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Analysis on Recent Installed Capacity of Major Overseas Energy Storage Market

published: 2023-09-15 15:34

By examining prominent energy storage markets overseas, such as the United States and Europe, it becomes evident that three pivotal factors are propelling the rapid surge in global demand for energy storage: the power market, policy support, and economic viability. To initiate renewable energy power generation goals, it is imperative to commence from the upper echelons of management. Moreover, the regulatory authorities should actively endorse wind power generation development and stimulate the associated demand for energy storage through measures like subsidies, tax credits, and other incentives.

When it comes to economic considerations, energy storage projects in the United States, Europe, and other regions can yield greater revenue by engaging in market-driven power trading for energy storage. This benefit is facilitated by the decreasing costs of energy storage systems, primarily those utilizing lithium batteries, in tandem with subsidies offered through certain local policies. Consequently, overseas energy storage projects, on the whole, exhibit more favorable economic prospects.

Year-on-year growth in installed capacity
Germany household storage:
In August 2023, the installed capacity reached an impressive 206 MW/309 MWh. According to data from ISEA, this marks a substantial 49% increase compared to the same period last year. However, it’s important to note a month-on-month decrease of 21%, amounting to 62%.

Figure: Monthly installed capacity of household storage in Germany (MW/MWh)

Furthermore, it’s worth highlighting that in August 2023, the residential electricity price in Germany stood at 38.47 euro cents/kWh. This represents a year-on-year decrease of 0.3%. Following its peak in November 2022, German residential electricity prices have consistently been on a declining trend.

Figure: Monthly residential electricity prices in Germany (euro cents/kwh)

Italy: During the first quarter of 2023, a substantial 741 MW/1089 MWh of new household storage was installed.

Based on data from ANIE, it’s worth noting that in Q1 2023, a total of 80,200 units of grid-connected household storage systems were installed in Italy. This represents an astounding year-on-year increase of 479% and 296%. Additionally, on a quarter-to-quarter basis, there was a notable increase of 40% and 26% in the installed capacity.

Figure: Quarterly installed capacity of household energy storage in Italy (MW/MWh)

US household storage: 155.4MW/388.2MWh household storage were installed in Q1
In Q1 of 2023, a substantial 155.4 MW/388.2 MWh of household storage systems were installed. According to data from Woodmac, during this period, the installed capacity of U.S. household storage witnessed a year-on-year increase of 7.2% and 16.2%. However, it’s important to note a quarter-on-quarter decrease of 9.1% in capacity and 9.3% in installed.

Furthermore, in 2023, California initiated the implementation of the NEM3.0 policy, signaling a shift in the structure of household PV from net metering to net billing. This shift has made household PV distribution storage more economically viable. Since the beginning of 2023 until September 4th, SGIP has reported the installation of 26.2 MW/64.9 MWh of household energy storage capacity.

Figure: SGIP’s Installed Capacity of Energy Storage in California(MW/MWh)

U.S. Energy Storage
The installed capacity of energy storage in the first quarter of 2023 surged to an impressive 792.3 MW/2144.5 MWh, according to data from Wood Mackenzie. This reflects a year-on-year increase of 6.1%. However, it's important to note a 10.6% decrease compared to the previous year and a substantial quarter-on-quarter decrease of 25.7% and 29.2%.

In more specific terms, within this total capacity, 554 MW/1553 MWh were installed in the front-of-meter (FTM) market. This segment experienced a modest year-on-year increase of 2.8%, but a significant decrease of 19.2% compared to the previous year. On a quarterly basis, there was a substantial decrease of 34.7% and 38.0%. The decline in installed capacity can primarily be attributed to the diminishing capacity of large-scale storage projects in the FTM market. This decline is attributed to delays in finalizing specific rules within the IRA act, a situation that persisted from the end of the previous year through May of this year. Consequently, project grid connection applications were backlogged, and the supply chain faced tense conditions. In the first quarter, 1.4 GW of installed capacity from the 1.8 GW backlog of projects were postponed to the second quarter, with an additional 0.2 GW postponed to the third quarter.

Figure: U.S. Quarterly Energy Storage Installations (MW/MWh)
Based on data provided by the EIA, the U.S. energy storage market witnessed significant growth in grid-connected installations during the period from January to July in 2023, totaling an impressive 3.30 GW of electrochemical energy storage. When examining the monthly figures, it’s worth noting that July 2023 saw a remarkable surge with 1506.4 MW of grid-connected installations, marking a staggering 281% year-on-year increase and a substantial 42% month-on-month growth. Looking ahead, EIA grid-connected statistics forecasts a robust continuation of this trend, with an estimated 6.33 GW of energy storage projects slated for grid connection between August and December in 2023. As a result, the annual total for new grid-connected installations is expected to reach an impressive 9.62 GW, marking a remarkable year-on-year increase of 133.4%.

Figure: Monthly Grid-connected Installations of Energy Storage in the U.S. (MW)

Domestic Production, Global Sales:
Chinese Firms Vie for International Energy Storage Market Share
During a press conference held by the MIIT on September 5th, Yang Xudong, the deputy director of the electronic information department, provided insights into the burgeoning new energy storage industry in China. According to his remarks, the newly installed energy storage capacity in 2022 reached a remarkable 7.3 GW, marking a staggering year-on-year growth of 200%. Notably, more than 20 100-megawatt projects successfully connected to the grid, a fivefold increase compared to 2021. Lithium energy storage batteries, in particular, accounted for a substantial 97% of the total installed capacity, with production exceeding 100 GWh.
Yang Xudong emphasized MIIT’s commitment to fostering the integration and development of solar photovoltaic technology, new energy storage products, crucial end-use applications, and key information technology (optical and energy storage). This integrated approach aims to bolster comprehensive planning for the development of the new energy storage industry.
Turning our gaze towards the global arena, we find that the past year marked a significant start in the energy storage industry’s expansion into international markets. Prior to this, the overseas energy storage market was predominantly dominated by Japanese and Korean brands. However, since the advent of last year, the demand in the international energy storage market has surged dramatically. Notably, the scale of single orders placed with Chinese companies has escalated from tens of megawatts in 2021 to hundreds of megawatts and even gigawatts. This clear trend underscores that the overseas energy storage market has unquestionably become the most substantial contributor to the revenue of domestic energy storage enterprises.
In the European market, which is mainly dominated by household energy storage, local electricity prices have soared dramatically due to energy transition policies and geopolitical conflicts. In this case, the cost of electricity for household installation of energy storage has in turn become even cheaper.
The U.S. market is dominated by FTM energy storage. Driven by policies, its economics is further increased. Last August, Biden announced the investment of $369 billion in the field of climate change and renewable energy through Inflation Reduction Act (IRA). IRA brings substantial stimulus on solar, wind, battery industry chain and energy storage market.

When it comes to energy storage, the United States has introduced a groundbreaking policy by implementing the Investment Tax Credit (ITC) specifically for independent energy storage systems. Starting from 2023, energy storage can now qualify for a substantial 30% investment tax credit for a duration of 10 years as an autonomous entity. This policy holds immense significance for the burgeoning energy storage industry. Importantly, energy storage no longer needs to be tethered to solar power to be eligible for the ITC; it can stand alone as an independent entity. Furthermore, the sources for charging energy storage systems are not restricted solely to solar power. Additionally, energy storage systems have the potential to generate supplementary revenue or savings, thereby further reducing the construction costs associated with independent energy storage projects.

Due to the contrasting economic landscapes between domestic and international markets, a prevailing trend has emerged in the energy storage sector: “producing domestically and selling abroad” has taken center stage. This trend signifies that overseas markets have evolved into a crucial arena for national brands to boost their revenue, gross profit margins, and brand value significantly. Regarding front-of-meter (FTM) energy storage projects, the process of selecting developers, integrators, and manufacturers predominantly occurs through closed-door negotiations. Additionally, some independent power producers have also taken on the roles of developers and integrators in this space.
The main forms of domestic enterprises to participate in the U.S. FTM energy storage
Chinese companies primarily participate in the energy storage market as suppliers, and their involvement can be categorized into two main types. Firstly, they are engaged in direct exports of integrated systems or battery cabinets. The second type involves providing batteries, power conversion systems (PCS), or temperature control solutions to overseas system integrators. It’s noteworthy that Chinese batteries have gained substantial traction in the U.S. energy storage market, primarily owing to the limited presence of a complete battery industry chain within the United States.
When it comes to the BTM market and industrial and commercial energy storage, the majority of domestic enterprises have chosen to enter the overseas market through OEM arrangements and collaborations with foreign brands. This approach is crucial for becoming integral components of the upstream industrial chain, encompassing batteries, PACK, and inverters. In this context, many integrators are primarily local U.S. manufacturers, with first-tier suppliers like Tesla and Fluence being notable examples. Some larger manufacturers, boasting more mature product offerings, are also endeavoring to expand their reach downstream. They are focusing on localization efforts, establishing service centers, building their own brands, and seeking to command premium prices in the market.

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