Focus analysis| Hokkaido, which has only 5 million people, Tesla and Huawei are competing for the energy storage market

Author | Yuan Silai

Edit | Su Jianxun

In Hokkaido, 3,000 kilometers away, the smell of gunpowder in the energy storage market is becoming stronger.

According to Nikkei Asia, Huawei will start selling 2MWh energy storage systems in Japan in March. They will buy battery packs from manufacturers such as CATL for use in energy storage systems.

Huawei has set its sights on the Hokkaido market, which is rich in resources and short of energy storage. According to James Chen, head of Huawei's Japan branch, they intend to "grow rapidly in the solar industry and reduce costs." There is no lack of ambition in the discourse.

After the establishment of the legion and the entry into the large energy field, Huawei has more competitors. This time, they will be against Tesla.

The latter received an energy storage order in Hokkaido, Japan, last year, providing a Megapack battery system that can meet the electricity consumption of 500 households for one day and connect to Hokkaido's power supply network this year.

Japan's demand for new energy is urgent in the world, by 2030, their new energy power generation will account for 35% of the whole, Japan's Ministry of Economy, Trade and Industry (METI) allocated nearly 98.3 million US dollars to install lithium battery energy storage systems for families and merchants, subsidies as high as 66%.

Japan has also become a market for companies to enter. In Hokkaido alone, there are foreign companies such as Tesla, Huawei, and SB Energy, as well as local giants.

The moment when Huawei established several major legions in 2021 actually marked the company's entry into the deep water zone. They will face stronger and fiercer competition than the mobile phone market and even the communication market.

outpost

Many people ignore the gold content of the Japanese market. Japan is the fourth largest consumer of electricity for many years, and according to the Wood Mackenzie report, in 2030, Japan will become the third largest energy storage country after the United States and China, reaching 25GWh. Their market growth is also fast enough to excite companies, according to the market research agency Fuji Economy, when the Japanese solar and wind energy storage market will triple from 2020 to 45.8 billion yen (about 2.556 billion yuan).

Competition in China and the United States has become fierce, and Japan, where the strength of local manufacturers is slightly inferior, has naturally become the next target of leading enterprises. Tesla spares no effort to grab customers, according to the Mitsubishi Research Institute, the cost per kWh of industrial fixed batteries made in Japan reached 240,000 yen (about about) in 2019, while tesla gave a price of $40 (about), which is one-sixth of the former, and Huawei's price will be lower.

In addition to the Battery Power Park project in Hokkaido, Tesla also received an order from J-Power in Hiroshima last November. Power company Japan Renewable Energy also announced the use of Tesla's energy storage system.

Among domestic manufacturers, BYD entered Japan very early. In 2015, their shipments of energy storage systems in Japan reached 130MW/60MW. However, photovoltaic leaders have only begun to speed up energy storage to go to sea last year. In the J-Power project, in addition to Tesla, the bidders also include Chinese photovoltaic cell manufacturer JinkoSolar.

Although it did not win the J-Power order, JinkoSolar's main home energy storage system SUNTANK was also sold in August last year through Marubeni, a large Japanese general trading company.

Japanese companies, seeing the aggressive onslaught of multinationals, have also begun to act. Hokkaido became an outpost of the Japanese energy storage market In 2020, Mitsubishi UFJ and SoftBank's subsidiary SB Energy jointly funded the launch of Japan's largest solar power plant in Yakumo-cho, Nikai-gun, Hokkaido, equipped with lithium-ion energy storage batteries with a storage capacity of up to 27.8 MWh, when SB Energy claimed that this project would become one of the largest solar power plants with batteries in Japan.

Companies in the United States, China, and Japan all want to capture more of the market in 2030. Even if Japanese companies are slightly inferior in cost control, it is difficult to say that they have no opportunities. In October last year, the Japanese cabinet set a goal to reduce the price of industrial fixed batteries produced in Japan to a quarter of the current level. In Japan, where the business environment is more conservative, the land snakes still have strong customer resources. Sumitomo Electric Industries, which has a history of more than 100 years, delivers dozens of energy storage systems to Japanese users every year, including Tokyo Electric Power Company. They have also deployed a 17MW/51MWh energy storage system in Hokkaido, which is directly connected to the wind power plant.

Chaotic markets

Energy storage is indispensable in the new energy industry, and the continuous decline in the cost of lithium batteries marks that energy storage has a foundation for development. Governments, on the other hand, actively subsidize and continue to deliver ammunition to it. Companies including Tesla and CATL are confident in seeing energy storage as the second growth curve.

This massive shift has just begun. The U.S. Energy and Environment Agency's EIA released a troubling figure: The cost of energy storage has fallen by 70 percent in three years and will fall at a rate of 8 percent a year. The main reason behind this is the rapid iteration of battery technology, and in 2019, the cost per kilowatt-hour of electric vehicle power batteries fell by 85% compared with 2010.

Photovoltaic modules, silicon materials and other industries are extremely concentrated, new entrants have difficulty in playing space, but energy storage can be said to have just begun to divide the pattern, in 2020, the domestic energy storage system ranked in the top five companies, shipments accounted for less than 30%.

The price war is beginning to appear. At the end of 2020, the bidding of Qinghai photovoltaic energy storage projects was announced, and BYD refreshed the bidding unit price, which was as low as 1.06 yuan / wh, and at the beginning of the year, the energy storage system quotation was still around 2.5 yuan / wh.

This approach is actually radical. At present, the domestic energy storage market is shrouded in doubts. It was not until July 23 last year that the state issued the "Guiding Opinions", which delineated the time point for energy storage to go to marketization: by 2025, realize the transformation of new energy storage from the initial commercialization to large-scale development, and by 2030, achieve the comprehensive market-oriented development of new energy storage.

Many provinces in the country also see opportunities. Taking Anhui as an example, Hefei claims to "build the first city of photovoltaics in an all-round way", AVIC Lithium Battery's battery + energy storage project in Changfeng County, Hefei, with a total investment of 24.8 billion, and Wuhe County, Bengbu City, has introduced Linyang Energy's wind and photovoltaic storage integration project with an investment of 10.8 billion.

In addition to solar energy, Anhui also has Envision Energy in Suixi County, and Xiehe New Energy in Bozhou Chenbei wind power + energy storage projects, all of which are more than 50MWh.

Compared with photovoltaic power generation with a clear profit model, assisted energy storage is still in a chaotic period in China. The clearest profit path for energy storage is to store electricity at low prices and sell it at high prices, but because domestic energy storage has not implemented a tiered rate, it can be expected that in the short term, the entrants will not even lack regulations on how to earn revenue. For the participants, this is the arena that requires bloodshed.

The overseas market is indeed a clearer path. In addition to subsidies, U.S. energy storage can be profitable by participating in market-oriented operations, peak and valley arbitrage, etc. Household energy storage in Japan and Europe is the main head, even if the subsidies in the future decline, relying on a huge household population, there is also enough imagination space.

Even so, the development of overseas energy storage has only increased significantly in recent years. Tesla launched the residential energy storage product Powerwall in 2015, but looking back, they didn't have much of a first-mover advantage.

In addition to policies and markets, energy storage itself also has technical problems that need to be overcome. According to the estimate of Liu Ke, a foreign academician of the Australian National Academy of Engineering, in a daily economic interview, the current battery production capacity of global battery manufacturers for more than 5 years can only meet the electrical energy required for the 3-day power outage in Tokyo. Coupled with Tesla's energy storage project in Australia, SK Energy's energy storage power station in Ulsan, South Korea, have all caught fire, and manufacturers cannot avoid safety barriers.

No matter how prosperous the future "trillion" market depicted is, energy storage can only be said to have just taken the first step at the moment. It has the potential to become an engine of growth, and neither Huawei nor Tesla will let go of the gap in the market, even if they can only tentatively take the next step.

Image from 36 Kr