Can 2023 energy storage investment continue its glory?

In 2022,?energy storage will enter the fast lane to suppress peak and valley power generation and ensure the safety of the power grid. Affected by supply chain disruptions and numerous favorable policies, and with the gradual implementation of China's "dual carbon" strategy, the proportion of energy storage continues to rise. 2022 can be regarded as the first year of energy storage explosion. Can energy storage investment continue to flourish in 2023?

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Energy storage has become the focus of attention for major securities firms, harboring new investment opportunities

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According to the 2023 A-share investment strategy report of securities firms, "new energy" has become a high-frequency term of concern for multiple securities firms such as Ping An Securities, Guotai Junan, and Huaxi Securities. They have expressed that in 2023, the new energy field will breed more investment opportunities, with energy storage being a key focus and favored as one of the three major sub sectors in the new energy field.

Energy transformation is a development trend in China and even globally. The "14th Five Year Plan for Modern Energy System" proposes that by 2025, China's electrification level will continue to improve, and electricity will account for about 30% of terminal energy consumption, which also gives rise to new investment opportunities in the energy storage industry in 2023. With the increasing proportion of new energy, photovoltaic, and wind power in power generation, the instability of renewable energy generation has led to a demand for energy storage. At the same time, new energy storage has become an important way to solve the problem of grid consumption in the context of rapid development of renewable energy. With the increase in installed capacity of new energy sources such as wind and solar power, the demand for energy storage in the power system is also rapidly increasing.

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Continuous policy benefits and vast market space for energy storage

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Global energy storage is mainly divided into three major markets, namely China, the United States, and Europe. Currently, more and more people are accepting energy storage as the mainstream power technology, and with the promotion of net zero goals, energy storage systems are growing rapidly. In 2022, the global installed capacity is expected to reach 35.5GWh. According to the analysis of GlobalDate data, it is estimated that the global electrochemical energy storage capacity will reach 92.2GW by 2026. It not only has a large demand for installation, but also has a vast development space. It is predicted that the growth rate of China's large reserves in 2023 may be the fastest, followed by the United States and Europe. The development of domestic energy storage is divided into three stages. The first stage is the early subsidy stage, the second stage is the stage of entering practical application, and the third stage is the stage of meeting economic applicability. With the continuous introduction of favorable domestic distribution and storage policies, large-scale energy storage installations are expected to experience rapid development. Since 2022, China's Inner Mongolia, Shaanxi, Shandong, Henan and other regions have successively introduced mandatory storage allocation policies.

In terms of development model, with the gradual introduction of energy storage supporting policies and the impact of the good business model of "new energy+energy storage", the integration of "photovoltaic+energy storage" and household light storage may become a new trend on the future development path. From the perspective of segmented application scenarios, domestic user side energy storage is mainly focused on industrial, commercial, and industrial parks. In 2021, the proportion of user side energy storage in domestic new energy storage reached 24%, with industry, commerce, and industrial parks occupying the absolute main force, accounting for over 80% in total. It is also the mainstream use of user side applications. For overseas household energy storage, the market space is expected to further expand in 2023 under the catalysis of geopolitical factors. For large-scale energy storage in China, which is still in the early stages of industry development, the profitability of the industry is expected to continue to increase in 2023, driven by various factors such as subsequent policies, technology, and scale.

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Cost is expected to decrease, and industry investment prospects are promising

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From the perspective of energy storage industry, it is mainly divided into three major links. The first is the upstream battery materials, which have a certain overlap with the upstream industry chain of new energy vehicles; The second is its own link, with battery packs accounting for over 60% of the entire cost, inverters accounting for 10% of the cost, as well as battery management systems and energy management systems. The third is downstream customers, including some large power generation groups and industrial and commercial distributed users. On January 7, according to the latest news released by the National Energy Administration, the cost per kilowatt hour of lithium iron phosphate battery is expected to decrease as the production of energy storage lithium batteries in China continues to rise. Meanwhile, in the past 10 years, the cost of lithium-ion battery packs has decreased by more than 80%. Due to the improvement of the upstream supply and demand structure, it may drive a decrease in system costs and better performance.

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At present, domestic energy storage has entered the stage of economic applicability. Since 2022, whether on the power generation or consumption side, the grid electricity price, including the terminal electricity price, has basically met the economic applicability. In the future, we will enter the stage of marketization, and our dependence on subsidies will become lower and lower. At the same time, the reduction of energy storage costs and the continuous growth of demand in 2023 will inevitably bring more industry investment opportunities. Numerous energy storage system integrators that have transformed from power equipment, such as Xinfengfeng, Kehua Data, Shangneng Electric, and Jinpan Technology, have emerged. Their main business of power equipment is stable and strongly related to new energy. They not only have the technical advantages of system integration and grid connection, but also have some overlap in customer channels between energy storage customers and power equipment main business customers.

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In summary, energy storage in 2022 is in the early stages of industry explosion, with stock price performance showing a logical verification stage and a period of economic spillover. With the continuous growth of the energy storage industry, Southern Potential New Blue Chip and other enterprises have been heavily investing in energy storage layout. In 2023, the energy storage industry is expected to continue its strength, with great potential for development and investment opportunities.

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