024. With 70% of its revenue stemming from European markets, Company A projects a 30% growth in the inverters and ESS sector for 2024.
Company H: Orders have been gradually increasing since March, with production plans rebounding in April, leading to a decline in inventory levels expected by May and June. Market dynamics are predicted to improve quarter by quarter, with the industry poised to witness a nearly 30% growth in shipments.
Additionally, SolarEdge, a residential storage company generating half of its revenue from the European market, stated in its 2022 earnings report that the second and third quarters of 2024 will mark an inflection point in inventory consumption. Given its high cumulative inventory in Europe in 2022, SolarEdge's outlook aligns with expectations from other companies with significant inventory towards destocking in the European market.
The European residential battery storage market is poised to experience a 20% growth in 2024.
Despite a slight early-year dip in residential ESS installations across Europe, the region is projected to surpass the 20% growth mark in residential storage installations for the year.
This optimistic outlook is underpinned by several key factors:
Firstly, according to BNEF forecasts, Europe is expected to add 23GW in residential PV systems, marking a 6.2% increase and laying a solid foundation for future installations.
Secondly, lower prices are anticipated to drive growth in distributed PV markets, consequently leading to increased storage installations.
Thirdly, the ongoing upgrade of residential products is resulting in the introduction of more high-capacity residential storage options. Notably, companies like Huawei and BYD have launched residential ESS products with capacities exceeding 15KWh, indicating a trend towards larger capacity residential storage solutions. Consequently, further expansion in residential ESS capacity is expected.
According to TrendForce statistics, around the world, 11GW/20.9GWh capacity of residential ESS is projected to be installed in 2024, marking a 5% and 11% increase from the previous year. However, with declining power and gas prices, the urgency among customers for installations has waned, leading to a slowdown in installation growth rates expected for 2024.
Projections for Global ESS Installations by Different Types in 2024 (Unit: GW)
Despite this, the overseas residential battery storage markets remain the most lucrative in the industry. Consequently, both new and established players in China have expanded their capacities, while overseas distributors are hastening to deplete their inventory. Although the growth rate of residential battery storage is slowing, there is still ample opportunity to witness further increases in its penetration rate.
In conclusion, the return on investment (ROI) of European residential battery storage remains favorable. Furthermore, the sector's product offerings are becoming more diverse, and the costs of raw materials are gradually decreasing compared to the past two years. Coupled with burgeoning demand, we anticipate continued robust growth in the European residential battery storage market.
