(Report produced by Author: Guojin**, Yao Yao, Yu Wendian).
Looking forward to 2024, the cost of energy storage will drop sharply, the project yield will increase, and the expectation of interest rate cuts in the United States will superimpose the expectation that the global energy storage installed capacity will continue to achieve rapid growth, and we expect the new global energy storage capacity to be installed in 2023-2024. 4GWh, up % year-on-year. Large storage and installed capacity are: 0GWh, a year-on-year increase of %;Commercial and industrial energy storage are: 4GWh, up % year-on-year. Household savings are: 0GWh, a year-on-year increase of %;
1.1 China: Consumption issues are driving up the proportion of new energy distribution and storage, and the installed capacity is expected to reach 70 in 20244gwh
1.1.1. Large storage: The requirements of the new energy distribution and storage policy have been improved, and the yield of photovoltaic storage after the price reduction of raw materials is considerable
According to incomplete statistics from the Zhongguancun Energy Storage Industry Technology Alliance, the newly installed capacity of domestic energy storage from January to October 2023 will be about 128gw/26.0GWh, we expect that the new installed capacity of domestic energy storage is expected to reach 181gw/36.8GWh, a year-on-year increase of 158% to 141%. In the first half of the year, energy storage on the grid side, power supply side and user side accounted for % of the installed capacity, of which 94% on the grid side was independent energy storage, 98% on the power supply side was new energy (wind and solar) distribution and storage projects, and 87% on the user side was industrial and commercial energy storage.
Most of the investors of grid-side and power-side projects are large-scale power generation enterprises, mainly to meet the policy requirements of new energy distribution and storage in various places. With the growth of wind and solar installed capacity, the scale of domestic energy storage bidding continues to increase. According to the incomplete statistics of the Zhongguancun Energy Storage Industry Technology Alliance, in the first half of 2023, a total of 466 bidding information released by 276 companies were tracked, with a total bidding scale of 183gw/64.4GWh, of which the scale of centralized procurement and frame mining projects reached 216GWh, which is mainly dominated by central and local state-owned enterprises. According to EESA statistics, from January to November 2023, the cumulative scale of energy storage system bids has reached 1294gw/31.55gwh。With the weakening of lithium carbonate supply and demand at the end of the year, the bidding in the system showed an accelerated trend, and the weighted average winning bid of the domestic 2-hour lithium iron phosphate battery energy storage system fell to 0 in November8 yuan wh, down 46% from the average price at the beginning of the year.
Under the pressure of new energy consumption, the proportion of energy storage allocation is expected to increase. This year, the historical grid-connected scale of domestic wind and solar power has increased the pressure on many provincial power grids, and it has become an inevitable development trend for new energy projects to allocate a higher proportion of energy storage in the future. According to our statistics, at least 8 provinces and cities in China require to increase the proportion of new energy projects for the duration of the allocation and storage, while most of the province's market-oriented grid-connected projects choose to take the proportion of distribution and storage as one of the competitive allocation conditions, requiring a moderate increase in the proportion of market-oriented project energy storage allocation, and in accordance with the principle of the proportion of competition from high to low to arrange new projects, the proportion of energy storage allocation of new projects under the "involution" or have greater room for improvement.
The decline in the cost of photovoltaic storage has given way to profit margins, and the yield of photovoltaic storage is still considerable after the increase in the proportion of distribution and storage. According to the recent opening of bids for photovoltaic centralized procurement, the leading module companies have fallen to 11 yuan w, down 08 yuan W, PV EPC ** range fell to 25-3 yuan w, down 1 yuan w from the beginning of the year. Assuming that the energy storage power station is only used to assist photovoltaic to participate in market-oriented transactions (this income is reflected in the photovoltaic power generation income), and does not generate other additional income, considering the simultaneous decline of photovoltaic and energy storage costs, the construction cost of photovoltaic and energy storage is calculated according to 3 yuan W and 1 yuan Wh respectively, and when the photovoltaic distribution and storage ratio is increased to 30%*2h, the photovoltaic storage yield in most provinces and cities in China is still more than 8%. If the cost of PV construction is further ** to 24 yuan w, then the allocation and storage ratio is 50%*2h and there is still more than 9% of the project yield.
A higher proportion of wind and solar power will enter the power market, and the utilization rate of energy storage power stations is expected to increase. On November 21, the Guangdong Provincial Energy Administration and the Southern Supervision Office of the National Energy Administration issued the Notice on Matters Concerning Electricity Market Transactions in 2024, requiring all wind and solar power stations of 220kV and above in 2024 to participate in spot market transactions, and industrial and commercial users with annual electricity consumption of 5 million kWh and above to directly participate in market transactions in principle. Based on the experience of mature overseas power markets, although short-term market-based transactions may put pressure on wind and solar yields, in the long run, they can give full play to the low marginal cost advantages of wind and solar, thereby improving the capacity of new energy consumption. At the same time, the risk of electricity price fluctuations generated by electricity market transactions will also make investors pay more attention to the role of energy storage in peak shaving, which is expected to improve the utilization rate of existing new energy storage power stations.
1.1.2 Industrial and commercial energy storage: distributed consumption pressure promotes strong allocation of energy storage, and valley power at noon in many places pushes up the rate of return
Distributed PV in many places has no access capacity, and the configuration of energy storage has become a way to break the situation. Since the second half of 2023, many places have issued distributed photovoltaic grid connection warnings, and in October, the Henan Provincial Energy Big Data Center announced that as of the third quarter of this year, the distributed photovoltaic capacity of various cities can be opened, and only 858GW, most of the regional carrying capacity assessment level in the province is red and yellow, and energy storage devices that are not less than the hourly and hourly installed capacity of the project need to be configured respectively before they can be connected to the grid. As of November 2022, 53 of the 104 counties in Hebei South Power Grid have no distributed PV access space, and the remaining 51 counties have only 2065GW, new grid-connected projects need to be equipped with hours of energy storage as required.
Since the beginning of this year, many places have implemented noon valley electricity prices, which is good for industrial and commercial energy storage. In 2021, the state issued the Notice on Further Improving the Time-of-Use Electricity Price Mechanism, which aims to guide users to shave peaks and fill valleys, improve power supply and demand, and promote the consumption of new energy. With the further increase in the proportion of photovoltaic power generation, more and more regions in China have begun to implement the noon valley electricity price this year to encourage user-side energy storage, electric vehicle charging piles and other adjustable loads to use electricity during the peak period of photovoltaic output, and improve the problem of oversupply and demand of electricity at noon. Judging from the power purchase of power grid enterprises in November 2023, at least 11 provinces and cities, including Zhejiang, Shandong, Hubei, Hebei, and Ningxia, have implemented valley electricity prices at noon.
At present, Zhejiang, Guangdong, Jiangsu, Chongqing, Hainan, Anhui, Shanghai, Hunan, Hubei, Henan, Shaanxi and other provinces and cities can theoretically realize the daily "two charging and two discharging" of energy storage power stations, among which the eastern provinces have the highest yield and investment enthusiasm due to the high demand for industrial electricity and the larger peak-to-valley price difference. According to the statistics of the Zhongguancun Energy Storage Industry Technology Alliance, the number of industrial and commercial energy storage projects registered nationwide in June this year accounted for 81% in Jiangsu, Zhejiang and Guangdong. As the cost of energy storage falls, C&I energy storage projects in more regions will become economical.
In addition, although the Shandong industrial and commercial energy storage power station can only achieve "one charge and one discharge" per day, due to the large local peak-to-valley price difference, the peak-to-valley price difference in summer reaches 085 yuan kWh, spring, autumn and winter due to the existence of 2-3h deep valley electricity prices during the day, the peak-to-valley price difference is as high as 095 kWh, the project also has a high economy. According to calculations, when the cost of energy storage construction is less than 1At 4 yuan, the after-tax IRR of industrial and commercial energy storage in Shandong can reach more than 9%.
We follow the current C&I energy storage construction cost of 13 yuan Wh estimates, most of the domestic "two charge and two release" provinces and cities can reach more than 8% of the after-tax full investment IRR, Shandong, as the only economic "one charge and one release" province, the project full investment IRR can reach 983%。
1.1.The proportion of 3 large storage and distributed distribution and storage has increased, and the installed capacity is expected to reach 30 in 20246gw/70.4gwh
From January to September 2023, the new installed capacity of domestic photovoltaic and wind power will be respectively. 5GW, the new installed capacity of energy storage is 120gw/24.4GWh, corresponding to an average allocation ratio of 74%, and the storage time is 20 hours;Assuming that the new installed capacity of photovoltaic and wind power in 2023 will be GW respectively, the corresponding energy storage demand is estimated to be 181gw/36.8gwh。Taking into account the increase in the distribution and storage ratio of various provinces and cities in 2024 and the distribution and storage of distributed photovoltaic in some regions, the weighted average distribution and storage ratio of the country is estimated to be 120%, and the storage time is 23 hours, conservatively assume that the new installed capacity of photovoltaic and wind power in 2024 will be GW, and the corresponding energy storage demand will be 306gw/70.4GWh, up 69% 91% year-over-year.
1.2 United States: Raw materials have become a "double-edged sword", and the demand before and after the 24-year table is expected to resonate upward
1.2.1 Large Reserves: Under the wait-and-see sentiment, the installed capacity still achieved high growth, the interest rate peaked, and the demand expectation margin improved
1H23 New installed capacity 7 in the United States7GWh, up 335%, with an average storage time of 315 hours. Among them, the large storage, industrial and commercial storage, and household storage and installation machines in front of the table are respectively. 77GWh, a year-on-year increase, and the installed capacity accounted for %.
In the first three quarters of 2023, the newly installed capacity of large storage in the United States was 4,374MW and 13,444MWh, a year-on-year increase of 41% and 46%, which has exceeded the annual installed capacity of last year. Among them, the new installed capacity in Q3 was 2142MW and 6227MWh, an increase of 79% and 124% year-on-year and 42% 22% month-on-month. However, from the perspective of year-on-year growth, the growth rate of installed capacity in the first three quarters of 2023 has slowed down compared with the same period in 2022, which is mainly caused by the following factors: 1) lithium carbonate **fast** leads to wait-and-see;2) Short-term interest rate increases;3) Grid-connected delay congestion.
Raw materials** bottomed out, interest rates peaked downward, or become a turnaround in demand for large reserves in 2024. Since the beginning of the year, lithium carbonate has accelerated, although the U.S. energy storage system has basically followed the raw materials, but the overall energy storage system is still lagging behind the country, according to the order cycle of about half a year, we estimate that the unit price of U.S. storage is 04~0.5 yuan Wh, there is a wait-and-see mood in terminal demand under the short-term clear price reduction trend.
In addition, the Federal Reserve's repeated interest rate hikes this year have put some project earnings under certain pressure, and the Fed announced in November that it would not raise interest rates as scheduled, and the US 10-year Treasury bond interest rate has recently turned downward. According to CME Fed Watch data, the current market sees a 60% chance that the Fed will start a rate cut cycle in May next year, with rates expected to fall by about 100 basis points by the end of 2024. According to calculations, when the cost of energy storage construction is from 0$2 wh drops to 0At $18 Wh, the project yield can increase by at least 5 pct, while for every 100 basis point decrease in the lending rate, the project yield will increase by 14pct。We judge that in 2024H1, with the acceleration of lithium carbonate** bottoming out and the gradual implementation of the Federal Reserve's interest rate cut policy, the IRR of energy storage power stations is expected to be significantly improved, and the growth rate of installed capacity may exceed expectations.
The problem of grid-connected congestion has attracted attention, and FERC 2023 is expected to optimize the process and speed up the implementation of the project.
According to Berkeley Lab, the time required for battery energy storage projects in the U.S. to be put into operation has increased from 1. in 20205 years to 2022In 6 years, the grid-connected period of PV + energy storage projects has also increased by 3 compared with 2021As of June 2023, the scale of projects applying for grid connection in California reached 536GW, an increase of 354GW compared with 2021 (California suspended grid connection applications in 2022), most of which are photovoltaic + energy storage and independent energy storage projects, which brings huge challenges to operators' grid connection review.
In response to the growing problem of grid-connected congestion, the U.S. Federal Energy Regulatory Commission (FERC) issued Order No. 2023 on July 28, 2023, requiring reforms to FERC's estimated interconnection procedures and transmission providers' open access to formal interconnection agreements in transmission tariffs, which is expected to optimize the grid-connection approval process and speed up the implementation of projects.
From the perspective of the distribution of large storage capacity, the United States is mainly composed of photovoltaic + energy storage and independent energy storage projects, accounting for 97% of the total installed capacity of large storage. In the past two years, the proportion of new installed capacity of photovoltaic + energy storage has declined due to the drag of the photovoltaic ** chain and the impact of the IRA Act on the ITC subsidy for independent energy storage.
With the marginal improvement of Sino-US relations, we expect that the problem of the PV ** chain in the United States is expected to be alleviated, and the growth rate of new PV installed capacity is expected to maintain rapid growth, which in turn will promote the growth of energy storage installations. We expect that in 2023-2024, the new installed capacity of PV in the United States will be GW, a year-on-year increase, and the new installed capacity of large storage will be GWh, a year-on-year increase.
1.2.2 Household savings: Affected by interest rates more, demand is expected to usher in an inflection point next year
In 2022, the new installed capacity of household storage in the United States will be 15GWh, a year-on-year increase of 57%, accounting for 90% to 102%。In 2023H1, the new installed capacity of household storage is 077GWh, an increase of 8% year-on-year, but due to factors such as battery chain restrictions and high interest rates, the household storage penetration rate has fallen for three consecutive quarters since the second half of last year.
The main purpose of installing household storage in the U.S. is to save on electricity bills and backup power. From the perspective of residential electricity prices in the United States, the average residential electricity price in the United States in 2023 is about 16 cents kWh, which is much lower than the European average, but the residential electricity price in Hawaii, California, Connecticut, Massachusetts, Rhode Island, New Hampshire and other regions is higher than 25 cents kWh, and in recent years, affected by fuel and transmission and distribution costs**, electricity prices have shown a gradual increasing trend, stimulating the enthusiasm of local household storage installation.
In California, for example, the electricity price for California residents in 2022 is 265 cents kWh, 4 percent of the installation cost for residential PV storage$9 kW, 5-year bank loan interest rate of 3%, after enjoying the ITC 30% tax rebate, the estimated household cost of electricity (LCOE) is 0$29 kWh, which is at least $0 for most household savings programs in CaliforniaA $15 California** Self-Generation Incentive Program (SGIP) subsidy reduces the LCOE to 0$26 kWh, which is lower than the local electricity price and has a high return on investment. After entering 2023, the interest rate of U.S. bank loans has risen all the way to 7%, which has had a relatively large impact on household savings investment, which is already at the economic critical point, and at the same time, the cost side has been affected by the ** policy, and the cost reduction rate lags behind other markets, resulting in a higher household savings LCOE in 2023 than in 2022, and customers' short-term investment enthusiasm is not high. In addition, as a pure consumer spending, backup power has become less enthusiastic about end-customer installations as interest rates rise and natural gas** falls. We believe that in 2024, the demand for household storage may usher in a turnaround, first of all, the transmission of terminal channels** has a certain lag, with the further decline of household photovoltaic and energy storage** in the second half of the year, and the interest rate from a high level, the household storage LCOE will return to a level close to that of 2022, and the economy will be highlighted again, followed by California NEM30 The formal implementation will also promote the increase in the penetration rate of household savings.
1.3 Europe: The large storage policy and bidding ushered in an outbreak, and the end of household storage to the warehouse is expected to resume growth
According to the statistics of the European Energy Storage Association (EASE), the new installed capacity of energy storage in Europe in 2022 will be 45GW, of which the pre-meter energy storage (large storage) household storage is 2 25gw；From the perspective of the installed capacity of energy storage in front of the meter, the UK market accounts for 42%, which is the largest storage market in Europe, followed by Ireland, Germany and France, with an installed capacity proportion of %.
On 14 March 2023, the European Commission published a draft reform of the electricity market, and on 19 July the European Parliament formally voted to approve the proposed reform of the electricity market design. The focus of this reform is mainly to improve the liquidity and reliability of the long-term electricity market, through the revision of the relevant EU electricity regulations, etc., to encourage renewable energy generators to enter into long-term power purchase contracts (PPAs) and authorized contracts for difference (CFDS) to reduce short-term fluctuations, and at the same time encourage the grid to introduce more non-fossil fuel flexible resources (such as energy storage, demand-side response), and provide them with a reasonable return on investment through capacity markets and other means. From the top-level architecture level, the important role of new energy storage in building a reliable energy system is emphasized.
In addition, the relevant support policies and bidding speed for large-scale energy storage in European countries have been significantly accelerated. According to our statistics, the number of large reserve projects in the United Kingdom, Italy, Spain, Greece and other countries has increased significantly compared with previous years, and the scale of large reserve projects approved in the United Kingdom has reached 202GW, explosive growth.
According to the European Energy Storage Association**, the number of new installations in Europe's large storage capacity will reach 37GW, a year-on-year increase of 95%, of which the United Kingdom, Italy, France, Germany, Ireland, and Sweden are the main installed markets, and we expect that in 2024, Spain, Germany, Greece and other markets are expected to accelerate the release of large storage demand with policy support, driving the new installed capacity in Europe to reach 5 in 20243GW, up 41% year-on-year.
In 2023, the decline in natural gas in Europe will drive the terminal residential electricity price to fall from the high level at the end of last year, according to the statistics of the Energy Price Index, the average residential electricity price in European capitals in October 2023 is 2422 euro cents kWh, down 25% compared to the same period last year and up 20% compared to October 2021. According to EESA statistics, as of 3Q23, the new installed capacity of major household storage markets in Europe has doubled compared with the same period last year, and we expect that the new installed capacity of European household storage in 2023-2024 will be. 0GWh, a year-on-year increase of %;
According to BNEF statistics, the average penetration rate of energy storage in residential PV in Europe in 2023 is 25%, and there is still a lot of room for improvement. In Europe's markets with a high installed capacity of household storage, the penetration rate of household storage in Germany in 2023 is 78%, basically the same as the high point in 2022In 2023, Italy's household savings penetration rate was less than 70%, down 7pct from 2022, mainly due to the sudden cooling of the market due to the removal of the superbonus subsidy in Italy at the beginning of the year. Judging from the export data, the amount of inverter exports to Europe in 2H23 decreased significantly year-on-year, on the one hand, the downstream demand gradually weakened due to the decline in natural gas ** and the decline of subsidies, on the other hand, the channel hoarded inventory due to fear of short supply in the early stage, and turned to speed up the destocking due to the fear of inventory loss caused by price reduction, which further shrank new orders in 2H23. We judge that with the gradual decline of inventories to a reasonable state, coupled with the arrival of the 2Q24 European installation season, it is expected to promote the recovery of household storage shipments year-on-year.
2.1 Energy storage system integrators: the profit gap at home and abroad has expanded, and the head enterprises are strong
With the alleviation of the problem of energy storage battery chain tension, the competition of domestic energy storage system integrators is becoming increasingly fierce, and the products are also showing a trend of homogenization, which has become a key factor for enterprises to obtain orders, resulting in low profitability of the entire industry. However, we believe that relying only on low-price competitive strategies is not sustainable, and only companies with global business layout, vertical integration of industrial chain and good bankability can finally stand out from the encirclement in the future.
1) Global business layout can bring higher profitability and market share.
From the perspective of profitability, after the battery chain alarm is lifted in 2023, the profitability of energy storage system integrators will begin to show a completely different trend, and the profitability of companies with strong overseas order acquisition capabilities will be quickly restored, and even some companies will show obvious excess profits. At the same time, overseas high-profit orders make the head enterprises more calm when striving for domestic orders, and can give more advantages to obtain a higher market share. Looking forward to 2024, as the price reduction of lithium carbonate gradually slows down, it may be difficult to further expand the excess profit of overseas energy storage system orders, but considering the higher entry threshold and better competition pattern in overseas markets, we believe that the leading system integrators will continue to lead their peers in order acquisition and gross profit margin.
2) Vertically integrated industrial chain.
The energy storage system integration industry chain includes batteries, BMS, PCS, EMS and other links, among which the equipment with the highest cost proportion and the greatest impact on performance and safety are mainly batteries and PCS. As downstream customers put forward more detailed requirements for products, energy storage system integrators are no longer just hardware "accumulators", how to optimize battery charging and discharging, and ensure the safe operation of thousands of battery cells is a test of the integrator's strength. At present, the energy storage system integration market is mixed, and there are many cross-border enterprises, but at the same time, more and more head enterprises are deeply involved in all aspects of system integration through vertical integration, and improve product design and production from top to bottom.
3) Good bankability.
In recent years, factors such as rising energy storage costs and long payback cycles have made project investment and financing more difficult, and brands with high reliability and high financing strength are more likely to be favored by overseas developers and financial institutions. According to the 2022 BNEF Bankability Survey of 62 battery manufacturers, PCS** vendors and energy storage system integrators, CATL and Tesla are considered to be the most bankable battery providers, SMA and Power Electronics are the most bankable PCS providers, and GE and Fluence are the most bankable energy storage system providers. In the bankability ranking of energy storage system integrators, only 6 domestic energy storage system integrators are on the top 21 list, namely Sungrow, BYD, CATL, Trina Energy Storage, Canadian Solar, and Nandu Power, all of which are well-known listed companies in China, and have obtained many high-quality orders overseas this year.
2.2 Inverter: The Matthew effect appears during the industry reshuffle period, and the pressure on overseas inventories is expected to improve quarter by quarter
Affected by the accumulation of inventory in overseas channels from the end of last year to the beginning of the year, the revenue and shipments of 2Q23-3Q23 distributed inverter companies declined month-on-month, although the gross profit margin of inverters remained stable as a whole, and even some companies were affected by foreign exchange earnings, but due to the rapid expansion of the industry in the past two years and the increase in investment in human channels, the decline in the company's net profit was more obvious. At the same time, terminal channel providers are also experiencing tests in the process of destocking, and channel providers with high operating leverage will face the risk of liquidation in the future. With the gradual digestion of channel inventory in the near future, we expect that distributed inverter household storage shipments are expected to improve quarter by quarter, and the industry will further concentrate on companies with high-quality customer resources, strong financial strength and high brand awareness.
With the gradual resolution of the tension problem of IGBT modules this year, we judge that next year's SIC products may become the focus of the differentiated layout of the head players, and the new generation of product iteration is expected to help it continue to maintain its market share and profitability advantages. This year, the domestic demand for large-scale storage and industrial and commercial energy storage is strong, but because new entrants are also mainly in the energy storage PCS sector, the competition has intensified, the PCS gross profit margin has fallen compared with before, and the excess profits mainly come from overseas markets. At present, the PCS of the head energy storage system integrators such as Sungrow, Tesla, and Kehua Data are self-developed and self-made, and the third-party PCS ** suppliers are mainly some energy storage system integrators and developers, and companies with stable customer resources overseas are expected to fully benefit from the growth in demand.
This article is for informational purposes only and does not represent any investment advice from us. To use the information, please refer to the original report. ）
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