China Market Insider In China's energy storage market, prices are tumbling

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A fierce price war is raging in the Chinese energy storage market. This is partly due to an oversupply. Which providers are currently leading.

Henrik Bork is Managing Director at Asia Waypoint, a consulting agency specializing in China based in Beijing. "China Market Insider" is a joint project of Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

The rapid growth of the energy storage industry in China has triggered around ten thousand new company startups in the past year alone. Despite growing demand for large blocks of lithium batteries and other energy storage solutions, overcapacities have quickly emerged.

"The competition in the energy storage industry is becoming increasingly tough. Public statistics indicate that there are currently more than 40,000 companies officially registered with a connection to the energy storage business," reports the online portal "36kr".

In the sector, which has only been developing on a larger scale in China for about three years, a boom has erupted since last year at the latest. One reason is China's ambitious climate goals, which have greatly expanded the need for large energy storage facilities on the edge of new photovoltaic and wind power plants.

The total installed capacity for energy storage in the People's Republic had reached 86.5 gigawatts by the end of last year, representing a 45 percent increase over the previous year, according to figures from the Chinese industry alliance CNESA. Of this, 51.3 GW were storage with hydropower, i.e., pumped-storage power plants where renewable energy can be temporarily "stored" using reservoirs. Almost all of the remainder, 34.5 GW, were so-called "new type energy storage". This includes mainly large container blocks full of lithium batteries, but also various new technologies, such as compressed air energy storage or "flow batteries".

The growing opportunities in the market have called a large number of investors to action. Analysts are now talking about a "structural overcapacity" in the Chinese market for energy storage. As a result, the prices for energy storage have almost halved over the course of the past year.

This price war is further intensified by the decline in prices for lithium batteries, which in turn is closely linked to the world market price for lithium. This has also fallen sharply recently.

This may be good news for climate protectors worldwide, as without affordable energy storage, renewable energy sources such as solar or wind power cannot be effectively fed into the power grids. However, for foreign competitors of Chinese energy storage providers, a perfect storm is brewing. "The energy storage industry is repeating the brutal competition of the photovoltaic industry," wrote the Chinese industrial newspaper Zhongguo Gongyebao at the beginning of this month.

For Chinese manufacturers, whose margins are quickly shrinking due to increasingly tough competition in the domestic market, there is really only one way out: more exports. And that is exactly what they are currently trying to do. This can be clearly seen in the current figures and strategies of the five biggest Chinese manufacturers:

1. Hyperstrong

• Headquarters: Beijing

The company Beijing Hyperstrong Technology Co., Ltd., founded in 2011, is already one of the world leaders for "Battery Energy Storage Systems" (BESS). It relies on its own research & development in design, battery management, system integration and verification, as well as the operation and maintenance of its facilities.

Although Hyperstrong has dominated the Chinese domestic market for battery storage for three years, it has so far been barely profitable. In 2020, it was still in the red, but since 2021, it has been making modest net profits. It is still difficult for Hyperstrong to make money, writes 36kr.

The strength of the company is based on its good business relations with the large state-owned energy companies in China, such as the State Grid or the "China Southern Power Grid". During the 14th Five-Year Plan, most of the country's major energy storage projects were commissioned by such large state-owned enterprises.

2. CRRC Zhuzhou

• Headquarters: Zhuzhou, Hunan Province

Even for a market as young as the one for industrial energy storage in China, where new "crossover players" can grow incredibly quickly in a short period, the meteoric rise of CRRC Zhuzhou has given the entire industry a "little shock," as the energy specialist portal Guoji Nengyuanwang recently wrote.

Founded only in 2019, it has soared out of nowhere to the second place among the market leaders for energy storage in China last year – with a sold capacity of 3 GWh. The newcomer has surprised everyone.

CRRC Zhuzhou is a subsidiary of the huge state enterprise CRRC, the world's largest manufacturer of rail vehicles and the operator of the Chinese network of high-speed trains, known as "Gaotie".

The subsidiary started with the construction of its own batteries for refrigerated wagons. However, in 2021, CRRC Zhuzhou officially announced its entry into the market for energy storage for China's power grid. This has obviously been achieved with a big bang.

3. CATL

• Headquarters: Ningde, Fujian Province

The "Contemporary Amperex Technology Co., Ltd." is better known as the world leader in car batteries. However, the share of sales from large energy storage systems in the company's revenue is steadily growing.

Domestic customers of CATL in this sector include major Chinese energy providers such as China Huaneng, the China Nuclear Power Group, the China Three Gorges Power Corporation, and the China National Energy Group, as can be read on the company's website.

Internationally, CATL collaborates on energy storage with companies such as Tesla, Fluence, Wärtsilä, Flexgen, and Hyosung. Last year, CATL was able to increase its revenue from energy storage by more than 230 percent to 5.8 billion euros.

4. BYD

• Headquarters: Shenzhen, Guangdong Province

BYD is becoming an international household name, having surpassed Tesla in terms of volume as a manufacturer of electric vehicles and now selling more cars in China than any other automaker – whether talking about electric vehicles or combustion engines.

For more than a decade, BYD has also been building energy storage systems and selling them primarily in the global market. In the German market for household energy storage, the largest in Europe, BYD is very well positioned. Only since around 2020 has "Build Your Dreams", whose early supporters include the well-known US investor Warren Buffet, also shown increased interest in the domestic energy storage market, which has begun to grow significantly in recent years.

As a major battery manufacturer known for its thorough vertical integration, BYD can produce at low costs and has therefore recently put pressure on the competition with very low prices. Both BYD business divisions for energy storage, one for industrial large-scale storage and the other for household storage, have been growing rapidly ever since.

5. Sungrow

• Headquarters: Hefei, Anhui Province

The company, founded in 1997 by university professor Cao Renxian, started as a supplier to the energy industry, particularly as a successful manufacturer of solar inverters. Later, they also began to produce complete photovoltaic systems and energy storage units.

With products like "Powertitan" or "Powerstack", Sungrow is already one of the largest exporters in the industry in China, selling to more than 150 different countries. According to figures from Wood Mackenzie, Sungrow was the global market leader in "Battery Energy Storage Systems" (BESS) in 2022. With a 16 percent share of the world market, it was ahead of competitors such as Fluence and Tesla (both 14%), Huawei (9%), and BYD (9%).

Although the large sales volume at Sungrow ensures scale effects and the high-quality cooling systems in the industry have a good reputation, the company cannot escape the price war that has now broken out. Should there be a consolidation in the Chinese market for energy storage in the coming years, Sungrow is very likely to be among the successful winners of the price battle.