Sectoral dynamics
Energy storage is an important component of the new power system and the core proposition of carbon neutrality. It has the potential and certainty of nearly a trillion yuan market size. The energy storage track is becoming a battleground for capital, and the era of energy storage has begun.
Global Energy Storage Market Size
The global energy storage market is in a stage of rapid growth, and the proportion of electrochemical energy storage is increasing year by year, becoming a major incremental contributor in the future. The three major economies of China, the United States, and Europe are the main markets for global new energy storage, and it is expected that China, the United States, and Europe will continue to control the main increase in global new energy storage capacity. By 2025, the global installed capacity of electrochemical energy storage is expected to reach 148GW.
The US market relies on the energy storage subsidy policy of the IRA Act, making energy storage an independent subsidy subject and enjoying a 10-year investment tax credit ratio. It is expected that by 2023, the installed capacity of electrochemical energy storage will reach 16.6GW, a year-on-year increase of 168.0%; By 2025, the cumulative installed capacity of electrochemical energy storage is expected to exceed 75GW.
The IRA Act Promotes State Installed Capacity Growth (GW) in the United States from 2022 to 2030
Source: AVIC Securities Research Institute
The European market is planned to have a wind and solar capacity of approximately 1100GW by 2030, with both supply and demand promoting energy storage development. The promulgation of policies such as REPowerEU and Carbon Reduction 55 will promote research on battery energy storage technology and provide financial support. It is expected that by 2023, the installed capacity of electrochemical energy storage in Europe will reach 7.0GW, a year-on-year increase of 37.3%; By 2025, the cumulative installed capacity of electrochemical energy storage is expected to approach 40GW.
Domestic energy storage
The growth rate of China's energy storage market is higher than that of the world, and it is expected that by the end of 2025, the cumulative installed capacity of electrochemical energy storage will reach 70GW. The proportion of new energy storage is continuously increasing, with electrochemical energy storage accounting for nearly 90%. Driven by the policy of new energy distribution and storage on the power side, the Chinese energy storage market will usher in opportunities for rapid development. During the 14th Five Year Plan period, more than 50GW of new energy storage capacity will be built. It is expected that by the end of 2025, the installed capacity of new energy storage in China will reach 53GW, with new energy distribution and storage on the power side becoming the main driving force.
Accumulated scale and growth rate of energy storage installed capacity in China
Source: AVIC Securities Research Institute
At present, the global proportion of new energy installed capacity has exceeded 20%, and it is expected to exceed 37% by 2027. The continuous increase in the proportion of new energy will continue to pose risks to the stable operation of the power system. Policies in many regions in China have also proposed mandatory allocation and storage requirements for new power stations, and there will be significant room for improvement in the proportion of installed new energy allocation and storage. The economy of energy storage is expected to improve.
The business model of the energy storage industry is gradually becoming clear, and independent energy storage has become the main development direction of future large-scale energy storage projects. Currently, the profit models for independent energy storage mainly include spot arbitrage, auxiliary services, capacity compensation, and capacity leasing. With the implementation of national and local policies, the bidding capacity of independent energy storage projects is increasing year by year, and it is expected that independent energy storage projects will occupy a larger proportion of the market share in the future.
The widening of the peak valley price difference on the power consumption side will significantly improve the economic efficiency of energy storage on the user side. The recent "Notice on Further Improving the Time of Use Electricity Price Mechanism" requires each province to improve the peak valley electricity price mechanism and reasonably determine the price difference between peak and valley electricity prices. The grid electricity price on the power generation side is gradually being relaxed and market-oriented, and the resistance of large storage and installation is expected to ease. At the same time, if the lithium price further falls back, the energy storage on the power generation side will gradually achieve a break even.
Core links of energy storage industry
The overall energy storage industry chain revolves around batteries (PACK), mainly including upstream raw material and component suppliers, midstream battery packs, energy storage converters (PCS), battery management systems (BMS), energy management systems (EMS), and other equipment and system integrations. It is mainly applied in the four major fields of power generation, grid, user, and microgrid, where the power generation side benefits from the development of the new energy industry, It is the main driving force behind the energy storage market.
1. Cell
With the continuous increase in installed capacity of wind and solar power in regions such as China, the United States, and Europe, as well as policy support from various countries, energy storage cells are also expected to rapidly release. At present, domestic electrochemical energy storage cells mainly rely on the lithium iron phosphate route, while overseas cells mainly use a combination of lithium iron phosphate and ternary materials. Among them, domestic cells account for about 90% of the global energy storage market and have a monopoly position in the market.
According to the prediction of Gaogong Lithium Battery, the production of energy storage cells in China will reach approximately 120GWh by 2022, a year-on-year increase of 150%; By 2025, the production of energy storage cells will reach 390GWh, with a compound annual growth rate of up to 68.8%.
2. PCS
PCS (Energy Storage Converter) is a device that connects a battery pack and the power grid (or load) to achieve bidirectional conversion of electrical energy. It can control the charging and discharging process of the battery, perform AC/DC conversion, and directly supply power to AC loads without a power grid. It is suitable for various DC energy storage units, such as supercapacitors, battery packs, flywheel batteries, etc.
With the continuous expansion of the energy storage market, the demand for high-power PCS is showing rapid growth, but the technical barriers are high. PCS, as the core component of the energy storage system, accounts for approximately 20% of the cost of the energy storage system. Among them, IGBT, as the core component of PCS, is mainly responsible for rectification and inverter. The domestic production rate of IGBT is only about 25%. Currently, low-power PSC can achieve the localization of IGBT chips, while high-power PCS still needs to import IBGT modules. Manufacturers with stable IGBT supply will have certain advantages.
3. System integration process
As a midstream link in the energy storage industry chain, system integrators have become a must-have for the energy storage industry by connecting equipment providers and energy storage system owners.
The high-voltage cascade method can effectively improve the efficiency and lifespan of the energy storage system. The advantage is that there is no need for transformers, which can effectively save equipment costs and space. At the same time, the omission of transformers can avoid efficiency losses caused by the transformation process and improve conversion efficiency. In addition, each unit has the ability to actively adjust, and when a single unit encounters a problem, only the problem node needs to be addressed without affecting the normal operation of other units, which can effectively reduce maintenance costs.
Comparison of low-voltage parallel and high-voltage cascade indicators
4. Energy storage temperature control link
Energy storage temperature control and fire protection are important links to ensure the safe operation of energy storage systems. The technical route can be divided into air cooling, liquid cooling, phase change cooling, and liquid tube cooling. Compared to air cooling, liquid cooling has higher heat transfer efficiency, lower operating energy consumption, and lower risk of thermal runaway.
The energy storage temperature control market is in its early stages, mainly focused on cross-border players, with inconsistent standards and low concentration. The value of energy storage and temperature control accounts for 3% to 5% of the total, with air cooling and liquid cooling leading the industrialization due to their cost-effectiveness advantages. At present, the market is mainly air-cooled, with high liquid cooling costs. However, it has obvious advantages in uniformity, volume, and energy consumption, and the penetration rate is expected to increase from 12% in 2021 to 45% in 2025. The cost of liquid cooling/air cooling temperature control systems is approximately 90/0.3 billion yuan/GWh, and it is expected that the market space will reach 16 billion yuan by 2025.
Global Energy Storage Temperature Control Market Space from 2021 to 2025
Source: AVIC Securities Research Institute
5. Fire protection process
Energy storage fire protection mainly includes fire warning, fire control, fire extinguishing, and other aspects. It is necessary to select appropriate fire protection equipment and plans based on battery characteristics and site conditions. After the improvement of energy storage and fire protection industry standards, the demand has significantly increased. According to the requirements of the "Safety Regulations for Electrochemical Energy Storage Power Stations", the battery room/compartment of the energy storage power station should be equipped with an automatic fire extinguishing system that is linked with BMS, detectors, and temperature control systems. At the same time, the automatic fire extinguishing system should be equipped with a module level fire extinguishing system.
Perfluorohexanone, which has lower toxicity and better fire extinguishing properties, is expected to become a new trend in fire extinguishing media. At present, the value of energy storage fire protection in China accounts for about 3%, and it is expected that the domestic energy storage fire protection market space will reach 46.75 yuan by 2025, with a CAGR of 45.7%.
2021-2025 Global Electrochemical Energy Storage Fire Protection Market Space
Source: AVIC Securities Research Institute
6. Long term energy storage
Long term energy storage (generally referred to as more than 4 hours) has become an important direction for energy storage development, with the potential to improve new energy consumption capacity and replace traditional power generation methods. It can provide sufficient flexible resources for the power grid, effectively reduce the operating costs of the power grid, and have stronger peak valley arbitrage and market profit potential. The focus is on analyzing compressed air energy storage and all vanadium flow batteries.
Compressed air energy storage
The compressed air energy storage system uses high-pressure air pressure energy as the form of energy storage, and generates electricity through the expansion of high-pressure air. The main components are the gas storage cave, compressor, combustion chamber, and expansion agent.
The thermal storage compressed air energy storage system is more prominent in terms of system efficiency and technological maturity, while there are many salt caves and abandoned mining caves in China, which have the conditions for large-scale commercialization. According to statistics, in 2022, the capacity of compressed air energy storage projects in China exceeded 6GW, and the installed capacity was above 100MW, with a backup time of 4-8 hours. Under neutral expectations, by 2025, China's cumulative installed capacity of compressed air energy storage will reach 6.76GW, with a CAGR of 151%; By 2030, it is expected to reach 43.15GW.
Prediction of Accumulated Installed Capacity of Compressed Air Energy Storage in China (GW)
Source: AVIC Securities Research Institute
All vanadium flow battery
Liquid flow battery energy storage technology utilizes changes in the valence states of positive and negative energy storage active substances to achieve the storage and release of electrical energy. It has the characteristics of high flexibility, long lifespan, high safety, and environmental friendliness.
Among various types of liquid flow batteries, all vanadium liquid flow batteries are currently outstanding in terms of application scale and industry chain, with hundreds of MWh level projects emerging. According to EVTank's prediction, in the future, driven by national support policies and the mature development of the industrial chain, the new installed capacity of vanadium batteries is expected to reach over 2.3GW in 2025.
