Industrial and commercial energy storage: high growth trend emerges, development models are diverse

As of the end of 2022, the cumulative installed capacity of electrochemical industrial and commercial energy storage in operation in my country is 1.81GWh. According to relevant data, the total registered scale in Guangdong, Zhejiang, Jiangsu and other places has reached 3.46GW/9.26GWh in 2023. Although the development of the industry is still in its early stages, the trend of high growth has already emerged. Economics is the main driving factor for industrial and commercial enterprises to participate in projects. Peak and valley arbitrage, cost reduction, and policy subsidies have all brought about a significant increase in IRR.

In addition, distributed distribution and storage have become an important means of consumption adjustment, and there may be a relatively broad market space for distribution and storage in Taiwan in the future. The industry is in a state of flux and the landscape is yet to be determined. Developers and operators with channel resources and leading parts suppliers with technology and cost advantages may continue to benefit.

Since 2023, with the continuous catalysis of domestic industrial and commercial energy storage policies, time-of-use electricity price policies have been implemented in various regions, peak-valley price differences have widened, and energy storage investment costs have declined. The economics of industrial and commercial energy storage have gradually emerged, and the industry has begun to develop rapidly. In 2023, it will become an industrial and commercial energy storage industry. The first year of development of energy storage. According to TrendForce's forecast, China's newly installed energy storage capacity is expected to reach 29.2GW/66.3GWh in 2024, of which industrial and commercial energy storage is expected to reach 4.3GW/11.2GWh.

Peak and valley arbitrage is superimposed on subsidy income, and cost reduction helps highlight economics

In 2023, the economics of industrial and commercial energy storage will be significantly improved, stimulating demand growth. Through sensitivity analysis, it was found that the peak-to-valley price difference, energy storage unit price, loan ratio and battery cell cycle times are the four factors that have the greatest impact on economics.

Since 2023, regional peak-valley electricity price differences have widened. There are as many as 25 regions with an average price difference of more than 0.7 yuan/kWh in December, and more than 20 provinces meet the charging and discharging strategy of two charges and two discharges. Energy storage investment costs are declining rapidly. The average bid price of energy storage systems/EPC in December was 0.79/1.387 yuan/Wh, which was a significant decrease from the beginning of the year. Considering only the peak-valley arbitrage income, the IRR of projects in Zhejiang, Guangdong and Jiangsu can reach more than 7%, which has excellent economics. After adding leverage, the project IRR will further increase significantly.

In addition, Zhejiang, Guangdong, Jiangsu, Anhui and other places provided support through direct subsidies, which also led to a significant improvement in economic efficiency.

Anhui, Hubei and Hunan have development potential, and the industrial and commercial storage market is expected to grow rapidly

Areas that can realize large-scale development of industrial and commercial energy storage need to have a good industrial development foundation in addition to a large peak-to-valley price difference and/or better subsidies. In terms of peak and valley arbitrage, calculations have found that Zhejiang, Guangdong, Shanghai, Anhui, Jiangsu, Hubei, Hunan, and Hainan adopt two recharging and two recharging IRRs of more than 5.7%, and the investment economics are superior. Taking three factors into consideration, it is believed that Anhui, Hubei and Hunan have great potential for industrial and commercial energy storage development.

The market is worried about the sustainability of the time-of-use electricity price mechanism. By analyzing the GDP proportion of the tertiary industry and the proportion of photovoltaic installed capacity in each province, it is believed that Jiangsu, Zhejiang, Anhui, and Hubei may have certain sustainability.

Distributed distribution and storage assist consumption, and policy subsidies are an important source of profit at this stage.

Distributed photovoltaics are developing rapidly, and many places have issued grid connection warnings, causing grid consumption to become a "stuck" problem. When open capacity is insufficient, distributed distribution and storage have become a means of self-rescue for many provinces and cities. As of November 2023, 12 provinces/autonomous regions across the country have introduced relevant policies, and more than 10 regions have clarified the allocation and reserve ratio, ranging from 10-30%.

Policy subsidies are an important source of profit at this stage, and many places have introduced subsidy policies to further enhance the economics of industrial and commercial energy storage. The direct financial subsidies, tax policies, and market access policies of local governments across the country for industrial and commercial energy storage have gradually become clear. Since 2022, 11 provinces including Zhejiang, Jiangsu, Guangdong, and Anhui have released more than 50 policies to promote the construction of industrial and commercial energy storage projects. An industrial and commercial energy storage subsidy policy encourages industrial and commercial users to build energy storage power stations. The main forms of subsidies are discharge subsidies, capacity subsidies and investment subsidies.

There are currently many players and the competitive landscape is yet to be determined.

Integrators serve as a link in the industrial chain, and development and operation are the core links between products and owners. From the perspective of the energy storage industry chain, equipment manufacturers purchase raw materials such as cell materials and electronic components from upstream, and manufacture key modules of the energy storage system: battery modules, BMS, EMS, transformers, PCS, etc., which are then controlled by the system. Integrators integrate the above-mentioned modules and then sell the system to downstream owners or installation operators.

At present, industrial and commercial energy storage is still held by third parties for a high proportion, and developers and operators play a key role in connecting products and owners. Currently, there are many industry participants, which can be divided into three categories: large storage/household storage integrators & main component suppliers, professional industrial and commercial storage integrators, and power energy companies (including distributed photovoltaic companies, etc.).

① Large storage/household storage integrators & main component (battery cells, PCS, etc.) suppliers: such as BYD, Sungrow, Shenghong Co., Ltd., etc., extend the industrial chain to the integration link by outsourcing other components. The advantage lies in cost and Integration capabilities are more involved in the front-end integration links.

② Professional integrators of industrial and commercial energy storage: such as Singularity Energy, Sixiang New Energy, etc. Most of them have electronic and electrical technical backgrounds and do not involve upstream parts and components. They focus more on distributed application scenarios and concentrate their main resources on product optimization and Intelligent operation and maintenance. If such companies can continue to establish competitive barriers such as brands and channels, they are also expected to further expand their market share.

③Power energy companies: including distributed photovoltaic companies, comprehensive energy service providers, electricity sales companies, power EPCO service providers, etc., such as Xineng Technology, Suwen Electric Power, etc. Such companies can reuse traditional business sales channels to quickly expand business , the advantage lies in the channel side, and more involvement is in the back-end development and operation links.

Summary: Currently, industrial and commercial energy storage is in the early stages of industry development. There are many new entrants, market competition is intensifying, and fierce price wars may compress corporate profit margins. Enterprises should think about how to create differentiated products, continuously improve product performance and quality, provide a solid foundation for the large-scale promotion of industrial and commercial energy storage, and seize market share.