In the first half of 2023, many energy storage battery companies benefited from the price reduction of upstream raw materials and the release of new production capacity, further improving their profitability. But at the same time, in the context of overcapacity, enterprises have to face fierce market competition.
Not long ago, Dai Deming, the chairman of Chuneng New Energy, publicly announced that by the end of this year, the 280Ah energy storage lithium battery of Chuneng New Energy will be sold at a price not exceeding 0.5 yuan/Wh (excluding tax). At the same time, it announced that the product quality will be guaranteed according to industry standards, and the price will not be affected by fluctuations in upstream lithium carbonate prices.
For a while, Chu Neng New Energy has caused a huge uproar in the energy storage industry, but many people believe that this actually reflects a downward trend in prices. Long Zhiqiang, a senior researcher at Xinlun Information, told China Business Daily that due to a combination of factors such as the decline in upstream lithium carbonate prices, overcapacity in battery cells, and lower than expected demand, battery cell prices have significantly decreased, with a decrease of over 40% compared to their previous year high. At present, competition among enterprises is very fierce, and some enterprises have resorted to price cutting and market grabbing in order to obtain orders.
In addition to the energy storage battery end, system integrators have also lowered prices, and bidding prices are frequently low. The reporter learned through interviews that since the second half of the year, the price of energy storage systems has further declined, and the price on the network source side has already been around 1 yuan/Wh.
It is undeniable that as the energy storage track enters the high light moment, with thousands of new and old players swarming to compete in the market, the market infighting is taking place in the form of a “price war”. Liu Zhongbin, Executive Secretary General of the China Battery Industry Association, told reporters that the healthy and sustainable development of the energy storage industry relies on technology and technological progress to achieve cost reduction. Relying solely on price wars to obtain the market will inevitably bring various hidden dangers, and will also bring huge hidden dangers to the industry’s development.
Reduce prices to seize the market
At present, competition between enterprises is very fierce, and some enterprises have resorted to price cutting and market grabbing in order to obtain orders.
The significant reason for the decrease in battery cell prices is the decrease in lithium carbonate prices. From the overall data of the first half of 2023, the price of battery grade lithium carbonate remained at 170000 yuan/ton to 510000 yuan/ton, with an average price of 326300 yuan/ton, a decrease of 32% compared to the annual average price last year.
However, the industry believes that the production capacity of battery cells exceeds demand, intensifying market competition, and thus accelerating the price decline.
The reporter noticed that over the past year, battery companies such as “veterans” from the energy storage industry, power battery companies, and cross-border photovoltaic module companies have been planning or expanding energy storage battery projects. The expansion of production capacity of 10GWh has become the norm, making the energy storage track even more crowded.
From the perspective of competitive landscape, the High Industry and Research Institute of Lithium Energy Storage (GGII) points out that the competitive landscape of first and second tier enterprises (Ningde Times, BYD, Yiwei Energy Storage, Ruipu Lanjun, Haichen Energy Storage, Guoxuan High Tech, Penghui Energy) is relatively stable, while first and second tier enterprises face significant competitive pressure. In the next 2-3 years, as mainstream battery companies gradually release their production capacity, market competition will further intensify. In addition, 2023 has become a critical period for energy storage enterprises to gain an advantage in “ranking”.
The accelerated release of battery cell production capacity has led to overcapacity, “Long Zhiqiang pointed out. According to Xinlun Information, as of the end of July, the nominal global energy storage battery production capacity was 430GWh, and the actual effective production capacity also reached around 400GWh. Currently, the operating rate of enterprises is not high, and with the continuous influx of new forces, battery cell prices have dropped again and again.
Long Zhiqiang also told reporters that currently, competition between enterprises is very fierce, and some enterprises have engaged in price cutting and market grabbing behavior in order to obtain orders. Except for Ningde Times, which offers higher prices than its peers, in fact, there is not much difference in product prices among other battery cell companies. Currently, the industry price includes tax, which is around 0.55 yuan/Wh. Different companies offer different prices, and some companies may be more aggressive.
A market insider from a battery company told reporters that the current price of energy storage cells is between 0.56 yuan/Wh and 0.6 yuan/Wh including tax. The price of Ningde Times is higher, while the new manufacturer will be lower, depending on the size of the project volume.
Long Zhiqiang stated that in the face of fierce competition, the gross profit margin of battery cells for enterprises in the domestic market will decrease, but it is still very good in foreign countries. Some companies offer very low prices and are in a low profit state, without falling below the cost line
In Long Zhiqiang’s view, with the changing supply and demand situation, the price of battery cells may further decrease, heading towards the “40 Mao era”.
Info Link Consulting also analyzed that as battery cell companies expand production and seize the market, it is foreseeable that China’s energy storage battery cells will face a price war of less than 0.5 yuan/Wh in the second half of the year.
Of course, short-term product price competitiveness cannot represent the overall competitiveness of the enterprise.
Wu Hui, General Manager of the Research Department of Yiwei Economic Research Institute and President of China Battery Industry Research Institute, previously stated in an interview with reporters that the competitiveness of a battery company still depends on whether it has good technology and products. On the one hand, can the company’s own research and development capabilities continuously drive product updates and upgrades; On the other hand, is the cost control capability of existing mature products more cost-effective for enterprises.
Wu Hui believes that “industry competition is already quite fierce, and large enterprises have advantages in large capacity, long cycle, safety, and low-cost indicators. Small enterprises should be eliminated in 2023
Intense competition in the field of system integration
Currently, the system integration process has become a must-have in the energy storage industry, and both new and old players hope to get a piece of it.
As the overall level of energy storage cells declines, the prices of downstream energy storage systems also decrease.
On August 2nd, Chen Haisheng, Chairman of the Zhongguancun Energy Storage Industry Technology Alliance and Chairman of the Energy Storage Professional Committee of the China Energy Research Association, introduced at the 8th Energy Storage Western Forum in 2023: “Affected by price linkage transmission, the average bid price for energy storage systems in the first half of the year was 1.33 yuan/Wh, a 14% decrease from the annual average price level last year and a 25% decrease from January this year
The reporter noticed that in the second half of the year, the prices of energy storage systems continue to decline.
According to incomplete statistics from the CNESADataLink global energy storage database, over 70% of the winning projects in July 2023 came from the centralized procurement of China Energy Construction’s 2023 lithium iron phosphate battery energy storage system. The average price for the 1C section is 1.305 yuan/Wh, the 0.5C section is 1.056 yuan/Wh, and the 0.25C section is 0.987 yuan/Wh. Taking the 2-hour lithium iron phosphate battery energy storage system (excluding user side applications) as an example, the average bid price for the energy storage system is 1.106 yuan/Wh, a year-on-year decrease of 26% and a month on month decrease of 3%.
On August 28th, the bidding results of the first batch of energy storage power station (Honghua Hydropower Plant) energy storage system integrator procurement project of Guangxi Institute in 2023 were announced. The total bidding capacity of the project was 150MW/300MWh, with a bidding price range of 0.94 yuan/Wh to 1.23 yuan/Wh, and a winning unit price of 1.15 yuan/Wh.
On September 7th, a system integrator told reporters, “Recently, the bidding price for the source network side energy storage project has been around 1 yuan/Wh, with a high point of 1.1 yuan/Wh. The user side industrial and commercial energy storage price ranges from 1.2 yuan/Wh to 1.3 yuan/Wh. If the price is even lower, the safety of the battery cells may not be guaranteed
The formation of energy storage system prices is not only a result of declining cell prices, but also a result of intensified competition.
Currently, the system integration process has become a must-have in the energy storage industry, and both new and old players hope to get a piece of it.
In the energy storage system integration market, PCS and power equipment manufacturers such as Sunshine Power, Kehua Data, Shangneng Electric, Huawei, Nanwang Technology, Xuji Electric, Zhongtian Technology, and Siyuan Electric, as well as lithium battery manufacturers such as Ningde Times, BYD, Yiwei Lithium, Paineng Technology, and Nandu Power, all rely on their own resource accumulation and product manufacturing advantages to extend to the field of system integration and participate in market competition. In addition, specialized system integrators such as Hibiscus and Singularity Energy cannot be ignored.
It is worth mentioning that Ningde Times officially entered the company in the first half of 2023. As of now, the company has participated in multiple bidding for energy storage system integration systems, known as the “one catfish” in the industry.
Long Zhiqiang said, “This year, Ningde Times and BYD have further shifted their strategic focus towards the domestic market, and have expanded their system integration field layout through integration strategies, continuously devouring some market shares of other enterprises
But he also stated that not all battery manufacturers can do so. For battery companies, if they further extend their system integration efforts, they must have a certain customer base and brand effect in end projects, otherwise they may easily turn customers into competitors
In the interview, Long Zhiqiang told reporters that due to fierce competition among system integrators, if the competition fails, the battery factory, as its upstream supplier, will also have an impact on its orders.