China’s battery storage business is booming as the country continues to rapidly install wind and solar power generation, beating previous records and leading global investments in renewables.
China is set to spend trillions of U.S. dollars to adapt its energy system to growing shares of renewables, and battery storage will be key to integrating the constantly rising clean energy generation into the power systems.
So, battery storage is one of the latest rushes in the Chinese energy market, where the number of companies registered as energy storage firms has now reached around 109,000, more than doubling in the past three years, per data by Chinese companies information provider Aiqicha cited by the Financial Times.
Battery and other forms of energy storage will be critical for the Chinese – and the world’s – pivot to more renewable energy power generation as developed economies look to ditch coal while China aims to see a peak in its carbon emissions by 2030.
China, which has a net-zero emissions target set for 2060, isn’t ditching coal.
But as its renewables investments soar and account for nearly half of the global investment in clean energy, it cannot go without battery storage to provide the backup for intermittent solar and wind power generation.
China Unmatched In Renewables Spending
China is leading the global spending on clean energy.
Last year, as global investment in the low-carbon energy transition totaled $1.1 trillion and equaled the investments in fossil fuel supply, for the first time ever, China was the leading country for attracting energy transition investment, accounting for $546 billion or nearly half of the global total, research firm BloombergNEF (BNEF) said earlier this year.
The second-largest low-carbon energy investment was in the United States, which was a distant second at $141 billion, while all such investments in the EU reached $180 billion in 2022.
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China also dominated the supply chain and manufacturing investments in clean energy.
Manufacturing facilities for batteries and related components formed the largest share, at $45.4 billion, of the $78.7 billion global investments in manufacturing facilities for clean energy technologies. China alone accounted for 91% of manufacturing investments in 2022, according to BNEF, despite increased efforts from other countries to capture more of the global clean energy opportunity and diversify their supply chains away from China.
“From a supply chain diversification point of view, the picture has not changed much. China is investing by far the most in building out its clean energy supply chain, and it remains to be seen if other regions can capture significant market share,” said Antoine Vagneur-Jones, BNEF’s Head of Trade and Supply Chains research.
Battery Storage Booming
In China, energy storage investments are surging together with solar and wind power installations. Even companies from other, completely unrelated businesses, such as the food industry, are venturing into battery storage, FT notes.
Battery storage will be part of the $7 trillion investment opportunity in power generation, batteries, and grids by 2040, per Goldman Sachs estimates cited by FT.
At the end of 2022, China’s total installed capacity of energy storage, excluding conventional pump storage, was at 13.1 gigawatts (GW), having surged by 128% from the previous year, according to a report by China Energy Storage Alliance (CNESA) quoted by state news agency Xinhua in April.
To support the soaring but intermittent renewable energy installations, China will need around 520 GW of storage by 2030, Goldman Sachs Research said in a report in March.
“GS Research predicts China will require about 520 gigawatts of storage, more than three-fourths of which will come from batteries— 70 times higher than 2021. The remainder of the storage increases will come from pumped hydropower facilities,” Goldman’s analysts wrote.
China has the manufacturing and supply chain capabilities to be self-sufficient in lithium by 2024, which will drive down battery costs, Goldman Sachs analysts Nikhil Bhandari, Amber Cai, Chao Ji, and Chelsea Zhai write in the report.
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“We expect the average battery prices in China to decline substantially and to fall faster than [other parts of the world] due to the severe local surplus of battery manufacturing capacity,” they noted.
Boom And Bust?
Yet, the ongoing rush to battery storage in China could go through boom-and-bust cycles as various companies without energy and energy storage expertise have entered the industry in recent years.
At the end of the day, the winners in the long term would be a much smaller group compared to the hundred thousand firms currently describing themselves as ‘energy storage companies’, as scale and technology will weed out the weaker players, Bernstein analyst Neil Beveridge told FT.
Another major concern for investors in the Chinese market for clean energy manufacturing is the U.S. push to reduce America’s dependence on China in the clean energy supply chain, Beveridge said, adding that the isolation of China is among “the biggest concerns for investors.”
By Tsvetana Paraskova for Oilprice.com
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