Lithium battery has become one of the best selling export products in China

On October 7, 2022, it was reported that lithium batteries have become one of the best selling export products in China. What’s the reason?

Global energy storage market demand increases greatly

Nowadays, lithium battery has been regarded as the first choice of modern energy storage equipment in the world due to its high charge discharge efficiency, long battery life, low self discharge rate and other advantages.

Previously, Europe, the United States, Australia and other countries have issued policies to vigorously promote the promotion and application of photovoltaic energy storage systems. 

In particular, household photovoltaic energy storage has become a common energy supply route in Germany, the United States and other places to ensure daily power supply and save electricity costs.

Since this year, the Russia Ukraine war has intensified the energy crisis in Europe. The prices of natural gas and coal fossil energy in Europe have risen significantly. The price of electricity in many countries in the world has soared.

Moreover, the cost of electricity has risen sharply, and there is still pressure to cut off power supply. The demand for energy storage products in the market has increased significantly. As a result, China’s lithium battery exports have also witnessed explosive growth.

The cost of China’s lithium battery industry drops rapidly

China has always been a large producer of lithium batteries. With the increase of global orders, the production scale has also been expanding, further boosting China’s lithium battery export scale. Data shows that in 2015, China officially exported the first batch of lithium battery equipment. 

Now, China’s lithium battery equipment exports have covered more than 30 countries and regions. In 2021, China’s energy storage battery shipments reached 48GWh, with a year-on-year growth of 167%. It is estimated that the installed capacity will exceed 90GWh in 2022, with a year-on-year growth of 88%, and will exceed 324GWh in 2025.

Statistics show that in the first eight months of 2022, China’s lithium ion energy storage battery exports totaled $29.926 billion, up 82.97% year on year. The export volume of energy storage lithium batteries from January to August this year has exceeded that of all lithium batteries in 2021.

In recent years, Chinese energy storage companies are also competing to layout the global energy storage market and accelerate the export of energy storage products.

The semi annual report of 2022 shows that, as the four major manufacturers of lithium batteries in China, CATL, BYD, Gotion High Tech and Sunwoda have achieved different levels of growth in global revenue. Among them, the business revenue of CATL has doubled, and the revenue of Gotion High Tech has increased by 358.28% year-on-year.

Behind the increase of export scale is the breakthrough of technology. The synergy of technological innovation, economies of scale, manufacturing experience and other factors further promoted the expansion of China’s lithium battery industry and the rapid decline of costs. The cost of energy storage battery including home battery storage cost also brings export advantages to companies.

Taking Pylon Tech, a representative company of household energy storage, as an example, the data shows that the unit price of its energy storage battery system has been declining continuously, from 2.03 RMB/Wh in 2017 to 1.37 RMB Wh in 2021.

In addition, the sales price of battery system in CATL also dropped from 0.94 RMB/Wh in 2019 to 0.89 RMB/Wh in 2020.

According to statistics, the lowest price of energy storage system procurement in the past four months was below 1.41 RMB/Wh, and the overall average market price was about 1.5~1.6 RMB/Wh, which was significantly lower than the lowest price of about 1.7 RMB/Wh at the beginning of the development of new energy power generation side energy storage application in 2020.

The fluctuation of lithium price triggered the exploration of non lithium technology field

The rapid development of the global energy storage market and the rapid growth of the size of the energy storage market in the United States will lead to further competition for available batteries.

As the first choice of modern energy storage equipment in the world, lithium batteries have led many companies to consider adopting new energy storage technologies to replace lithium ion energy storage systems.

Wartsila, a Finnish company, experienced a year of rapid development in 2021, but the battery supply chain problems encountered in 2022 brought it back to reality. In 2022, like many industries, Wartsila suffered from supply chain problems, which led to the company’s inability to supply its integrated lithium-ion battery energy storage solution at the contract price.

The company was in a situation of insufficient batteries, and had to renegotiate the contract with customers. The price of lithium carbonate on the market soared by 500% within one year.

Although the battery energy storage industry has done well in coping with these changes, and most technology suppliers have adopted raw material index pricing (RMI), it may take more than six months to develop mitigation strategies and negotiate with customers.

According to industry media reports, Lightsourcebp, a solar power developer, pointed out that the battery energy storage industry currently relies on the same battery supply chain as electric vehicles, which does not really work. This is becoming one of the motivations for Lightsourcebp and other industry manufacturers to further study non lithium alternatives.

Fluence, the energy storage system integrator, also expressed the same view. In general, the volatility of lithium prices has triggered a new round of interest in non lithium technology.

Fluence has a team responsible for evaluating promising energy storage technologies, characteristics and how to meet market demands. Of course, for the emerging energy storage technology, it is not easy to compete with the most mature advanced battery technology.

Inflation Reduction Act may increase supply chain restrictions

At present, the US energy industry is focusing on the recently passed Inflation Reduction Act, which is expected to have a positive and transformative impact on the clean energy industry.

However, IHI Terrasun, a battery energy storage integrator of utility scale, also said that in the short term, the growth of demand may impose more restrictions on the supply chain of industries that have been restricted. Some people predict that this will lead to a doubling of the deployment of battery energy storage systems.

The impact of the Inflation Reduction Act may have some positive effects, but it may cause great pressure. So far, IHI Terrasun has cooperated with a few major battery suppliers. At present, these battery products will be sold out at least in the next two years.

Any alternative energy storage technology faces great challenges

The battery supplier Gotion has entered the battery manufacturer dedicated to energy storage system and promised to put it into actual production in the United States. SK has also issued some announcements.

However, IHI Terrasun expects that it will take at least three years for more suppliers’ batteries to enter the market in large quantities. Therefore, the company is looking for viable battery technologies that can eliminate risks and use them in the next few years.

Although the cost of lithium ion battery has declined year by year over the past decade, it is unknown how new technologies can enter the market in a large scale. However, today, although the sharp increase in raw material prices has slowed down, it is still higher than the previous level, and the battery energy storage industry has also improved its understanding of supply chain risks.

The price rise has indeed opened the door to the adoption of other energy storage technologies. Due to the insufficient supply of lithium materials extracted and refined, this may also be an opportunity for other energy storage developers, and users are also seeking solutions that are more environmentally friendly and have lower carbon emissions than lithium ion batteries.

Industry insiders have not clearly pointed out the most promising alternative energy storage technology. However, IHI Terrasun has been discussing with a sodium battery developer. One fact is that any alternative energy storage technology faces great challenges in establishing supply chain, large-scale production and bank financing to obtain market appeal.