[Biz View] "Faster Growth Than Electric Vehicles" Battery Company Circulating ESS Volume

Last Year ESS Expansion Share: China 34%·US 31%
China's H1 This Year Up 600% YoY
CATL ESS Business More Than Tripled Compared to Last Year

A battery installed at the Moss Landing power plant in California, USA, considered the world's largest ESS project. This battery was supplied by LG Energy Solution, enhancing installation efficiency and energy density.

[Asia Economy Reporter Choi Dae-yeol] Energy Storage Systems (ESS) are gaining attention because the way electricity is used is fundamentally changing from the past. The 'mainstream' power generation method established in the 20th century after the Industrial Revolution is close to a form where electricity generated at large-scale power plants is sent to places where it is needed, such as homes or factories. It is produced by utilizing heat and steam from burning fossil fuels, then goes through transmission, distribution, and transformation processes before being used where needed.

In the future, it is highly likely that renewable energy sources such as solar and wind power will be used extensively to respond to climate change and carbon neutrality. The problem is that stable electricity supply is difficult, unlike the existing centralized power generation method. Not only is the lack of power sources an issue, such as when clouds block the sun or when there is no wind, but also excessive electricity production caused by prolonged sunshine or strong winds can cause problems in the power grid.

ESS is a system designed to store electricity in advance to be used stably when power supply from renewable energy is unstable. It is expected to complement the intermittency of renewable energy, which is vulnerable to time and external environmental changes. Future energy consumption is likely to increase the share of small-scale facilities near places where electricity is needed, such as factories or homes, rather than large-scale power generation facilities located by the seaside as in the past. Renewable energy and ESS have thus boarded the same ship.

Transmission lines around Chester, England. They symbolize the past power supply system centered on large-scale power plants.

Solar panels installed at Arizona State University in the United States. As the share of renewable energy increases, the entire process of generating, distributing, and consuming electricity is expected to change.

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The leading players in growing the ESS market are the G2 countries, China and the United States. According to data recently compiled by Kim Jong-won, manager at KOTRA Wuhan Trade Center, after surveying local researchers, as of last year, the global electrochemical ESS expansion volume was about 34% in China and 31% in the US, accounting for roughly two-thirds. The ESS scale in China reached about 3.27GW, more than doubling compared to the previous year and nearly eight times that of 2017. Until 2017, China held a 9% market share, ranking around fifth place, but it has rapidly increased since then and has been the world leader since 2019.

China's growth momentum has accelerated further this year. As of the first half of this year, the new ESS expansion scale locally is estimated at 10GW, about 600% more than the same period last year. According to a local securities firm, China's ESS installed capacity is expected to reach 34.4GW by 2025, growing at an average annual rate of 84%. The US ESS market is also projected by energy consulting firm Wood Mackenzie to increase more than 14 times from 523MW in 2019 to about 7.3GW by 2025.

Samsung SDI supplied a 240 MW battery for a power supply project in California, USA

This rapid growth is due to active support policies tailored to the expansion of renewable energy in each country. The US federal government and individual states provide subsidies and tax credits. China has recently introduced various support measures to attract participants to the ESS market. South Korea and major European countries are also operating measures to increase ESS distribution alongside renewable energy expansion.

As the ESS market grows, battery companies are also actively joining. This is interpreted as a recognition that since battery costs account for more than half of ESS costs, companies with competitive batteries can stand out in the ESS market. According to KOTRA Wuhan Trade Center data, CATL, the world's largest electric vehicle battery company, recorded ESS revenue of 1.94 billion yuan last year, a 219% increase from the previous year. SK On, the battery subsidiary of SK Innovation, which previously only made electric vehicle batteries, has declared plans to focus on the ESS business mainly in key markets such as the US.

An executive of Ruifu Energy, an energy solutions company in China, recently said in a media interview, "ESS demand is surging so much that it is difficult even to receive orders," adding, "In the first half of this year, Korean (battery) companies have already shifted 50% of their production capacity to the ESS sector, shipping relatively fewer power (electric vehicle) batteries."