The rapid growth in global renewable energy installations has created a vast market for the energy storage industry. Solar panels, electric vehicles, and lithium batteries are emerging as key drivers of international trade, boosting exports and accelerating the development of the photovoltaic and energy storage sectors. Here are five trends likely to shape the energy storage industry through 2024:
1. In-House Development: The Competitive Edge in Energy Storage
Cost advantage is crucial in the competitive energy storage market, and the ability to develop and produce equipment in-house is key. To stay profitable amid price wars, companies need to self-develop components like battery cells and power conversion systems (PCS). Mastery of electrochemistry, power electronics, and digital technology is essential to reduce costs and enhance product competitiveness. Companies that produce their own battery cells and direct current systems have significantly higher profit margins than those that rely on external suppliers.
Maintenance software for energy storage stations has become standard, offering basic monitoring features. However, the true competitive edge lies in advanced monitoring capabilities, such as single-cell performance assessment and thermal runaway warnings. In the future, the focus will shift towards intelligent operations and revenue optimization. Companies that excel in precise electricity price forecasting and automated operation strategies will maximize profits, highlighting the importance of in-house development for cost control and product reliability.
2. Domestic Spot Market Development: A New Era of Profitability
In September 2023, China marked a milestone in its electricity market with the introduction of the first national-level electricity spot market trading rules by the National Development and Reform Commission and the National Energy Administration. This new market mechanism is designed to integrate renewable energy more deeply and ensure policy stability, encouraging new market players like distributed generation, load aggregators, energy storage, and virtual power plants to participate in electricity trading.
Following this, in October 2023, additional guidelines were issued to accelerate the construction of the electricity spot market. By 2024, many provinces will have initiated long-term trial settlements, with some moving towards formal operations. This progression promises to solidify the profitability of energy storage projects and enhance the maturity and international competitiveness of China's electricity market, offering unprecedented opportunities for the energy storage industry.
3. Breaking Homogeneity Through Innovation
The energy storage market faces significant challenges due to product homogeneity and rapid iteration. Technological innovation is critical for companies to stand out. Customers are increasingly focusing on the overall performance, operational efficiency, safety, and reliability of energy storage systems, which must pass stringent grid tests.
While price competition has created a turbulent market environment, leading some companies into a low-price, low-quality trap, the industry consensus is shifting. Low-price competition is nearing its end, and companies that emphasize technological innovation and core competencies will thrive. Energy storage companies must invest in research and development, accelerate technological advancements, and build unique strengths to secure their market position.
4. Integrated Solar and Storage: Accelerating Global Energy Transition
Integrated solar and storage (combining distributed photovoltaics with energy storage) is expanding rapidly, driven by advancements in distributed photovoltaic technology and the booming electric vehicle market. This model improves energy utilization efficiency and reduces reliance on fossil fuels, contributing to environmental protection.
In regions with high distributed photovoltaic installation rates, the demand for integrated solar and storage is growing. These regions are implementing flexible electricity pricing policies, developing power auxiliary service markets, and exploring virtual power plants, creating diverse revenue streams for integrated solar and storage projects. As these successful experiences spread, the commercial model of integrated solar and storage will mature and be replicated more widely.
Europe's rapid development in integrated solar and storage sets a benchmark for the global industry. There, solar and storage stations are becoming active energy system participants, heralding a new era of solar and storage integration. Leading companies are collaborating to create a more open and coordinated energy storage ecosystem, driving the industry towards a higher quality and more sustainable future.
5. Overseas Energy Storage Market: A Profitable Blue Ocean
The overseas energy storage market, with its diverse revenue models and strong potential, is a key focus for energy storage companies. Channels like energy trading, frequency regulation, and backup power provide stable and substantial returns.
In contrast, the domestic energy storage market's mechanisms are still developing, with revenues mainly reliant on capacity leasing, limiting profitability. The high degree of electricity marketization overseas offers significant arbitrage opportunities, attracting domestic companies to expand internationally.
To succeed abroad, companies must navigate supply chain, regulatory, and policy challenges and establish a localized presence. By leveraging technological innovation and cost control, domestic energy storage companies can capture international markets and contribute to the global growth of the energy storage industry.
