A Guide for Automotive Manufacturers to Penetrate the Stationary Storage Market as Hardware Suppliers, from Battery Cells to Racks

• The SESS market is projected to capture around 36% of the global battery market by the year 2030 with annual added capacities growing at a compound annual growth rate (CAGR) of 23%source.
• SESS is segmented into Utility, Commercial and industrial (C&I), and Residential sectors, experiencing the most significant growth in the utility sector, followed by C&I, while the residential sector remains a niche market.
• North America leads the expansion of the SESS market, primarily due to policies like the Inflation Reduction Act, with China and Europe following closely—primarily driven by respective policy incentives such as China's 14th Five-Year Plan and Europe's REPowerEU.
• The paper emphasizes a strategic focus on Europe for new market entries due to regulatory frameworks, demand for regional supply chains, and the existing European footprint of automotive manufacturers.
• To succeed in this transition, manufacturers must offer a ready-to-use, standardized product with a competitive local design and high local service level.
• A suggested approach involves starting with System Supply to accumulate product expertise before moving to Standardized Products to target a larger market segment.

In conclusion, the whitepaper outlines a transformative strategy for automotive manufacturers, advocating for a gradual yet targeted penetration into high-potential regional markets with bespoke product offerings and service models, ensuring alignment with local manufacturing and supply chain requirements.

High Level - SESS Value Chain

The end-to-end value chain of stationary energy storage systems (SESS) from battery cell to project development involves multiple stages, each contributing vital functions to ensure the effective operation and integration of SESS into the energy infrastructure. The key stages of the value chain include:

1. Battery Cell: The foundational unit of a SESS, where energy is stored chemically. Platform providers typically partner with cell manufacturers to obtain high-quality battery cells tailored for specific storage applications.
2. Battery Module/Rack: Individual cells are organized into modules or racks, which are then assembled into larger storage units tailored to the project's specifications.
3. Power Conditioning System (PCS): This system converts energy from direct current (DC) to alternating current (AC), aligning it with grid requirements for compatibility and efficiency.
4. Battery Management System (BMS): A system designed to monitor and manage the health and operation of the battery cells, ensuring optimal charging, discharging, and longevity.
5. Energy Management System (EMS): Utilizes real-time data to orchestrate energy flow, balance power supply and demand, optimize system performance, and ensure seamless grid interaction.
6. System Integration: This process involves setting parameters for the EMS, aligning asset management tools, and ensuring all components of the SESS are configured properly to operate as an integrated whole.
7. Operation and Maintenance (O&M): Regular upkeep and servicing are necessary to ensure the system operates consistently and efficiently.
8. Engineering, Procurement, and Construction (EPC): This phase encompasses the entire project lifecycle, managing everything from design and component procurement to system construction and project commissioning.
9. Project Development: This stage involves conceptualizing the project, securing financing, obtaining regulatory approvals, and overseeing the project's execution from inception to completion.

Platform providers can span the entire SESS value chain, offering end-to-end solutions that cover from cell sourcing to project development. These providers stand out for their ability to deliver global distribution and consistent solutions across multiple projects. They can engage in various collaboration models with other companies, from subcontracting specific segments, such as cell selection and project development, to outsourcing the entire hardware spectrum. Additionally, while excellent in orchestration and customization, integration and service providers might not fully encompass the spectrum of value chain activities like platform providers do.

Hardware Provider/Supplier

The role of a hardware provider, also known as a hardware supplier in the Stationary Energy Storage Systems (SESS) market, typically involves delivering comprehensive hardware solutions that span various components of the overall system. This can range from Battery Modules/Racks to the Battery Management System (BMS), all of which are integral to the value chain of SESS.

Key aspects of the hardware provider's role include:

1. Expert Decision-Making: Hardware providers often outsource supplier decisions, relying on specialized expertise to select the best components for the hardware systems they provide. This ensures that the components are optimized for performance and cost-effectiveness.
2. Supply of Key Components: The provider may supply essential hardware components, such as battery modules and racks, which are used by integrators for final assembly.
3. Integration of BMS and EMS: A critical role for hardware providers is ensuring the seamless integration of the Battery Management Systems and Energy Management Systems (EMS). The focus is on synchronized functionality for achieving the specific application targets of a project, such as capacity management.
4. Risk Mitigation: With a deep focus on hardware, these suppliers work towards mitigating risks by providing reliable and standardized solutions that reduce potential system failures.
5. Scalable Production: As the market for SESS expands, hardware providers are expected to scale their production capabilities to meet increasing demand for high-quality, optimized solutions.
6. Research and Innovation: Dedicated to the hardware aspect of SESS, these suppliers strive to drive advancements in battery modules, racks, and other related components through focused research and innovation.
7. Market Positioning: Through specialization in hardware components, these providers position themselves as trusted industry experts, delivering solutions that service the growing demand for energy storage systems.
8. Market Sizing: The hardware provider may also engage in evaluating the market size and potential for various service classes within the SESS landscape, aiding in strategic planning and business development.

Hardware providers play a pivotal role in the SESS value chain by ensuring that the physical components of storage systems are expertly designed, manufactured, and integrated, supporting the overall performance and efficiency of energy storage solutions.

Expert Decision-Making

Expert decision-making for hardware providers in the SESS market hinges on leveraging specialized knowledge through an outsourced decision process. When platform providers and integrators outsource supplier decisions, they employ the prowess of specialists to navigate the complexities of selecting hardware components that meet the optimal benchmarks of performance and cost. This approach is instrumental in ensuring that the hardware systems provided are primed for effectiveness and efficiency.

Crucially, this external consultancy feeds into the intricate process of aligning Battery Management Systems (BMS) and Energy Management Systems (EMS), which is central to the successful orchestration of SESS projects. Decisions on crucial components, especially the selection of cell suppliers, are made with an eye toward meeting specific project objectives such as effectively managing capacity. This structured reliance on outsourced expertise underscores the hardware provider's commitment to delivering particularly tailored and high-quality solutions to their end users

Supply of Key Components

In the realm of stationary energy storage systems (SESS), the function of a hardware provider is central to the entire ecosystem's success, supplying the indispensable hardware components that form the backbone of SESS infrastructure. Essential components like battery modules and racks, supplied by the provider, represent the crucial intermediaries between the granular level of battery cells and the larger architecture of an energy storage system. These components are pivotal for integrators who take on the task of final assembly, ensuring that the entire system syncs effectively and operates to its optimum capacity once deployed.

By stepping into this role, hardware providers carve out a market opportunity for themselves, distinguishing their offerings as key elements within the value chain. Their supply of these crucial components is not merely transactional; it places them as industry anchor points—reliably provisioning integrators with the elements they need to bring SESS projects to fruition. This supply chain dynamic underscores the importance of a symbiotic relationship between hardware providers and system integrators, together enabling the holistic actualization of energy storage solutions that the contemporary energy landscape increasingly depends upon.

Integration of BMS and EMS

The integration of Battery Management Systems (BMS) and Energy Management Systems (EMS) stands as a pivotal requirement among the responsibilities of hardware providers in the stationary energy storage system (SESS) domain. This role is centered on fine-tuning the two systems to operate in harmony, a technical choreography that ensures the project's success through effective capacity management and other objective-specific requirements.

It is within this scope of duties that hardware providers are tasked to provide not just components, but a cohesiveness that binds the BMS and EMS into a synchronized unit. By doing so, they facilitate a level of consistency and stability necessary for the SESS to fulfill its role, whether that be in utility, commercial, or residential settings. Achieving this synchronization is an intricate task that requires a keen understanding of hardware interactions, system requirements, and project goals to ensure that the SESS operates efficiently and responds aptly to the demands placed upon it.

Competitive Landscape

The competitive landscape for hardware suppliers in the stationary energy storage system (SESS) market is characterized by a mix of specialized companies that cater to different segments of the market and offer a range of products and services. Companies such as ADS-TEC Energy , TESVOLT AG , INTILION , and PowerCo are among the key players in this space.

For instance, ADS-TEC Energy is known for its expertise in battery-based platform solutions, combining battery storage with in-house software solutions for applications such as ultra-fast EV charging. This company segments its offerings to cater to the C&I and utility markets, providing indoor and outdoor energy storage solutions, as well as operation and maintenance services for battery-based energy storage systems.

Similarly, TESVOLT AG specializes in commercial battery storage systems using advanced prismatic lithium cells from Samsung SDI. The company operates the first gigafactory for battery storage systems in Europe and places a strong emphasis on CO2-neutral manufacturing and partnerships with installers, dealers, and project developers, holding significant market shares in commercial energy storage.

INTILION, a subsidiary of the HOPPECKE Group, offers modular energy storage systems and emphasizes safety, reliability, and digital solutions. With over 95 years of experience in electrochemical energy storage, INTILION seeks international growth and provides extensive cloud services for data monitoring of its battery storage systems.

PowerCo SE, a subsidiary of the 大众 is a vertically integrated battery company with a focus on cell manufacturing in Europe. With plans to achieve significant production capacity and giga factories under construction, PowerCo SE is becoming a prominent battery cell supplier, with an additional focus on the e-mobility sector and stationary battery storage solutions.

The competitive positioning of these suppliers varies based on their capabilities, ranging from full value chain offerings to specialization in certain components or services. Some, like ADS-TEC, TESVOLT, and INTILION, are integrators and potential clients for modules. PowerCo positions itself as a cell supplier, highlighting the variety within the market where companies align their strengths to different aspects of the value chain, from cell production to system integration and turnkey solutions.

Market Entry

The market entry situation for new players in the stationary energy storage systems (SESS) sector varies greatly depending on the region. A strong Renewable Energy (RE) regulatory framework coupled with a demand for regional supply chains characterizes favorable entry conditions in some regions. Notably, there is a rapid growth of cell manufacturing, driven by factors such as localized production, market demand, and regions actively seeking regional supply chains.

North America (NA) presents a noteworthy market possibility for new entrants where regulatory frameworks and the Inflation Reduction Act (IRA) continue to boost localized production and market appeal. The market in NA is less restricted by RE regulatory frameworks, making it more amenable to new entrants.

Conversely, the situation in China is described as a "Closed Shop," indicating a high threshold for entry due to the market's maturity and established competition. Similarly, the Asia-Pacific (APAC) and Rest of World (RoW) regions are challenging markets for new entrants as they are globally scattered, very diversified, and dominated by Chinese players.

All markets examined highlight the necessity for local presence, attributed to regulatory frameworks and sustainability considerations such as local production mandates. In this backdrop, Europe is positioned as a particularly attractive market for new entrants with an existing footprint, underscoring the strategic focus on establishing or leveraging local operational bases to navigate entry into the SESS market.

Benchmark

A benchmark product in the stationary energy storage system (SESS) market is exemplified by "EnerOne," a model designed for seamless integration that showcases CATL's cutting-edge technology. "EnerOne" provides an optional cell feature with an impressive cycling capability of up to 12,000 cycles, enhancing its endurance and performance for long-term applications. It incorporates an integrated frequency conversion liquid-cooling system that maintains cell temperatures within a narrow 3℃ range, thereby extending the product’s life expectancy by 33%. Additionally, its modular construction is compatible with a wide voltage range of 600-1500V, demonstrating its adaptability to various system requirements.

The product’s efficiency is bolstered by an innovative design including a separate water cooling system that ensures effective cooling while requiring 50% less floor space. EnerOne reduces on-site installation costs and commissioning time, making the deployment process more efficient. The modular approach, combined with the product's high energy density, exemplifies efficiency through a well-conceived design that aligns with market needs for space-saving and cost-effective energy storage solutions. EnerOne's strengths lie in its advanced integration capabilities, versatile applicability across a broad voltage range, and its efficient use of space, which together position it as a benchmark product in the SESS market.

Economic Frame

Generally, automotive manufacturers will need to consider factors such as the initial investment in new production lines or retooling of existing ones to handle SESS components, expenditure on research and development to innovate in the rapidly advancing SESS technological space, costs pertaining to ensuring regulatory compliance across different markets, and potential expenses related to establishing supply chain relationships for the SESS components.

Market conditions, such as the demand for SESS products, competition intensity, pricing strategies, and market growth rates, will also influence economic outcomes. Additionally, operational efficacies like production optimization, quality control, and integration expertise with SESS hardware will be critical in shaping the economic figures associated with this business model shift.

Moreover, automotive manufacturers need to establish reliable partnerships and client relations, potentially positioning themselves as contract manufacturers or system suppliers partnered with platform providers, as indicated in the "Benchmark Approach by STROMDAO" scenario outlined in the documents. This entails addressing intricate hardware requirements essential for global SESS projects, which could ultimately affect the economic success of the venture

Entry Advice

Entering the SESS market as a hardware supplier demands a multifaceted approach from an automotive manufacturer. The firm should establish robust processes for continuously monitoring regulatory changes, a critical step towards staying ahead in compliance and market positioning. By melding this regulatory vigilance with an effective response strategy, the company enhances its operational agility, enabling rapid alignment with new industry standards and policies as they evolve.

At the core of the company's strategic plan should lie a deep integration of Environmental, Social, and Governance (ESG) principles. By embedding these ESG considerations into the business model and brand narrative, the manufacturer stands to not only align with consumer values but also exceed expectations in terms of corporate responsibility and ecological stewardship. This strategic angle not only reflects a commitment to sustainability but also responds to a surging demand for environmental mindfulness in product offerings and corporate conduct.

As the automotive manufacturer repositions itself, the synchronization of the product developmental phase with the nuanced requirements of the SESS market is key. Tailoring hardware offerings to meet the interoperability expectations in the energy sector will require leveraging existing automotive manufacturing expertise while harnessing new technological advancements. In parallel, communicating this ESG-centric, regulation-compliant, and technology-driven orientation to potential clients will be instrumental in crafting a compelling value proposition, ideally leading to a successful market entry and sustained growth in the SESS arena.