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South Africa, Southeast Asia and other emerging markets Witness Non-linear Growth in Solar Energy and Storage Demand

published: 2023-07-21 17:59

The 2023 energy storage medium-term strategy report released by Soochow Securities highlights significant trends in the industry. Notably, the convergence of solar and energy storage prices is driving a surge in demand for large-size storage. Additionally, as the price gap between peak and valley periods widens, industrial and commercial storage is set to experience remarkable growth, while European household storage is undergoing de-stocking. However, the report predicts a rebound in local demand in Europe towards the end of Q3. Emerging markets such as South Africa and Southeast Asia are anticipated to witness non-linear growth in energy storage demand due to their low current market penetration rates, offering ample development opportunities. According to Soochow Securities’ projections, global energy storage capacity demand is expected to reach 120GWh and 315GWh in 2023 and 2025, respectively, indicating a substantial 95% year-on-year increase in 2023 and a CAGR of 72% from 2022 to 2025. Accounting for installation and shipment time lag, Soochow Securities estimates that the shipment volumes will reach 235.6GWh and 568.2GWh in 2023 and 2025, showing an 84% year-on-year increase in 2023 and a CAGR of 64% from 2022 to 2025.

China: Declining Prices Stimulate Demand; Industrial and Commercial Energy Storage Booms
Soochow Securities highlights that declining lithium carbonate and polysilicon prices will result in lower battery pack and module costs in 2023. This downward trend has led to a considerable drop in domestic energy storage bidding prices, reaching RMB 1.1/Wh, thereby bringing solar and energy storage costs closer to parity. Based on preliminary data from Soochow Securities, the first half of 2023 saw a remarkable increase in public bidding capacity, reaching 30.4GWh, with shared energy storage emerging as the mainstream mode. The implementation of a larger peak-valley price difference and the two-part tariff system is contributing to the non-linear growth of industrial and commercial energy storage this year. Soochow Securities predicts a substantial surge in domestic energy storage demand, projecting new capacity requirements of 43GWh and 129GWh in 2023 and 2025, respectively. The projected increase of 180% year-on-year in 2023 showcases the sector's rapid growth, with an impressive Compound Annual Growth Rate (CAGR) of 103% from 2022 to 2025.

U.S.: Energy Storage Records High Filing; Local Market Shows High Barriers and Profitability
During Q1 2023, the U.S. experienced a slight delay in grid connection for energy storage projects, which could be impacted by increasing interest rates in the short term. However, Soochow Securities remains optimistic due to several favorable factors. These include the continuous rise in residential electricity prices, streamlined customs clearance for modules, implementation of the ITC tax credit policy, inadequate grid coordination, and frequent blackouts. These factors collectively contribute to an anticipated quarter-by-quarter improvement in the U.S. energy storage installed capacity. Soochow Securities estimates that in 2023 and 2025, the demand for new energy storage capacity in the U.S. will reach 25GWh and 69GWh, respectively, reflecting an 80% year-on-year increase in 2023. The Compound Annual Growth Rate (CAGR) from 2022 to 2025 is projected to be 72%.

Europe: De-stocking Among Dealers; Local Market Offers Low Penetration Rate and High Growth Potential
In 2023, the sharp decline in natural gas prices led to a significant decrease in demand, prompting dealers to address their accumulated inventory. Soochow Securities predicts that household storage de-stocking will be completed by September, and customer demand will gradually recover in Q3. Looking ahead, Soochow Securities anticipates a gradual rise in European natural gas prices, highlighting the ongoing concern of energy dependence on foreign countries. Consequently, developing independent energy sources remains a long-term trend. The current household storage penetration rate in Europe is less than 3%, underscoring the vast potential for growth. Moreover, the industrial, commercial, and large-size storage market is also experiencing rapid expansion. Soochow Securities estimates that in 2023 and 2025, the new capacity demand for energy storage in Europe will be 12GWh and 29GWh, respectively, representing a 47% year-on-year increase in 2023. Additionally, the Compound Annual Growth Rate (CAGR) from 2022 to 2025 is projected to reach 53%.

Emerging Markets: South Africa’s Growing Demand for Solar and Storage; Vietnam's Power Crisis Drives Demand for Solar and Storage
According to Soochow Securities, South Africa is experiencing frequent disrepair accidents in its thermal power units, coupled with an aging power grid, leading to frequent power outages. This situation is driving a significant increase in the demand for solar and storage solutions in the country. Import data reveals a staggering growth of 353% in module imports and 600% in inverter imports during the period from January to May 2023. In the case of Vietnam, there is a stark difference in the electricity supply between the northern and southern regions. While the southern area boasts a surplus of power supply, the northern region is facing a power crisis due to extreme weather events and failures in thermal power units. This crisis has created a favorable environment for the development of energy storage solutions, driving the demand for solar and storage in Vietnam.

In summary, the solar and storage parity is a driving force behind the significant growth in demand for large-size storage solutions. Additionally, the widening price difference between peak and valley periods is expected to fuel the booming growth of industrial and commercial storage in the near future. In Europe, the household storage market is currently addressing high inventory levels, but it is projected to experience high growth in Q3. Furthermore, emerging markets such as South Africa and Southeast Asia are poised for non-linear growth, aided by their low market penetration rates, which offer ample growth opportunities. Soochow Securities predicts that the global demand for energy storage capacity will reach 120GWh and 315GWh in 2023 and 2025, respectively, marking a significant 95% year-on-year increase in 2023. Over the period from 2022 to 2025, the Compound Annual Growth Rate (CAGR) is projected at 72%. When accounting for the time lag in installation and shipment, the projected shipments are 235.6GWh and 568.2GWh in 2023 and 2025, respectively, with an 84% year-on-year increase in 2023. The CAGR from 2022 to 2025 is estimated to be 64%.

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