Chinese Energy Storage Products Cool Down From Soaring Sales in European Market

Credit: CFP

BEIJING, January 10 (TMTPOST) –S&P Global Commodity Insights data revealed a 2% decrease in global residential energy storage shipments in the second quarter compared to the first quarter, the first drop since data is available. Europe, the world’s largest residential energy storage market, witnessed even more significant changes.

Within Europe, only Germany’s energy storage market continued to grow, while Belgium and Spain experienced a 60% year-on-year decrease, and Italy saw a decline of over 40%. Experts at the 2023 Energy Electronics Industry Development Conference in Zhuhai predicted the closure of numerous energy storage companies in the coming year.

The period from 2019 through 2022 witnessed a remarkable surge in global portable energy storage shipments, increasing approximately 23 times. In 2020, 91.9% of global portable energy storage devices were produced in China. By the end of 2022, the utilization rate of household battery storage in Europe reached 85%, with Europe accumulating 5.2 GWh of residential energy storage products.

In 2022, China’s domestic energy storage industry experienced an unprecedented boom, with over 38,000 energy-related companies established, a tenfold increase compared to 2020. This surge was partly driven by China’s carbon emission reduction goal, which has catalyzed reforms in the domestic power market. By the end of 2022, China’s cumulative installed capacity of new energy storage exceeded 8.7 GW, with a market size of approximately 180 billion yuan, showing a year-on-year growth rate of around 240%.

The significant increase in the sales of household energy storage products in 2022, particularly in Europe, was triggered by the Russia-Ukraine conflict that started in February 2022. As Europe heavily relied on energy supplies from Russia, the initial stages of the conflict caused a substantial surge in European energy prices. This led to a sudden spike in demand for household energy storage products. The demand was fueled by continued uncertainties in the geopolitical situation, which prompted European governments to encourage such solutions.

However, the booming market of 2022 did not translate into an explosive period for the energy storage market in 2023. Instead, the industry entered a destocking phase. During the conflict, Chinese energy storage companies stockpiled products, however, as the Russia-Ukraine conflict persisted and the energy landscape in Europe changed, the market reality deviated from earlier expectations.

Government policies in Germany and Italy benefited Chinese firms. Germany implemented tax exemptions for household photovoltaic systems in 2022 and waived valued added tax (VAT) for residential photovoltaic energy storage systems that came on stream in 2023. Italy increased subsidies for solar energy systems to €48,000 per building, with an additional €1,000/kWh.

The surge in demand and government incentives prompted many Chinese companies to make foray into the global market. However, by the first half of 2023, Europe had not fully absorbed the previous year’s stockpiles, leading to continuous price reductions by Chinese energy storage manufacturers. According to EESA Energy, the global residential energy storage system shipments in 2022 were approximately 24.4 GWh, with nearly 9.8 GWh going to the European market. Despite a 5.1 GWh growth rate in the European energy storage market in the first half of 2023, excess inventory continued to pose a significant hurdle.

Apart from high inventory levels, fluctuations in lithium carbonate prices for batteries added to the troubles of energy storage manufacturers trapped in the destocking dilemma. The current price for battery-grade lithium carbonate stands at 95,264 yuan (US$13,393) per ton. In 2022, prices reached as high as 600,000 yuan (US$84,351) per ton, causing manufacturers to incur increased costs during stockpiling.

Despite the cooling off of the energy storage market in 2023, industry insiders view the Russia-Ukraine conflict-induced surge as a black swan event rather than a regular industry development. The long-term potential of the new energy storage industry remains intact amid the global shift towards carbon neutrality and the replacement of old energy sources with new ones.

As the market experiences a temporary downturn after the explosive growth in 2022, industry players anticipate a more stable and continuous expansion in the coming years. The sector, characterized by a 136.4% year-on-year increase in global household energy storage installations in 2022, is projected to enter a phase of steady growth after excess inventory and pricing pressures are eliminated. The ongoing price wars, driven by inventory clearance and market expansion, are expected to continue for some time, making differentiation in product features crucial for manufacturers in the highly competitive landscape of mobile energy storage.