China Market Insider Prices are tumbling in China's energy storage market

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A fierce price war is raging in the Chinese energy storage market, partly due to an oversupply. Find out 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/Germany, and Jigong Vogel Media Advertising in Beijing.

The rapid growth of the energy storage industry in China has triggered around ten thousand startup companies in the past year alone. Despite growing demand for large blocks of lithium batteries and other energy storage systems, overcapacities have quickly arisen.

"The competition in the energy storage industry is getting tougher. Public statistics show 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 at least since last year. One reason is China's ambitious climate goals, which have greatly increased the need for large energy storage systems at the edges of new photovoltaic and wind power plants.

The total installed capacity for energy storage in the People's Republic 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 using hydropower, i.e., pumped storage power plants where renewable energy can be temporarily "stored" using reservoirs. Almost all of the rest, 34.5 GW, were so-called "new type energy storage". This primarily includes 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 attracted a large number of investors. 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 last year.

This price war is further intensified by the decline in prices for lithium batteries, which in turn is closely linked to the global market price for lithium. This has also dropped significantly 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 integrated 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 the increasingly fierce competition in the domestic market, there is really only one way out: more exports. And that's exactly what they're trying to do right now. This can be clearly seen in the current figures and strategies of the five largest Chinese manufacturers:

1. Hyperstrong

• Headquarters: Beijing

The company Beijing Hyperstrong Technology Co., Ltd., founded in 2011, is already one of the world leaders in "Battery Energy Storage Systems" (BESS). It focuses 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 been dominating its Chinese home market for battery storage for three years, it has hardly been profitable so far. In 2020, the company was still in the red, and since 2021 it has been making modest net profits. It is still difficult for Hyperstrong to make money, writes 36kr.

However, the company's strength is based on its good business relationships with the major 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 such a young market as industrial energy storage in China, where new "crossover players" can grow extremely fast in a short period of time, the meteoric rise of CRRC Zhuzhou has given the entire industry a "small shock," as the energy specialist portal Guoji Nengyuanwang recently wrote.

Founded only in 2019, it has virtually risen from 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 colossal state-owned enterprise CRRC, the world's largest manufacturer of rail vehicles and the operator of China's network of high-speed trains, the "Gaotie".

The subsidiary started with building 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 quite evidently been accomplished with a bang.

3. CATL

• Headquarters: Ningde, Fujian Province

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

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

Internationally, CATL cooperates on energy storage with Tesla, Fluence, Wärtsilä, Flexgen, and Hyosung, among others. Last year, CATL was able to increase its energy storage revenue by more than 230 percent to approximately 5.8 billion euros (approx. 6.3 billion USD).

4. BYD

• Headquarters: Shenzhen, Guangdong Province

BYD is becoming a household name internationally, having overtaken Tesla in terms of the volume of electric vehicles (EVs) manufactured, and now sells more cars in China than any other automaker – regardless of whether they are EVs or internal combustion engines.

For more than a decade, BYD has also been building energy storage systems and primarily selling them on 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 increasingly become interested in the domestic energy storage market, which has started 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 been putting pressure on the competition with very low prices. Both of BYD's business divisions for energy storage, one for industrial large-scale storage and the other for home storage, have since been growing rapidly.

5. Sungrow

• Headquarters: Hefei, Anhui Province

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

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 global market, it was ahead of competitors like Fluence and Tesla (both 14%), Huawei (9%), and BYD (9%).

Although Sungrow's large sales volume leads to economies of scale and its high-quality cooling systems are well-regarded in the industry, the company cannot escape the price war that has now broken out. Should there be consolidation in the Chinese energy storage market in the coming years, Sungrow is very likely to be among the successful winners of the price battle.