Time to Go Global or Fall Behind! Global Energy Storage Market Overview

Time to Go Global or Fall Behind! Global Energy Storage Market Overview

Recently, two pieces of news have drawn significant attention in the energy storage industry.

The first news came on July 2, with Tesla releasing its Q2 2024 production and delivery report. The report shows that Tesla’s energy storage installations reached 9.4 GWh in Q2, marking a year-over-year increase of 157% and a quarter-over-quarter increase of approximately 132%. This set a new quarterly record for energy storage installations, reflecting astonishing growth.

The second news broke on July 5, with Beijing Energy’s Ulanqab project in Inner Mongolia announcing the bid winners for its 300 MW/1200 MWh integrated wind-solar-thermal-hydrogen energy storage system equipment procurement. CRRC Zhuzhou won the pre-bid at a unit price of 0.495 yuan/Wh for a 1.2 GWh energy storage system. The project attracted 29 companies, with bid prices ranging from 0.4699 yuan/Wh to 0.625 yuan/Wh. Notably, six companies offered prices below 0.5 yuan/Wh.

Reflecting on the average bid price of 1.08 yuan/Wh for energy storage systems in August 2023, it’s clear how rapidly prices have fallen in less than a year. This year, the trend “no lowest, only lower” continues to be the norm in China’s domestic energy storage industry. These two pieces of news clearly show that under the intense domestic competition, going global has become the only hope for Chinese energy storage companies.

“Whoever goes overseas is the hero of the company!”

An insider revealed that CATL (Contemporary Amperex Technology Co., Limited) had its employees set a unified desktop background with the slogan “Whoever goes overseas is the hero of the company!” In May 2024, CATL Chairman Robin Zeng issued the company’s first president’s office document of the year, personally overseeing overseas business. He noted that while domestic competition is fierce, CATL’s market share abroad has matched international competitor LG and still has significant growth potential. This move is seen as CATL’s signal to fully accelerate its overseas market expansion.

Financial reports show that CATL’s overseas revenue reached 130.992 billion yuan in 2023, a year-on-year increase of 70.29%, accounting for 32.67% of its total revenue, up from 23.41% in 2022. Similarly, Gotion High-Tech saw its overseas revenue grow by 115.69% in 2023, with its share of total revenue increasing by 7.41%.

In June 2024, EVE Energy announced that its subsidiary EVE Energy Storage signed another strategic cooperation agreement with leading American system integrator Powin for a 15 GWh battery deal, further enhancing its global manufacturing, delivery, and cooperation capabilities. Previously, EVE had signed agreements with Powin for 1 GWh and 10 GWh of lithium iron phosphate energy storage batteries in 2021 and 2023, respectively.

Indeed, it’s not just EVE. Chinese companies like CATL, REPT Battero, Gotion High-Tech, Penghui Energy, Hithium, and Far East Battery have signed overseas energy storage battery orders totaling over 32 GWh recently. This impressive achievement in an era of intense competition indicates the high recognition of Chinese energy storage products in the international market.

According to the General Administration of Customs, in 2023, China exported lithium batteries worth $13.549 billion to the United States, accounting for 20.8% of total exports. The U.S. has been the largest destination for Chinese lithium battery exports for four consecutive years from 2020 to 2023.

From January to May 2024, China’s cumulative exports of energy storage batteries reached 8.4 GWh, a year-on-year increase of 50.1%, significantly outpacing the 2.9% growth rate for power batteries in the same period. Particularly in May, energy storage battery exports hit 4 GWh, a year-on-year increase of 664%, signaling a peak period for Chinese energy storage batteries going abroad.

Research by China Energy Storage Network shows that domestic energy storage projects generally have profit margins below 8%, while overseas markets see profit margins close to 20%. Companies like CATL and EVE, which ventured abroad early, report that their overseas revenue growth and profit margins far exceed their domestic operations. CATL’s recent “No. 1 document” and EVE’s plan to exceed 50 GWh in energy storage shipments by 2024 highlight their focus on expanding overseas markets.

Similarly, PCS (power conversion system) companies find higher profit margins in overseas markets, often exceeding 30%. For example, Deye’s inverter profit margin is 52.3%, Aiswei’s is 39.90%, Hoymiles’ is 35.81%, and Kehua’s is 33.36%. High overseas profits enable some PCS companies to achieve growth despite challenging market conditions.

The U.S. and Europe remain major export markets

Globally, the U.S. and Europe are the main export markets for Chinese energy storage products. Thanks to the Inflation Reduction Act, which provides a 30% tax credit, the U.S. energy storage battery market is rapidly growing. It’s predicted that from 2023 to 2025, the U.S. market’s compound annual growth rate will reach 88.5%, and by 2030, North America’s energy storage market demand will exceed 200 GWh. Similarly, Europe’s market is expected to deploy about 200 GW of battery power capacity by 2030.

According to Wood Mackenzie and the American Clean Power Association’s Q1 2024 energy storage monitor report, the U.S. saw robust growth in grid-scale and residential energy storage markets in the first quarter of 2024, while commercial and industrial storage significantly declined.

In Q1 2024, the U.S. deployed 993 MW/2952 MWh of grid-scale energy storage, with California, Texas, and Nevada accounting for 90% of the new capacity. This set a new quarterly record, growing 84% compared to Q1 2023. Grid-scale energy storage awaiting interconnection grew by 10% year-over-year, with 426 GW of systems waiting to be connected.

Due to a significant cost decrease, the average deployment cost for U.S. grid-scale storage systems dropped from $1776/MWh in Q1 2023 to $1080/MWh in Q1 2024, a 39% reduction. By the end of 2024, the total installed capacity of U.S. grid-scale energy storage systems is expected to grow by 45%, reaching 11.1 GW/31.6 GWh, with an estimated 62.6 GW/219 GWh to be deployed over the next five years.

Additionally, the U.S. installed approximately 250 MW/515 MWh of residential storage systems in Q1 2024, growing 8% from Q4 2023. Residential solar installations increased by 48% year-over-year in the same quarter.

California’s residential storage installations in Q1 2024 tripled compared to the previous year. Wood Mackenzie predicts that the U.S. will deploy 13 GW of distributed energy storage over the next five years, with residential systems accounting for 79% of this capacity.

As another major market, Europe saw 64% of global residential storage installations in 2023. Despite a drop in natural gas prices and residential electricity costs in 2024, they remain historically high, keeping demand for residential storage strong. For instance, in Germany, the payback period for installing a photovoltaic system alone is about 7.2 years, while adding storage reduces it to 6.0 years, making residential solar and storage systems economically viable.

After a roughly year-long inventory reduction cycle, Europe’s residential storage inventory has mostly cleared. Some European distributors have started increasing orders since June 2024, although demand sustainability remains to be seen as Q3 enters the holiday period.

Germany, the UK, and Italy continue to lead Europe’s storage market, with new installations in 2023 estimated at 5.5/4.0/3.9 GWh respectively, showing year-over-year increases of 60%, 70%, and 91%. Wood Mackenzie forecasts that by 2031, Europe’s large-scale storage installations will reach 42 GW/89 GWh, with the UK, Italy, Germany, and Spain leading the market.

Cost remains a key advantage for going global

Although it is well known that venturing abroad is highly attractive, it also comes with numerous challenges. Since April this year, the European Union has imposed several restrictions on Chinese new energy enterprises, enacting the Foreign Subsidies Regulation and subsequently launching anti-subsidy investigations into Chinese photovoltaic and wind power companies. Meanwhile, the United States has increased tariffs, raising the tariff on storage batteries from 7.5% to 25% by 2026, implementing trade protectionism. Consequently, Chinese energy storage companies entering the European and American markets will face higher tariffs and trade barriers, directly impacting their export profits and market competitiveness.

China Energy Storage Network noted that CATL Chairman Zeng Yuqun identified geopolitical issues as the biggest challenge in CATL's efforts to go global.

It's important to note that, in addition to the aforementioned restrictions, the U.S. government announced a significant increase in tariffs on lithium battery products imported from China. The tariff rate on electric vehicle lithium batteries will rise from 7.5% to 25% this year, and the tariff on non-electric vehicle lithium batteries will increase from 7.5% to 25% by 2026.

However, energy storage batteries are not currently subject to FEOC restrictions. Projects that meet ITC localization requirements can receive a 10% production tax credit, but the cost gap between American-made batteries and Chinese lithium iron phosphate batteries remains much larger than 10%.

According to Bloomberg New Energy Finance, the global average price of a 4-hour energy storage system in 2023 is $263/kWh, down 24% year-on-year. The average cost in China is 43% lower than in Europe and 50% lower than in the U.S. Even with a 25% tariff increase on battery cells, Chinese cell costs are still approximately 26% lower than in the U.S., maintaining a significant cost advantage.

Industry consensus is that the U.S.'s "2-year buffer period" for tariffs on Chinese energy storage batteries indicates a high demand and dependency on these batteries. China has a mature lithium battery industry chain and large-scale production bases, providing a clear scale advantage. Even with the addition of ITC localization subsidies and a 25% tariff, Chinese energy storage batteries will still have a cost advantage.

Some analysts believe that the tariff increase on energy storage batteries starting in 2026 will prompt U.S. energy storage owners to complete installations earlier, leading to a surge in installations in 2024 and 2025. This could create new growth opportunities for Chinese energy storage exports in the second half of 2024.

Industry insiders note that with the release of battery supply and intensified price competition in the energy storage market, companies will see significant differentiation in revenue growth and profitability. Companies with strong capabilities in securing overseas orders will experience notable growth in volume and profit. In the future, enterprises with global business layouts, vertically integrated industry chains, and robust financing capabilities will have a competitive edge in market share and profitability. "As the domestic market becomes increasingly competitive, energy storage companies must seize the opportunity to go global in the second half of this year or risk being eliminated."

Of course, the process of going global for energy storage companies will not be as rapid as in e-commerce, gaming, or finance. It requires understanding local business rules and international policies and meticulous, diligent work akin to "plowing a field." Under the influence of geopolitical factors, companies cannot engage in geopolitical arbitrage; they must integrate into local industrial systems to reap more substantial benefits.

Global Energy Storage Market Demand Overview!

Germany The energy storage market is projected to reach a scale of 15 GW/57 GWh by 2030.

In December 2023, the German government announced an energy storage strategy. This strategy, released by the Federal Ministry for Economic Affairs and Climate Action (BMWK) on December 19, 2023, aims to support energy storage deployment and achieve the "optimal integration" of storage systems with the power system. The release of this strategy marks the first time energy storage systems have been placed on Germany's political agenda.

The BMWK stated that Germany's renewable energy targets include deploying 215 GW of solar power and 145 GW of wind power facilities by 2030, necessitating the integration of more energy storage systems. The strategy identifies 18 distinct areas where measures can be appropriately taken to promote energy storage deployment. These include the role of storage systems under the German Renewable Energy Act (EEG), accelerating grid construction, promoting battery and component production, and removing obstacles to the development of pumped hydroelectric storage (PHES) power facilities and grid charging plans.

Fluence, along with four other active energy storage developers and integrators in the German market, recently commissioned consulting firm Frontier Economics to write a report analyzing the demand for energy storage systems in the German grid. The report found that with a supportive policy framework in place, Germany's energy storage system deployment could grow to 15 GW/57 GWh by 2030 and to 60 GW/271 GWh by 2050. By mid-century, these operational storage systems could provide Germany with approximately 12 billion euros (13.04 billion USD) in economic benefits and reduce wholesale electricity prices.

The growth of renewable energy and the need for energy independence are the macro drivers of the German energy storage market's recovery. Currently, Germany's battery storage market is on a fast development track, with a recent analysis by the Fraunhofer Institute for Solar Energy Systems (Fraunhofer ISE) indicating that the scale of battery storage systems deployed in Germany nearly doubled over the past year, from 4.4 GW/6.5 GWh at the end of 2022 to 7.6 GW/11.2 GWh by the end of 2023. The installed capacity of grid-connected pumped hydro storage remains at 6 GW, with no growth. According to Fraunhofer ISE, in 2023, Germany's wind and solar power generation of 260 TWh met 57.1% of the country's electricity demand, compared to 242 TWh and 50.2% in 2022.

To stimulate the household market, the Annual Tax Act passed by the Bundestag in 2023 exempts household PV systems of less than 30 kW from income tax (14-45%); multi-family hybrid use properties with PV systems of less than 15 kW are also exempt from income tax; and the purchase of PV and storage systems is exempt from value-added tax (VAT, 19%), effectively simplifying the VAT exemption process.

Additionally, the Solar Power for Electric Cars subsidy program released by KFW Bank in September 2023 provides financial subsidies for household integrated solar power and storage systems, with a total amount of 500 million euros. The subsidy covers about 25% of the total cost, with a maximum subsidy of 10,200 euros per household, benefiting at least 50,000 systems. However, data shows that in 2023, about 400,000-500,000 household storage systems were installed in Germany, indicating that the subsidy volume is limited.

Italy: 2030

Additional 71 GWh of Long-Duration Energy Storage

In 2023, the European Commission approved Italy’s €17.7 billion energy storage investment plan. This plan is expected to add 9 GW/71 GWh of long-duration energy storage by 2030. The EU’s approval of Italy’s energy storage investment signifies a firm commitment to supporting renewable energy development and highlights the growing emphasis on building long-duration balancing resources.

Under frameworks such as “Fit for 55” and “RePowerEU,” more countries are expected to propose energy storage investment plans, potentially accelerating large-scale energy storage development in Europe. Local developers in Europe have already secured GW-level energy storage construction contracts in Italy, and Chinese suppliers are expected to enter the European large-scale energy storage construction supply chain.

The European Commission stated that this measure will contribute to achieving the goals of the European Green Deal and the “Fit for 55” package.

The “Fit for 55” initiative aims to reduce the EU’s net greenhouse gas emissions by at least 55% by 2030.

According to research by Italian grid operator Terna SpA, the Fit-for-55 2030 scenario will require the development of approximately 71 GWh of new utility-scale storage capacity. In other words, by 2030, Italy needs to deploy a total of 71 GWh of renewable energy storage to decarbonize its energy system and meet the EU’s targets.

It is worth noting that the Italian government’s Ecobonus subsidy, introduced in 2020, began to phase out in 2023. The tax reduction for household energy storage equipment increased from the original 50-65% to 110% (extended to 2024), with payment spread over five years. This will gradually decrease to 90%, 70%, and 65% in 2023, 2024, and 2025, respectively.

United Kingdom: Planned or Deployed Storage Systems of About 61.5 GW

The UK, being Europe’s most mature large-scale energy storage market, significantly raised its short-term energy storage installation targets in the latest future energy vision plan. According to Solar Media, by the end of 2022, the UK had approved 20.2 GW of large-scale storage projects, expected to be completed within the next 3-4 years. Planned or deployed storage systems amount to approximately 61.5 GW. Wood Mackenzie predicts that the UK will lead Europe in large-scale energy storage installations, reaching 25.68 GWh by 2031, with significant advancements expected in 2024.

Additionally, the UK’s energy storage demand may be further driven by government incentive policies, such as the new energy storage battery tax exemption policy introduced in December 2023. Effective February 1, 2024, the policy removes the 20% VAT on the installation of energy storage battery systems (BESS), which previously applied only to batteries installed simultaneously with solar panels, benefiting household solar storage systems significantly.

Greece: Expected to Add Over 16 GW of Solar PV Capacity by 2030

In 2023, Greece ranked first in Europe for the proportion of domestic electricity generated by solar PV, more than twice the European average (8.6%) and three times the global average (5.4%). Greece’s grid-connected solar PV capacity is expected to exceed 1.7 GW by 2024. The Hellenic Association of Photovoltaic Companies (HELAPCO) forecasts that Greece will add over 16 GW of solar PV capacity by 2030. However, the National Energy and Climate Plan (NECP) projects only 3.1 GW of Battery Energy Storage Systems (BESS) by 2030, which is insufficient to keep curtailment at reasonable levels. Energy storage is needed to address curtailment issues, with the first large-scale ground-mounted PV stations equipped with storage expected to be operational by 2026, helping to alleviate curtailment.

### Spain: Deployed Approximately 495 MWh of User-Side Storage Systems in 2023

According to recent data released by the Spanish Solar Association (UNEF), by the end of December 2023, Spain had deployed a total of 25.54 GW of solar power facilities, with 5.59 GW added in 2023 alone. By the end of 2023, Spain’s cumulative energy storage capacity reached 1,823 MWh, with approximately 495 MWh of user-side storage systems deployed in 2023, and residential storage systems accounting for about three-quarters of the total storage capacity. This significant growth indicates a strong attraction of energy storage businesses in Spain’s renewable energy market, which is expected to maintain robust growth.

Romania: Deployment of Approximately 2.5 GWh of Battery Energy Storage Systems by 2030

Recently, the Romanian House of Representatives passed the new Bill 255/2024. This regulation mandates that households with 10.8 kW to 400 kW photovoltaic systems must install energy storage systems by December 31, 2027. Failure to install these systems on time will result in the power output of their photovoltaic systems to the grid being limited to 3 kW.

The bill states that Romania currently has a significant amount of excess solar power being fed into the grid, exacerbating grid congestion issues. Therefore, the mandatory installation of household energy storage systems is an essential step. As of the end of April, the household photovoltaic installed capacity in Romania reached 1.707 GW, surpassing the country's cumulative utility-scale photovoltaic installed capacity of 1.636 GW. The mandatory storage policy is expected to bring new growth to the local household energy storage market in the short term.

Enache Company indicated that Romania needs to deploy approximately 2.5 GWh of battery energy storage systems to accommodate its renewable energy deployment growth, a plan that is expected to be easily achieved before 2030. Like many other European countries, Romania is receiving deployment funds from the EU's Recovery and Resilience Facility to support the deployment of energy storage systems and other clean energy generation facilities.

Southeast Asia: Cumulative Energy Storage Market Growth Nearing 15 GWh from 2020 to 2030

Geographically, Southeast Asia consists of numerous islands, with some archipelago nations having primarily off-grid electrical systems. The weak power infrastructure, combined with the dispersed island populations and poor overhead line standards, creates significant opportunities for distributed rooftop photovoltaic storage (self-consumption). In the Philippines, for example, many remote islands are not connected to the grid, and natural disasters are frequent, making energy storage essential for its power supply market. Data indicates that the Philippines will accelerate renewable energy construction in the future, with an expected energy storage capacity of 6 GW.

In terms of policy, various countries have introduced relevant incentives, promoting local energy storage installation demand. For instance, in May 2023, Vietnam released the "Eighth Power Development Plan," aiming to halt coal power projects by 2030 and cease coal-fired power generation by 2050. By 2030, Vietnam's photovoltaic power plants are expected to increase to 12 GW, with energy storage reaching 2.7 GW.

The Philippines released a renewable energy plan and conducted the second green energy auction program (GEAP) in July 2023, awarding 3.4 GW of wind and photovoltaic projects slated for development from 2024 to 2026, which will also drive energy storage installation in the Philippines. Notably, the Philippines has lifted the 40% foreign ownership cap in local renewable energy projects and included electric vehicles, renewable energy, energy storage, and other green ecosystem industries in the "Priority Investment Areas for Foreign Investment," offering various tax incentives.

In the second half of 2023, Malaysia released its National Energy Transition Roadmap (NETR), with clear plans for the development of rooftop solar and energy storage projects. An official stated, "Rooftop photovoltaics are one of the easiest things to focus on to accelerate our energy transition," and mentioned that the government has allocated RM 50 million for installing solar panels on government buildings' rooftops. Countries like Indonesia, Thailand, Singapore, and Cambodia are also promoting renewable energy development through various measures.

Meanwhile, the rapid cost reduction of domestic lithium battery products in 2023 is highly attractive to the Southeast Asian region, which has a strong demand for energy storage and is sensitive to price. This has greatly stimulated installation demand. According to incomplete statistics, the Southeast Asian market accounted for only 2% of the global newly commissioned energy storage projects in 2022, but demand grew rapidly in 2023, with key markets including Thailand, Malaysia, the Philippines, Vietnam, Indonesia, and Singapore. It is estimated that from 2020 to 2030, the cumulative new energy storage market in ASEAN will approach 15 GWh. Industry insiders predict, "In the next 3-5 years, the Southeast Asian market will undoubtedly be one of the fastest-growing markets globally."

India: New 4 GWh of Battery Storage Capacity in 2024

In 2024, India's much-anticipated large-scale grid-connected battery subsidy guidelines will bolster the latest policies aimed at enhancing power system flexibility. Developers of successful projects will be selected through competitive bidding, with the implementing agency bearing the commercial risks. This developer-friendly scheme is expected to result in oversubscribed bids.

According to the Indian government's plan, intermittent renewable energy will account for 25%-55% of India's power generation structure by 2030. In 2024, the Indian government will subsidize 4 GWh of grid-application battery storage with a total subsidy amount of INR 94 billion (approximately USD 1.13 billion). Successful bidders will be selected through multiple rounds of bidding and will have 24 months to commission the projects, receiving subsidies in five installments starting from financing completion. According to BloombergNEF calculations, this subsidy can support 7.2-9.8 GWh of battery storage capacity, roughly double the 4 GWh target.

### Pakistan: Projected 12.8 GW of Solar PV Capacity by 2030

Customs data shows that from January to April this year, China's exports to Pakistan of photovoltaic modules, inverters, and lithium batteries amounted to RMB 7.83 billion, 779 million, and 330 million, respectively, with year-on-year growth of 110%, 170%, and 250%, indicating explosive growth.

The surge in Pakistan's solar storage market is similar to that of South Africa and is closely related to the fragile local power market environment. The country's grid frequently experiences load shedding due to insufficient generation capacity and outdated transmission and distribution networks with high line losses. Particularly during peak summer periods, the grid is overwhelmed, and blackouts are common.

Moreover, electricity prices in Pakistan are relatively high, around 17.5 cents/kWh, far exceeding those in India (10.3 cents), Bangladesh (8.6 cents), and Vietnam (7.2 cents), forcing households and businesses to consider cheaper alternatives. As the cost of solar storage continues to decline, users can reduce overall electricity costs through self-built solar storage systems.

According to the "Indicative Generation Capacity Expansion Plan (IGCEP2047)" released by NEPRA, Pakistan's solar PV capacity is expected to reach 12.8 GW by 2030 and 26.9 GW by 2047.

Middle East and Africa: Expected New Energy Storage Installations of 3.8 GW/9.6 GWh in 2024

In emerging markets such as the Middle East and Africa, South Africa and Israel, as the two main incremental markets, have both set clear energy storage installation plans and certain subsidy policies. With strong demand, these markets are expected to drive high growth in energy storage demand in the Middle East and Africa. Currently, demand in the Middle East and Africa markets is mainly driven by government tender projects. The high growth in photovoltaic installations has highlighted consumption issues, and favorable policies combined with a hot tender market are expected to lead to a coordinated explosion in distributed and large-scale storage demand, resulting in strong growth.

South Africa is a typical energy storage market driven by rigid demand. With the gradual emergence of large-scale storage increments, South Africa's new installations are expected to maintain high growth, reaching 3 GWh in 2024.

Israel aims to achieve energy independence with multiple promotion policies, and with the upcoming deadline for large-scale storage projects to be connected to the grid, Israel's new installations are expected to reach 3.4 GWh in 2024, growing by over 200% year-on-year.

According to the Arab Petroleum Investments Corporation report, between 2021 and 2025, approximately 30 energy storage projects are planned in the region. Additionally, the BMI report from Fitch Solutions indicates that the UAE and Saudi Arabia in the Middle East are preparing large-scale energy storage projects. For example, Saudi Arabia's large-scale infrastructure project NEOM includes an energy storage plan called ENOWA, with a storage capacity of 2,200 MW. Saudi Arabia's "Vision 2030" plan aims for 50% of energy to come from renewable sources by 2030. It is noteworthy that the UAE ranks eighth globally in planned and under-construction projects.

Australia: Energy Storage Capacity Expected to Increase to 61 GW by 2050

This year, the Australian federal government reached agreements with states to establish a capacity investment plan, allowing BESS to bid to fill anticipated reliability gaps. The electricity and ancillary services day-ahead spot market provides diversified revenue channels for energy storage. By 2050, the capacity from electrochemical storage, virtual power plants, and pumped hydro storage is expected to increase to 61 GW.