Energy storage layout is accelerating! Lithium iron phosphate welcomes new development opportunities!

The domestic electrochemical energy storage industry is gradually moving from the "early stages of commercialization" to a new stage of "large-scale development."

In 2020, although the domestic energy storage industry was affected by the COVID-19 pandemic, the installed capacity of energy storage still achieved counter-cyclical growth due to multiple factors such as the industry's endogenous driving force, external policies, and carbon neutrality goals.

According to statistics, as of the end of 2020, the cumulative installed capacity of China's operational power energy storage projects reached 33.4GW, with an additional capacity of 2.7GW put into operation in 2020; among them, the newly added operational capacity of electrochemical energy storage exceeded the GW mark for the first time, reaching 1.08GW/2.7GWh.

At the same time, the key indicator of the electrochemical energy storage industry - system cost - has also exceeded the critical turning point of 1,500 yuan/kWh.

All of the above changes seem to indicate that the domestic electrochemical energy storage industry market is gradually opening up. In this context, lithium batteries, with gradually mature technology and continuously declining costs, are becoming a lever to leverage the electrochemical energy storage market, and lithium iron phosphate batteries, the "main force" of the domestic electrochemical energy storage industry, are welcoming new development opportunities.

Battery companies accelerate deployment of energy storage

In recent years, many domestic battery companies have been accelerating to seize the energy storage market.

On April 24, the 20MWh user-side energy storage power station project jointly built by EVE Energy, a wholly-owned subsidiary of EVE Energy, and Jiangsu Suyan Jingshen Co., Ltd. was connected to the grid. It is reported that the project uses the lithium iron phosphate batteries provided by EVE Energy, which can achieve functions such as load regulation and peak load shifting for the Suyan Jingshen Industrial Park.

In the same month, CATL also announced that it would set up two joint ventures with ATL to engage in the research and development, production, sales and after-sales service of medium-sized batteries for home energy storage, electric two-wheeled vehicles and other fields. On the same day, CATL also signed a strategic cooperation agreement with Mingyang Smart Energy, according to which the two parties will cooperate in the fields of wind, solar and storage integration and source, grid, load and storage integration.

Going back further, the first phase of the 5GWh battery project of the Nantong Energy Storage Base of Shanghai Electric Guoxuan New Energy Technology Co., Ltd. held a production completion ceremony in September last year. It is reported that the base is jointly built by Shanghai Electric and Guoxuan High-tech, focusing on energy storage business, with a designed annual production capacity of 10GWh.

In addition, companies such as BYD, Lishen Battery, Penghui Energy, AVIC Lithium Battery, Payne Technology, and Xinwanda have also continued to increase their investment in the energy storage field.

It is worth mentioning that it is precisely by virtue of the active layout in the field of energy storage that battery companies have also achieved rapid growth in the energy storage business. Taking CATL as an example, data shows that in 2020, the installed capacity of CATL's energy storage business reached 2.39GWh, an increase of more than 200% year-on-year.

BYD, also a leading company in the energy storage field, has also achieved significant growth in its energy storage business. Data shows that BYD's total installed capacity of energy storage batteries in the first quarter of this year has reached 2.05GWh, an increase of more than 4.5 times year-on-year.

It is worth mentioning that while battery companies are accelerating their layout in the energy storage industry and achieving impressive growth, the national level and many provinces have also introduced policies to encourage the deployment of energy storage and strengthen the construction of energy storage standard systems. So far, the development of my country's energy storage industry has entered a new stage of development.

Lithium iron phosphate welcomes new development opportunities

The popularity of the energy storage industry has also led to a surge in demand for lithium iron phosphate batteries, the mainstay of batteries in the energy storage field, making them increasingly popular.

On May 6, China Mobile released a bidding announcement for the centralized procurement of lithium iron phosphate batteries for communications from 2021 to 2022 on its procurement and bidding website. According to this announcement, China Mobile plans to bid for a total of 923 million Ah of 3.2V energy storage lithium iron phosphate batteries, equivalent to about 2.95GWh, with a maximum bid price of 2.367 billion yuan (excluding tax). It is reported that this is the first large bidding order for lithium iron phosphate batteries for communications this year.

In fact, this is not the first time that China Mobile has issued a communication tender announcement. As early as March last year, China Mobile issued a tender announcement for the centralized procurement of lithium iron phosphate batteries for communications in 2020. At that time, eight companies including EVE Energy, Shuangdeng Group, and Narada Power successfully won the bid.

It is worth noting that not only China Mobile, but also China Telecom, China Unicom, China Tower, Huawei and other operators are also working hard in the communications market. "The background of enterprises' active participation in the communications field is that the construction of 5G communication base stations has become the top priority of my country's 'new infrastructure'. It is expected that the country will usher in a peak period of 5G base station construction from 2021 to 2023." An industry insider pointed out that driven by this, the demand for energy storage batteries will also usher in explosive growth.

It is predicted that by 2025, China's energy storage lithium battery shipments will reach 60GWh, and the market size will exceed 55 billion yuan. This is undoubtedly a huge benefit for lithium iron phosphate batteries, which currently account for more than 90% of the domestic energy storage market.

Of course, the iron must be strong before it can be forged. The strong demand for lithium iron phosphate is naturally inseparable from its many advantages that are compatible with the energy storage industry.

From the application side, the performance requirements of batteries for energy storage and new energy vehicles are very different. Batteries for energy storage require lower costs, longer life, and greater safety, while power batteries for automobiles require smaller size, higher energy density, and better power characteristics on the basis of safety. In terms of battery types, lithium iron phosphate batteries, which have mature technology and outstanding advantages in safety, service life, cost, etc., naturally become the preferred battery in the current energy storage industry.

Generally speaking, lithium batteries used in the energy storage field require more than 3,500 cycles (i.e., a service life of more than 10 years). The number of cycles of lithium iron phosphate batteries is much higher than that of lead-acid batteries and ternary batteries, reaching more than 7,000 times. In terms of cost, although the price of lithium iron phosphate battery raw materials has risen to a certain extent, its cost is still lower than that of ternary batteries, and it is expected to continue to be the main battery supply direction in the energy storage field in the future.

It is worth mentioning that, with its low-cost advantage, lithium iron phosphate batteries may have a huge opportunity to accelerate their "penetration" into the foreign energy storage market.

According to foreign media reports, in order to ease the tight supply of nickel demand and further reduce the cost of energy storage products, Tesla has recently switched its Megapack energy storage products with a maximum battery capacity of 3MWh per unit to lithium iron phosphate batteries.

It is worth mentioning that thanks to the popularity of the star energy storage product Megapack, Tesla's total installed capacity of energy storage batteries in 2020 achieved a year-on-year growth of 83%, reaching 3.02GWh.

"With the support of low cost of lithium iron phosphate batteries, Megapack's competitive advantage will be more obvious, and Tesla's energy storage business sales and gross profit are also expected to be further improved." An industry insider analyzed that in the long run, under the demonstration effect of Tesla, the leader in the new energy industry, lithium iron phosphate batteries may have the opportunity to break the overseas energy storage market structure that has been dominated by ternary batteries in the past.

In the domestic market, driven by multiple factors such as the "dual carbon" strategic goals, the continuous decline in lithium battery costs, the steady improvement of technology, and the continuous expansion of application scenarios, the energy storage market is opening up rapidly; in the foreign market, driven by the demonstration of Tesla's energy storage products switching to lithium iron phosphate, and the efforts of many domestic energy storage battery companies to "go overseas", lithium iron phosphate batteries may gradually become "favored" in the international energy storage market and move towards a broader stage.