The United States is further promoting the "decoupling" of the ** chain from China.
As recently reported by foreign media, as part of the latest National Defense Authorization Act (NDAA) for fiscal year 2024 passed on December 22 last year, members of the U.S. Congress have banned the Department of Defense from purchasing batteries produced by China's largest battery manufacturers, CATL and BYD.
The rule, which will begin in October 2027, prohibits the U.S. Department of Defense from sourcing batteries from Contemporary Amperex (CATL), BYD (BYD) and four other Chinese companies. The other four include Envision Energy, EVE, Gotion Hi-Tech and Haichen Energy Storage.
However, the most intuitive question arises, why not wait for three years instead of an immediate effect, as in the case of a chip ban? In fact, this reflects the embarrassing reality of new energy in the United States, that is, the so-called "symbolic meaning is greater than practical significance".
Specifically, only three of the world's top 10 battery manufacturers are non-Chinese companies. Moreover, CATL and BYD's global market share is still growing. Therefore, if you don't use the batteries of six battery companies such as CATL and BYD, which one can you use to replace them?
Question about safety?
Most intuitively, the ban shows that the United States does not want to hand over control of energy storage to Chinese companies like CATL, especially in the military sector.
Because the United States, the European Union, Japan and other countries have regarded new energy technology as an important breakthrough in the new round of scientific and technological revolution, industrial revolution and military revolution. Under such a trend, the possibility of "de-sinicization" has greatly increased, and it is impossible for Chinese companies to get too deeply involved.
For example, Duke Energy, one of the largest electric utilities in the United States. The company supplied an energy storage battery system to the U.S. Marine Corps' Camp Lejeune last year and uses CATL batteries. At the end of last year, CATL was accused of safety threats to the battery products it supplied to Duke Energy.
To this end, Duke Energy announced that it was disconnecting the large batteries produced by CATL from the North Carolina Marine Corps Camp Lejeune, "This project has raised some concerns, so we have disconnected these batteries in order to solve the problem." Duke Energy also mentioned in the statement that the energy storage battery system installed in Le Jean Camp has been built with safety in mind and is not connected to Le Jong Camp's network or other systems in any way.
CATL also stated in response: "The allegation that the company's batteries pose a safety threat is false and misleading. ”
CATL also stressed that its products have passed strict security reviews by U.S. authorities and companies, and that energy storage products sold to the U.S. are not equipped with communication interfaces to control products and do not have the ability to collect, transmit or send data. At the same time, because the integrator manages the connection to the grid, CATL's energy storage batteries cannot directly interact with the grid.
In other words, batteries are not as vulnerable to hackers as chips at all, so what's there to worry about?
However, a U.S. think tank issued a report calling on the U.S. to investigate and consider restricting Chinese battery manufacturer CATL from setting up joint ventures or partnerships with U.S. companies, especially in sensitive areas related to the U.S.
The report mentions that the U.S. Marine Corps' Camp Lejeune is located in North Carolina, a base that houses an amphibious operations training ground on 11 miles of beach. The report notes that malware is sometimes undetectable due to the complexity of the station's equipment, which could threaten the control system of the U.S. power grid.
The think tank also warns that in the worst-case scenario, an external attack on the control system could cause a large-scale power outage that hits major industrial or financial centers, and while there is no evidence so far that these risks are realised, it is necessary to face up to them and develop a response plan. It's the so-called "plan ahead".
Craig Singleton, an adviser to the think tank, also believes that CATL's close relationship with the U.S. power grid in the absence of strict regulation will soon become a national security blind spot, such as China's Huawei's control of the telecommunications sector, which is strategically dominating the future of power.
Last year, U.S. Republican Senators Ted Cruz and Marco Rubio also sent a letter to Defense Secretary Lloyd Austin warning of the safety risks associated with using CATL batteries.
And, in the U.S., the deployment of utility-scale battery energy storage systems (BESSs) is rapidly increasing with the spread of renewable energy. Most of this production capacity comes from Chinese companies. Experts in the United States say such systems require frequent, remote operations, and battery-connected telecommunications equipment can be vulnerable to hacking. In the worst-case scenario, a coordinated attack could destroy the energy network.
In addition, an October 2022 report from the U.S. Department of Energy highlighted the risks associated with onboarding battery storage systems, warning that hackers have shifted their focus to hardware and software vendors, seeking to "add backdoors for unauthorized access and control."
Mike Casey, director of the National Center for Counterintelligence and Security (NCSC), said companies should think twice before installing Chinese batteries.
What does not kill me will make me strong. "Under the cause and consequence, it is understandable that American politicians have launched a ban on Chinese battery manufacturers such as CATL and BYD.
But whether there is such a thing as a security risk, only God knows, and it is more likely to play on the topic.
The "Great Leap Forward" of energy storage in the United States
Although it has been suppressed, in terms of energy storage, CATL's cooperation with major companies in the United States is deepening. This is also related to the policy push of the United States.
In October 2022, CATL announced that it had reached an agreement with Primergy Solar LLC, a U.S.-based utility and distributed PV + energy storage developer operator, to provide exclusive ** batteries for Gemini PV + energy storage projects. The Gemini project is located near Las Vegas, Nevada, with a total investment of $1.2 billion.
Previously, CATL also announced a cooperation agreement with Flexgen, a leading provider of energy storage technology platforms and solutions in the United States, to provide the latter with 10GWh of energy storage products within three years.
In addition, CATL has participated in Southern California Edison with a total capacity of more than 2Three energy storage projects of 1GWh, and more than 500MWh of commercial energy storage projects in operation and under construction in Texas.
In March 2019, Powin (an energy storage system integrator in the United States and one of the leading energy storage integration companies in the United States) signed a battery cell supply contract with CATL, and CATL provided Powin with 185GWh cell. In June last year, Haichen Energy Storage and EVE Lithium Energy also entered the powin ** business directory.
According to the ranking of N**igant Research in the United States, POWIN has been ranked among the top 3 global energy storage system integrators in recent years. Headquartered in Portland, Oregon, Powin is an American battery energy storage system integrator and manufacturer with nearly 10 years of history.
It is worth noting that the four battery companies that have reached cooperation with Powin are all from the top 10 companies in energy storage battery shipments in 2022. Since 2023, three major battery companies have been bound to Powin. According to incomplete statistics, up to now, the scale of energy storage battery orders signed in cooperation with Powin has reached 20GWh.
Industry insiders also pointed out that this shows that the U.S. energy storage market is becoming more and more dependent on China. In this case, it is understandable that American politicians have made a drastic overreaction for the sake of energy security and other reasons.
Behind these overreactions is the "Great Leap Forward" of the U.S. energy storage market. In addition, in order to promote the development of the energy storage market, the United States has introduced a series of market incentives and policy support measures.
The U.S. passed a bill in August 2022 that provides tax incentives for individual energy storage devices for the first time, as was previously the case for solar power generation. Prior to the introduction of this bill, energy storage had to be joined by solar energy in order to enjoy a 30% investment tax refund.
In addition, the U.S. Department of Energy (DOE) Office of the Loan Program has reopened with $40 billion to support clean energy technologies, and the U.S. Clean Energy Demonstration Office, which is under construction, will allocate $20 billion to fund technologies such as long-term energy storage and green hydrogen. In addition to policies, the U.S. is also reforming or innovating the electricity market to improve the market** or competitiveness of energy storage services.
In the third quarter of 2023, according to a research report released by research firm Wood Mackenzie, the U.S. energy storage industry experienced another record-breaking quarter, with an installed capacity of 2,354MW and an energy storage capacity of 7,322MWh deployed in the energy storage system. And, most of the energy storage systems deployed are utility-scale energy storage systems.
The company said that 2023 and 2024 will be huge growth years for the U.S. grid-scale energy storage market, with the number of grid-scale energy storage systems deployed in the first three quarters of 2023 (4,225MW) already surpassing 2022 (3,966MW).
However, due to the difficulty of connecting energy storage systems to the grid in the United States, Wood Mackenzie has also lowered its 2027 deployment** by 5%, which has now been revised to about 63GW. The revised figure still represents a huge increase.
In addition, according to BloombergNEF**, North America will account for 21% of the world's new energy storage capacity by 2030 (with the United States accounting for 18%). China will overtake the United States to become the world's largest energy storage market, accounting for 44% of the market. This also means that the "volume" between China and the United States will also become more intensified in the future.
The process of decoupling
Finally, we must be soberly aware that this attempt to "decouple" the battery is also a signal that the United States has once again suppressed China's new energy lithium battery industry chain enterprises after the promulgation of new subsidy regulations.
On December 1 last year, in order to strengthen the security of the U.S. chain, the U.S. issued new regulations on subsidies for electric vehicles. Eligibility for the previous federal tax credit of up to $7,500 is detailed.
In addition, it is required that electric vehicles eligible for the relief must not contain any battery components manufactured or assembled by a "Sensitive Foreign Entity" (FEOC) starting in 2024. From 2025 onwards, it must not contain any critical minerals extracted, processed or ** by the FEOC. In a word, batteries imported from China must not be used, and they are stuck from the source of the material, and must be produced locally.
However, this ban can be said to be a three-year period that frames the scope of the Ministry of National Defense and does not dare to expand it. It has also "opened the net" to commercial purchase orders from Ford Motor Co., Tesla and other companies.
For CATL, after signing a cooperation agreement with Ford Motor in February last year, the cooperation was met with repeated difficulties and doubts from US lawmakers.
In late July last year, the battery cooperation project was also suddenly investigated. After a difficult operation, Ford announced on November 24 that it would restart the project, and now Ford is manufacturing electric vehicle batteries in Michigan through CATL's technology license.
Although the military road is now blocked, some industry insiders have analyzed that although the United States and other countries are trying to ensure the development of the industrial chain through protectionism, it is difficult to reduce the dependence on China's electric vehicles and other product chains.
According to the data of "China's Lithium-ion Battery Industry Development in 2024" jointly released by the research institute EVTANK, Ivey Economic Research Institute and China Battery Industry Research Institute, the overall global lithium-ion battery shipments in 2023 will be 12026GWh, a year-on-year increase of 256%。Among them, China's shipments will reach 887 in 20234GWh, accounting for 73 percent of total shipments8%, and the proportion of shipments continues to increase.
In other words, Chinese companies have occupied most of the world's electric vehicle battery market, and some battery materials, such as cathode materials, have met up to 90% of the demand, and even Tesla has been forced to seek help from Chinese companies, which is meaningless.
Of course, in the past two years, the United States in front of the meter energy storage (referring to the power side, grid side energy storage) development speed is relatively fast, the United States radical new energy policy and subsidies for long-term energy storage increased, according to relevant data, more than 80% of the energy storage in front of the meter are 4 hours, the demand for energy storage batteries is huge.
Therefore, the probability of success of Chinese battery companies in the US energy storage market is not low, but there is still a long way to go.