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Europe Completes De-Stocking, Emerging Markets See Surge in Installations

published: 2024-07-01 17:36

After 2020, the energy crisis in Europe caused electricity prices to soar, making residential storage much more economically viable. Additionally, the Russian-Ukrainian conflict in 2022 further boosted demand for residential storage, bringing significant attention to the industry. However, since the third quarter of 2023, the industry has faced inventory issues, leading to a decline in shipments along the supply chain and a rapid drop in profitability for manufacturers.

Cumulative installed capacity of global residential storage  (GWh)

After nearly a year of de-stocking, the de-stocking process in Europe has finally come to an end, and manufacturing shipments are expected to recover gradually each quarter. Meanwhile, with the increasing penetration of new energy sources, the prices along the solar and energy storage supply chain have significantly declined. Beyond the European and American markets, demand from emerging markets is rising and may contribute substantially to overall growth. Additionally, the application scenarios for residential storage are diversifying, including entry into the auxiliary services market in some countries. Clearly, the economics of energy storage systems (ESS) are improving, which will likely boost future demand.

Emerging market demand has significant potential.

Europe has been the main market for residential storage. In 2023, global new residential storage installations reached a capacity of 12 GWh, reflecting a year-on-year growth of 59.3%, with cumulative installations totaling 33.8 GWh. In Europe, residential tariffs are high due to their complex composition, making the installation of distributed solar and energy storage systems economically attractive. Consequently, Europe has been the dominant market for residential storage, with cumulative installations in 2023 accounting for 64% of the global total.

Residential solar and energy storage installation in Europe

Currently, total power demand in emerging markets continues to rise, but their power generation and grid facilities are relatively weak.

In recent years, Southeast Asia, South Africa, and other regions have experienced frequent power limitations and outages. The summer of 2023 saw high temperatures leading to regular power outages and limitations in countries like Vietnam, Bangladesh, and India. According to Abisoft, South Africa's annual power shortage exceeded 24 TWh in 2023, more than doubling from the previous year. For customers in these regions, distributed energy storage offers a degree of power security, thus showing great demand potential.

With the increasing frequency of extreme weather events, Southeast Asia and Africa are particularly vulnerable. These regions have relatively fragile power infrastructure and rely heavily on coal and hydropower for electricity. Extremely high temperatures have significantly reduced hydropower output, causing shortages in both power supply and coal. This, in turn, has stimulated demand for distributed energy storage systems.

South Africa's power shortage (GWh)

Since the beginning of this year, the solar and energy storage industry chain has seen a significant decline, leading to higher demand in emerging markets that are more sensitive to price changes. In May 2023, inverter exports to Asian, African, and South American markets increased by 9%, 34%, and 12%, respectively, compared to the previous month. Demand is especially strong in developing countries like India and Pakistan. In May, inverter imports to Asian countries reached $245 million, a new record high.

Diversification of Residential Storage Applications

Traditionally, residential energy storage systems (ESS) were primarily used to enhance the utilization of distributed solar power and ensure a stable power supply. However, with global advancements in new energy and power market reforms, residential storage in some countries now serves as a flexible resource, participating in energy, capacity, and auxiliary services markets. This has significantly improved the economics of residential ESS. Looking ahead, as power markets continue to develop, residential ESS will be applied in more diverse scenarios, leading to a surge in demand.

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