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The winning bid price for energy storage will reach a new low in 2024.
On March 12, Xinjiang Li New Energy's 75MW/300MWh energy storage system equipment procurement results were released, and Xu Ji Electric won the bid at a price of 0.564 yuan/Wh, setting a record low in the bid unit price of the energy storage system.
Since 2023, the unit price of energy storage systems has continued to fall, and most energy storage companies have not hesitated to "pursue" a low-price strategy at the cost of declining profits or even turning from profit to loss, and the average unit price of energy storage systems has increased from about 1.5 yuan/Wh at the beginning of 2023 to less than 0.9 yuan/Wh today, and the lowest unit price has dropped from 1.38 yuan/Wh (2h) to 0.56 yuan/Wh (4h), a decrease of nearly 60%.
Battery cells have not been spared, and prices have been cut in half since 2023. When will this wave of price reductions in the energy storage industry stop?
The price war lasts for a year
Energy storage is seen as the cornerstone of a new power system. With the large-scale grid of new energy sources such as wind power and photovoltaics, the industry hopes that energy storage can solve their problems such as volatility and intermittency, and the state and local governments have successively introduced a number of policies to encourage new energy distribution and storage.
In 2023, the installed capacity of new energy storage in mainland China will reach a new high. According to the CNESADataLink global energy storage database, the new energy storage scale in mainland China will be 21.5GW/46.6GWh in 2023, three times the installed capacity level in 2022.
According to the above database, by the end of 2023, the cumulative installed capacity of new energy storage in mainland China will reach 34.6GW/74.5GWh. The "Guiding Opinions on Accelerating the Development of New Energy Storage" issued by the National Development and Reform Commission and the National Energy Administration in 2021 set the goal of reaching more than 30 million kilowatts (i.e. 30GW) of new energy storage capacity by 2025. This means that the mainland has reached the target of new energy storage installation ahead of schedule.
The big numbers are gratifying. But for companies in the industry, it is a mixture of helplessness and pain.
From 2023 to the present, the price trend in the energy storage field has been like a roller coaster, and the price of both systems and batteries has fallen sharply. Energy storage companies have huge shipments, but they are "bleeding" business.
In March 2023, the price of energy storage systems fell below 1 yuan/Wh. Since June, the price war has moved towards a concentrated outbreak period. The price of energy storage cells of many domestic battery companies quickly dropped to below 0.5 yuan/Wh (excluding tax). In the centralized procurement of battery cells of a central enterprise that opened the bid in September, the tax-included quotation of some enterprises was even less than 0.5 yuan/Wh. In Q3 of 2023, the price of energy storage cells has dropped by more than 20%, and a round of battery cell price war has quietly begun.
At the beginning of August, Dai Deming, chairman of Chuneng New Energy, proposed that "the energy storage lithium battery market has officially entered the era of 0.5 yuan/Wh" has become a reality.
Subsequently, the price earthquake in the field of battery cells triggered a chain reaction in the industry. In late September 2023, the quotation range of 0.5C DC side is 0.66-0.705 yuan/Wh, and the weighted average quotation is 0.679 yuan/Wh. It is worth mentioning that the lowest price of 1 hour, 2 hours, 3 hours and 4 hours energy storage system (AC side) in September was lower than 0.9 yuan/Wh. At the beginning of October, the lowest price of 0.76 yuan/Wh DC side system appeared, which continued to intensify the price war in the industry.
At the end of December 2023, the bidding for the 4.6GWh battery cell frame of China Energy Construction Energy Storage Technology (Wuhan) in 2024 was opened. Among them, the bidding scale of the 0.5C and 0.25C bid sections is 4GWh, and the bidding unit price range of the 8 shortlisted companies is 0.409 yuan/Wh-0.508 yuan/Wh, and the average price is 0.439 yuan/Wh. This is another 40% drop from the September quotes.
Subsequently, the concentration of large reserves at low prices gradually became the norm. Taking battery cell enterprises as an example, a large number of enterprises opened "sales inventory" from November to December at the end of the year, and the price of battery cells continued to fall. At the end of December, the 0.5C and 0.25C bids were quoted at 0.409 yuan/Wh. From 0.9 yuan/Wh to 0.409 yuan/Wh in January 2023, the price of energy storage cells has dropped by more than 55%. Similarly, the average bidding price of energy storage systems also fell to 0.79 yuan/Wh in December, down 48% compared with the beginning of last year.
In 2024, this wave of price reductions will continue, and the winning bid price will be refreshed again and again.
Wind data shows that the net profit growth rate of the energy storage sector reached a high point in 2022, close to 70%, fell to 40% in 2023, and will fall to about 20% in 2024-2025.
In the face of record-breaking low prices, some companies have tightened their pace.
In October last year, in the third quarter earnings call, Sungrow said that domestic energy storage was almost unprofitable. After the third quarter, many leading companies stopped playing. Some energy storage companies have a large area of accounts receivable deferred in China, and not many companies can bear the loss for a long time.
It is undeniable that under the continuous promotion of the "14th Five-Year Plan" energy storage development plan, demonstration projects, new energy distribution and storage policies and market mechanism reforms, the mainland's energy storage will continue to develop rapidly in 2024, but will the energy storage industry have to go on the old road of low-price competition for another year, and how long will the energy storage bubble be squeezed out?
Behind the price war
Behind the downward bid price of energy storage systems is the dual pressure of declining raw material prices and oversupply.
The first is the continued decline in the price of raw material lithium carbonate.
As of December 31, 2023, the average domestic blended price of industrial-grade lithium carbonate was 94,000 yuan/ton, down 81.35% from the average price of 504,000 yuan/ton on January 1, and the average domestic blended price of battery-grade lithium carbonate was 103,000 yuan/ton on December 31, down 80.38% from the average price of 525,000 yuan/ton on January 1. Lithium carbonate prices will only rise from 2024.
Not only lithium carbonate, but also the four major materials of lithium batteries (cathode materials, anode materials, electrolytes and separators) have undergone a new round of capacity expansion, increased market supply, intensified product competition, and prices have fallen to varying degrees.
The formation of the price war in the energy storage market, in addition to the decline in the cost and price of battery cells, is also the result of intensified competition. In particular, all kinds of capital and cross-border manufacturers have flocked to it, and the volume price seems to have become the only way out.
Tianyancha APP data shows that in 2023, there will be more than 70,000 newly established energy storage-related enterprises in the country, almost the sum since 2013-2022.
As one of the most concerned tracks in the field of new energy, energy storage has also attracted the attention of investors. In 2023, more than 700 well-known institutions, industrial funds, and CVC institutions in the primary market will be involved in the energy storage industry, and it is conservatively estimated that about 90 billion yuan of financing will be invested in energy storage.
These battery companies from the energy storage industry, power battery companies and cross-border photovoltaic module companies are planning or expanding energy storage battery projects, and the capacity expansion of 10GWh has become the norm, which also makes the energy storage track more crowded.
According to incomplete statistics from China Energy Storage Network, as of December 2023, a total of 137 expansion projects have been signed and started in the energy storage industry chain, with an investment amount of more than 700 billion yuan, and the expansion scale of energy storage batteries and systems has exceeded 2 TWh (i.e., 2,000 GWh). Bloomberg New Energy Finance and other institutions predict that by the end of 2030, the cumulative installed capacity of global energy storage will exceed 1 TWh.
In order to digest the huge production capacity, it has become logical to cut prices to grab the market. In 2023, in the centralized procurement projects of central state-owned enterprises, 40-60 enterprises will participate in bidding at the same time, which will almost become the norm.
At the same time, affected by the domestic price war, the willingness of overseas household storage dealers to stock up is also decreasing. Taking Europe, the world's largest household storage market, as an example, due to the popularity of the household storage market in 2022, major dealers will stock up, resulting in European household storage inventory still at a high level of 6.4GWh in the second half of 2023. In the second half of 2023, the price of household storage products has fallen by more than 50% compared with the beginning of the year, and dealers generally believe that the stocking at the beginning of the year has harmed their own interests. In the case of high inventory and continuous decline in prices, dealers began to hold on to the currency, resulting in a sharp decline in orders for overseas household storage products and weakening market demand in the second half of the year.
In fact, the price war of "drinking water to quench thirst" not only caused these problems, but also caused serious problems such as false standards (the amount of discharge is not up to standard), and the increase in potential safety hazards.
Businesses face knockouts
The price war is a sharp blade to open up the market, but it is difficult to become a long-term and effective means of competition. Facts have proved that the market that is grabbed at a low price can also be snatched away by a low price.
In fact, the current overcapacity of the energy storage industry in mainland China is a "phased structural overcapacity", which is the overcapacity of low-end (low-quality, inefficient) and inferior (unqualified) products. In particular, due to the lack of scientific and technological research and development capabilities and manufacturing technology accumulation of new cross-border enterprises, most of the production capacity of the layout is basically low-end production capacity, and the supply of high-end products that truly meet the market demand, and have been verified by market application, meet the high safety of the market, and can ensure the service life is still insufficient.
The more times like this, the greater the elimination faced by enterprises. Most energy storage companies, especially those that have recently entered the cross-border sector, will not be able to meet this basic requirement in a short period of time, and there is basically no potential to tap in terms of technology cost reduction.
"In the next two or three years, energy storage will definitely enter a reshuffle period of big waves and sands. A number of industry insiders said that in the end, the energy storage industry will be the same as the power battery industry, forming a pattern of a few leading enterprises to focus on serving the market and customers.
The top giants have carved up more than eighty percent of the market share, such as CATL, Hipostron, Haichen Energy Storage, Sungrow, Trina Solar, Goldwind Technology, etc., all of which are "three-in-one" high-quality players in terms of volume, technology and capital. The remaining less than 20% of the share will need to be fought by a number of small and medium-sized enterprises.
However, what the market needs is not low price, but real cost reduction ability, real high-security, low-cost products, innovative breakthroughs in capacity, and intelligent system integration technology to meet the needs of power enterprises. If you only rely on low prices to grab orders, you will not be able to get rid of the fate of being eliminated in the end.