The long-term energy storage market is booming

In the energy storage industry, the intensity of competition continues to escalate, like a marathon with no end but constant acceleration. Just how fierce is this competition? According to the "Carbon Peaking Action Plan Before 2030" issued by the State Council, by 2025, China's new energy storage installed capacity will reach more than 30GW. However, according to data from the Zhongguancun Energy Storage Industry Technology Alliance, as of the end of 2023, China's cumulative installed capacity of new energy storage has reached 34.5GW/74.5GWh. In just one year, the scale of new operations reached an astonishing 21.5GW/46.6GWh, three times the scale in 2022.

The driving force behind this is the realization of the "double carbon" goal. With the rapid growth of wind power and photovoltaic installed capacity, unstable wind and photovoltaic power generation has brought huge challenges to the power grid. In order to solve this problem, various regions have introduced "wind and solar distribution and storage" policies, that is, supporting the construction of energy storage power stations in newly built wind farms and photovoltaic power stations. This "large power bank" can store excess wind and solar power and release it when needed, thereby improving the operating efficiency of the power system.

However, with the rapid release of energy storage product production capacity, the market oversupply has become increasingly serious, causing product prices to continue to fall. The 2024 battery cell framework bidding situation announced by China Storage Technology shows that the quotation of energy storage cells has been as low as 0.409 yuan/Wh, which is a drop of more than 50% compared to the base price in January 2023. This undoubtedly reveals that China's new energy storage industry is experiencing similar difficulties as the photovoltaic industry: overcapacity, product homogeneity, and intensifying price wars

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Although the new energy storage industry started late, it has developed rapidly and is now entering the same dilemma that the photovoltaic industry has experienced. However, in sharp contrast to the excessive competition in short-term energy storage, the importance of long-term energy storage is gradually becoming prominent. As the proportion of installed capacity of solar energy and wind energy continues to increase, the problem of matching between their power generation and terminal power demand has become more and more serious. Long-term energy storage relies on its long cycle and large capacity characteristics to regulate the supply of new energy power over a longer period of time.

The "Notice on Encouraging Renewable Energy Power Generation Enterprises to Build Their Own or Purchase Peak Shaving Capacity to Increase the Scale of Grid Connection" issued by the National Development and Reform Commission and the Energy Administration clearly requires that "new renewable energy power generation projects exceeding the guaranteed grid connection of power grid enterprises , need to be equipped with a peak shaving capacity of more than 4 hours." This policy guidance has received positive responses from Inner Mongolia, Xinjiang, Liaoning, Hebei, Shanghai and other places, and has put forward requirements for energy storage duration of more than 4 hours.

Global consulting firm McKinsey predicts that the potential market space for long-term energy storage will grow on a large scale starting from 2025, with the global cumulative installed capacity reaching 30-40GW, and the cumulative investment amounting to approximately US$50 billion. Compared with short-term energy storage, long-term energy storage is an emerging energy storage market segment in recent years. The threshold for enterprise participation is higher and the competitive environment is more benign. This provides valuable opportunities for companies with technological accumulation and forward-looking layout.

Driven by policies, the new energy storage industry is taking off rapidly. According to different demand scenarios, energy storage can be divided into large storage, industrial and commercial energy storage, and household energy storage. Large-scale storage mainly serves the power supply side and the grid side, while industrial and commercial energy storage has economic advantages in certain areas, and household energy storage is widely used overseas. Currently, the development of the new energy storage industry is mainly driven by policies. According to statistics, from 2021 to 2023, the state and local governments have issued nearly 1,200 policies directly related to energy storage.

However, the new energy storage industry also faces many challenges. On the one hand, there is a large amount of allocation without saving, and there is even a problem of "bad money driving out good money". Taking the power supply side distribution and storage as an example, due to the limitation of distribution and storage capacity and duration, its power consumption effect on the power supply side enterprises is relatively limited. Enterprises often only carry out the construction to meet the approval requirements for the construction of new energy projects, and less Consider the actual operation of subsequent energy storage. Therefore, during the construction process, companies often choose lower-cost solutions, such as cutting off power during part of the period.

On the other hand, the initial investment cost of energy storage projects is relatively high. For example, if a photovoltaic power station is equipped with an energy storage project, its initial investment will increase by 8-10%, while if a wind farm is equipped with an energy storage project of the same capacity, its initial investment cost will increase by 15%-20%. Since the construction of energy storage will significantly increase the initial investment cost of the project, new energy companies are more inclined to choose energy storage products with lower initial costs. This has also led to the phenomenon of “low bidder wins” when energy storage companies bid.

In order to solve the commercialization problem of new energy distribution and storage, the industry has begun to try the "shared energy storage" model in recent years. This centralized large-scale independent energy storage power station not only meets the needs of its own power station, but also provides services for other new energy power stations. For power supply companies, this reduces the construction costs of new energy supporting energy storage and reduces daily operation and maintenance costs; for power grid companies, multi-point centralized medium and large energy storage power stations will be beneficial to the balance of the power grid. Encouraged by the National Development and Reform Commission, the Energy Bureau and local governments, shared energy storage power stations are generally larger in size, and the builders are usually local state-owned enterprises, but there are also power grid companies that build their own shared energy storage power stations. In terms of fees, charging standards vary from province to province. As provinces with relatively typical profit models for shared energy storage power stations, Shandong and Hunan have energy storage rental fees of about 350 yuan/KW and 450-600 yuan/KW respectively. According to research, in areas such as Jiangsu and Zhejiang where the peak-to-valley electricity price difference is large, the internal rate of return of shared energy storage power stations can reach more than 7%. This has reached the baseline of internal investment rate of return for many central enterprises and local state-owned enterprises.

In addition, the rapid development of new energy industries such as photovoltaics and wind power has also left more cost space for the energy storage industry. Taking photovoltaics as an example, a report from the International Renewable Energy Agency shows that between 2010 and 2019, the average power generation cost of global photovoltaic power stations dropped by 82%, and module prices dropped by more than 90%. In recent years, the price reduction trend in the photovoltaic industry has continued. This means that while the overall investment budget of the enterprise remains unchanged, the cost of photovoltaic power generation is reduced, and more costs can be used for distribution and storage.

In summary, the development of the new energy storage industry is inseparable from policy promotion and market demand. Although it faces commercialization difficulties, through the advancement of innovative models and technologies such as "shared energy storage", we have reason to believe that this industry will usher in broader development prospects.

In the context of multi-technological competition, the application of energy storage technology requires "local conditions" decision-making based on different situations. According to different storage media, energy storage technology can be divided into electrical energy storage, thermal energy storage and chemical energy storage. Among them, electrical energy storage technology can be divided into electrochemical energy storage, electromagnetic energy storage and mechanical energy storage. Among the more subdivided energy storage technologies, pumped hydro energy storage and solar thermal energy storage (mainly molten salt energy storage) have a longer history of large-scale application. However, most of the world's molten salt heat storage projects are concentrated in areas near the equator, and the application of molten salt heat storage in China has only become popular in recent years.

Among various types of new energy storage, electrochemical energy storage is relatively mature and currently has the most commercial applications. Currently, most of China's electrochemical energy storage is lithium-ion battery technology. Because lithium-ion battery technology has been supported by consumer batteries, power batteries and other markets before the development of the new energy storage market, the entire industry chain technology continues to advance rapidly. One of the manifestations is that the cost of lithium-ion batteries has dropped by 97% in the past nearly 30 years. Although lithium-ion batteries have high energy density, they also have some unavoidable shortcomings, such as insufficient safety and insufficient energy storage time.

From the perspective of China’s energy storage policy goals, high safety, low cost, long life, large scale, high efficiency, and sustainable development are the future industrial development directions of energy storage technology. Safety, in particular, is the primary consideration in energy storage route selection. According to incomplete statistics, in the past five years, a total of 41 fire and explosion accidents in energy storage power stations with great social impact have occurred around the world, including 6 in the United States, 6 in China, 31 in South Korea, and 1 each in Belgium and Australia. In 2022, the National Energy Administration issued a letter clarifying that medium and large electrochemical energy storage power stations are not allowed to use ternary lithium batteries and sodium-sulfur batteries.

As the electrochemical energy storage product closest to pumped hydro energy storage, the output power and energy storage capacity of flow batteries can be designed independently. When applied to large-scale energy storage, the cost is lower, the safety is higher, and the energy storage time is up to 8 hours. Above, the overall service life can reach 25 years and above. Unlike lithium iron phosphate and ternary lithium, which are the two dominant lithium batteries, there are more types of flow batteries, and there are many choices and possibilities in the technology path. At present, the flow battery with the highest degree of commercialization and technological maturity is the all-vanadium flow battery. The all-vanadium redox flow energy storage battery has a charge-discharge cycle life of more than 20,000 times and a calendar life of more than 15 years (generally more than 20 years). It has the longest life among all types of secondary batteries.

Although flow batteries were born nearly 50 years ago, the main constraints that have not entered large-scale applications for a long time are: low energy density (only 1/10 of lithium batteries), excessive size, limited applicable scenarios, and insufficient economy. wait. However, in recent years, the cost of flow battery energy storage systems has been declining rapidly. Taking all-vanadium redox flow energy storage batteries as an example, the delivery price of advanced companies in the industry has dropped to about twice that of lithium battery energy storage systems. In long-term energy storage of more than 4 hours, vanadium flow batteries have shown better economics than lithium battery energy storage.

Regarding lithium batteries and flow batteries, which have their own advantages and disadvantages, industry experts have also combined their advantages to design lithium-ion flow batteries. Depending on the chemical composition of the electrolyte, in addition to all-vanadium flow energy storage batteries and lithium-ion flow batteries, flow batteries also have various technical routes such as zinc/bromine, zinc/iron, iron/chromium, sodium polysulfide/bromine, etc. . They have different energy densities, operating temperature ranges and charge and discharge times.

In addition to electrochemical energy storage technology, thermal energy storage technology and chemical energy storage technology also have their own development potential. For example, in areas such as the arid and flat Gobi and deserts, which do not have the geological conditions to carry out projects such as pumped hydro energy storage and air compression energy storage, photothermal energy storage technology has become a feasible option. Through the heat transfer and storage medium of molten salt, photothermal energy storage can not only meet the requirements of large energy storage capacity and long-term energy storage time, but also be economical, and can operate safely and stably for 25-30 years under harsh natural conditions. .

Overall, most of the various new long-duration energy storage technologies are still in the demonstration stage. It is crucial to select the most suitable energy storage route based on different usage scenarios and local conditions. As for which technical route can ultimately lead the development of the energy storage industry, we may need to observe it from a long-term perspective of more than 5-10 years.

In the early stages of the development of the long-duration energy storage industry, how to find deterministic opportunities when various technical routes are not yet clear? This requires in-depth research and understanding of national policies, as well as insight into the development trends of subdivided industries. In the field of photothermal power generation, national policies have given clear guidelines. The policy proposes that during the "14th Five-Year Plan" period, the annual new construction scale will reach about 3 million kilowatts, and emphasizes the implementation of a number of solar thermal power generation projects as soon as possible in the construction of new energy bases in deserts, Gobi, and desert areas. This means that if companies build solar thermal power generation projects in these areas, they are likely to receive more policy support and resource tilt.

For those subdivided technology routes that do not yet have clear policy support, we need to go deep into the industry chain and look for opportunities in each link. Taking vanadium flow batteries as an example, the entire vanadium battery energy storage system includes multiple parts such as stacks, electrolytes, inverters, intelligent controls, storage tanks, containers, pipe pumps, valves, and sensors. Among them, there is room for performance improvement and cost reduction in electrode materials and membrane materials in stack materials. At the same time, the technical threshold of bipolar plates is lower, but there is still the possibility of cost reduction. In terms of photothermal energy storage, its construction industry chain is relatively long, including four major sectors: light concentration, heat absorption, heat storage and exchange, and power generation. Among them, the heat storage and exchange sector involves a variety of materials and equipment, and there are many opportunities for subdivided industries.

The long-term energy storage industry is not an asset-heavy manufacturing industry, but more of an asset-light integration model. However, the threshold for integration is not low. There are many materials and equipment involved, and how to improve their adaptability is a high design threshold. Therefore, the future competition situation will be one where the strong will always be strong, and not too many companies will participate.