① The energy storage industry continues the price war. This week, China Resources and Guoneng's energy storage EPC projects opened bids and fell below low prices one after another, hitting a new low price for a 2-hour energy storage EPC. Battery prices fell below the same period last year. Some listed companies said the yield was low. ② In the context of energy storage capacity growing too fast and falling into excess, many enterprises continue to expand their scale. Industry insiders believe that only by continuously seizing the market through scale effects can we occupy an advantageous position in the industry reshuffle.
Finance Association, January 21 (Reporter Wu Chao) Since the beginning of 2024, the energy storage industry has continued the trend of low price competition. This week, the results of the National Energy Group's energy storage EPC project opening fell below 1 yuan/Wh, setting a new record for the lowest price of the same type. Cell companies generally offer 0.4 yuan/Wh, which is almost lower than at the beginning of last year, indicating that the fierce game between companies to compete for market share continues.
It is worth noting that in this seemingly fierce competition, many energy storage companies did not choose to cut spending to survive the winter, but continued to expand their scale. Industry insiders told the Financial Federation reporter that due to serious challenges such as overcapacity and falling profit margins, expanding production is risky, but only by continuously seizing the market through scale effects can it occupy an advantageous position in the industry reshuffle.
The energy storage war reignited, and the frequency of winning bids reached a record low
This week, China Resources Electric Power opened a tender for the 55mW/110MWh energy storage system EPC general contracting project in Taizhou Dainan. The project is located in Taizhou, Jiangsu. The consortium led by Xu Ji Electric Co., Ltd. won the first bid candidate at a unit price of about 1.067 yuan/Wh, and the consortium led by China Energy Construction Group's Anhui Electric Power Design Institute became the second winning candidate with a unit price of about 1.037 yuan/Wh. This price is already lower than the previous industry average.
This low price is not an exception. What is even more remarkable is that this week, the National Energy Group Henan Company announced the results of the bid opening for its energy storage EPC project. The project is located in Shangqiu, Henan. The Zhongnan Electric Power Design Institute of China Electric Power Engineering Consulting Group won the position of the first successful candidate with a unit price of 0.975 yuan/Wh. This price also set a new low price for a 2-hour energy storage EPC. Meanwhile, the second successful candidate, China Energy Construction Group's Anhui Electric Power Design Institute, had a price of only 0.987 yuan/Wh.
In fact, there was a clear downward trend in the winning bid price of an energy storage EPC last year. The 2-hour energy storage EPC fell all the way from 1.50 yuan/wh at the beginning of the year to 2.17 yuan/wh to an average price of 1.3 yuan/Wh in December. However, not only was the price of the above project far lower than the average price at the end of last year, the decline was more than 25%, and it even fell below the 1 yuan/Wh mark.
According to information, previously, the lowest prices for energy storage EPCs mostly appeared in the Xinjiang region, and most of them were 4-hour energy storage projects, and individual project prices could be less than 1 yuan/Wh, also because they did not include booster station equipment, etc.
“If we only do energy storage EPC, without self-developed products as support, the yield is indeed relatively low in the current market competition.” People related to Jinzhi Technology (002090.SZ), which won bids for several energy storage integration and EPC projects last year, told the Financial Federation reporter.
Behind the low price competition is increasingly fierce competition in the energy storage industry and declining battery costs.
In recent years, with the continuous advancement of energy storage technology and the expansion of application fields, the demand for energy storage systems has also continued to grow. However, competition in the energy storage industry is also increasing. In order to seize market share, domestic EPC manufacturers have chosen a low price competition strategy. Coupled with the continuous decline in cell costs, this has also led to a continuous decline in energy storage system and EPC prices.
In terms of energy storage batteries, in the beginning of 2024, the average price of battery-grade lithium carbonate fell below the 100,000 yuan/ton mark. Compared with the previous high of 600,000 yuan/ton, it has already dropped by more than 80%. Domestic energy storage cell prices have also dropped from 1 yuan/Wh in early 2023 to nearly 0.4 yuan/Wh, almost falling short.
Among the candidates recently announced that China Energy Construction Energy Storage Technology (Wuhan) Co., Ltd. won the bid for the 2024 battery frame procurement, the lowest price for 0.5C and 0.25C batteries was only 0.409 yuan/Wh, from Sunwoda (300207.SZ). Chuneng Renewable Energy followed, at 0.41 yuan/Wh.
According to reports, the reduction in the price of lithium carbonate has reduced the cost pressure on battery companies to a certain extent, but it has also increased the intensity of market competition. Earlier, companies such as Chuneng New Energy had publicly stated in the price war competition that the price of energy storage batteries will be decoupled from lithium carbonate and will not be affected by upstream lithium carbonate price fluctuations.
An industry insider told the Financial Federation reporter that the battery company's price of 0.4 yuan/Wh is close to “bottoming out”. If the price of upstream battery-grade lithium carbonate changes again and rises above 100,000 yuan/ton, the battery company will face very heavy losses.
According to the forecast of the Advanced Industrial Research Institute, the price of energy storage cells will stabilize at around 0.4 yuan/Wh in 2024, and the price of energy storage systems (0.5C) is expected to stabilize to 0.8 yuan/Wh, but disorderly competition below the cost price will still exist.
Why are concerns about bucking the trend and seeking to expand production
In addition to clearly disclosed lower tender prices, a recent rumor that “the five big six small country central enterprise power generation groups will stop lithium battery energy storage projects due to yield issues” has also caused an uproar in the energy storage industry.
According to statistics, of the 46.6 gigawatt-hours of additional energy storage system capacity in 2023, the Central State-owned Enterprise Power Generation Group, led by the Big Five and Six, alone purchased a total of over 36 gigawatt-hours, accounting for 77%. Therefore, if the five big six elementary schools stopped the lithium battery energy storage project, it would be tantamount to a salary cut from the bottom of the pot for the domestic energy storage industry.
Leaving aside the truth of the rumor, the industry panic it has caused cannot be ignored. This reflects the market's concerns about uncertainty about the future development of the energy storage industry and pressure on yield.
In July 2021, the National Development and Reform Commission and the National Energy Administration issued guidance on accelerating the development of new energy storage, which states that by 2025, new energy storage will be transformed from early commercialization to large-scale development, with an installed capacity of more than 30 million kilowatts (30 GW).
According to the data, by the end of December 2023, China had put into operation a total of 34.5 GW/74.5 GWh of new energy storage, and the power and energy scale both increased by more than 150% year on year. Industry insiders said that China's new energy storage has reached the target and completed the plan two years ahead of schedule. Against this background, approval of energy storage projects may slow down.
Furthermore, the energy storage industry is also facing problems such as overcapacity and serious homogenized competition. In the past year, with the heat of the market, a large number of enterprises poured into the energy storage sector, leading to increasingly fierce competition in the industry. In order to compete for market share, companies have fought price wars one after another, which further reduced the profit margins of the entire industry.
According to the forecast of the Advanced Industrial Research Institute, excess energy storage capacity will continue in 2024, and oversupply will become the main trend in the market. Under the competition of energy storage subsidiaries of central state-owned enterprises entering the market one after another and integrated enterprises with the ability to supply core components, it is expected that more than 50% of energy storage system companies will be eliminated from the market. At the same time, the market share of the top ten system companies continues to expand and will occupy more than 80% of the market.
Under such circumstances, a strange phenomenon has occurred in the industry. Instead of choosing to cut expenses to prepare for the winter, many companies are looking for ways to reduce costs and increase efficiency in order to continue to expand their scale.
Recently, Huawei revealed that the volume of large storage shipments in 2023 will exceed 1 GWh, and stated that it will continue to increase its market development efforts in 2024, with a target of several times that of 2023. Skyworth Digital (000810.SZ) laid out energy storage across borders last year. On January 8, the Jiangsu Skyworth New Energy Phase II project was officially signed and landed in the Suzhou High-tech Zone. It is scheduled to be put into operation in the first quarter. On January 18, Sunwoda signed a new energy storage industry cooperation framework agreement with Guangming District of Shenzhen. Previously, the company also signed a strategic cooperation agreement with Xuchang Xujidianke Energy Storage Technology Co., Ltd.
Environmental and utility analyst Xu Jie told the Financial Federation reporter that energy storage companies are still bucking the trend and expanding production. On the one hand, this is due to the background of falling energy storage prices, which has also spurred many domestic downstream manufacturers to intensively bid for energy storage projects recently, and there is still room to gain market access.
A CFA reporter noticed that on January 17, China Resources Group issued a tender notice for the EPC general contract for the supporting energy storage system for the 100MW composite photovoltaic power plant project in Huaiji Runzhou, Zhaoqing. On the same day, the Three Gorges Group issued a new tender notice for the 200mW/1000MWh all-vanadium liquid flow energy storage design and construction general contract for the Three Gorges Energy Xinjiang Jimsar Optical Storage Project.
On the other hand, there is the importance of the scale effect. At this stage where market efficiency is poor, only by reaching a certain scale can an enterprise gain a foothold, survive, and break through in fierce market competition, and become one of the few enterprises that can obtain excess profits until the industry pattern stabilizes and the market rises again. “Therefore, for leading companies with strong financial strength and strong technical strength, this stage is also a good opportunity to expand market share and enhance brand influence.” Xu Jie said.