Weekend Read: Solar giants enter the storage market

In July 2023, JinkoSolar made headlines by announcing an investment of more than CNY 8.4 billion ($1.17 billion) to establish an electrochemical energy storage factory. It came as a surprise to some that one of China’s PV manufacturing giants has made the strategic decision to invest in battery production.

The plant is set to have an annual production capacity of 12 GWh for batteries and associated power electronics. The first production line was scheduled to start operation by the end of 2023, with full capacity expected to be operational during 2024. The new venture is a bold move for Jinko, which is best known for its focus on vertically integrated solar cell and module manufacturing. The move highlighted the growing interest and ambition of China’s PV companies when it comes to energy storage.

Energy storage systems are playing a crucial role in supporting intermittent-generation renewable energy sources such as solar and wind. By incorporating energy storage, renewable energy power plants can enhance power quality and facilitate a better balance between electricity supply and demand.

First movers

Several other solar companies had ventured into energy storage prior to Jinko’s July 2023 move, with some initiatives dating back several years.

The initial players to venture into the market were solar inverter companies, leveraging their expertise in power electronics and power-conversion technology, as well as the similarities in their business operations. Leading PV inverter companies embarked on their energy storage journey years ago, showcasing significant ambition by providing comprehensive product offerings beyond the inverters required for batteries alone.

Chinese inverter maker Sungrow embraced energy storage early on. The company’s strategic approach involves outsourcing battery cell production while focusing on in-house research and production of components including power control systems (PCS), energy management systems (EMS), and battery management systems (BMS). Over the years, Sungrow has expanded its portfolio to include energy storage inverters, lithium ion battery packs, EMS solutions, and various system-level offerings including grid connection equipment, power optimization tools, microgrids, demand-response enablers, and residential energy storage systems. In 2022, Sungrow achieved global shipments of energy storage systems totaling 7.7 GWh.

Communciations-technology giant Huawei has integrated energy storage into its comprehensive solar storage solutions, enhancing its offer with a string-type energy storage product. This innovative approach enables Huawei’s energy storage system to efficiently manage and optimize battery packs and clusters, neatly addressing lithium ion battery module uniformity challenges.

A number of prominent inverter companies, such as Huawei, Sineng, Solis, Kstar, TBEA, GoodWe, Growatt, and Sofar have also introduced energy storage products. By diversifying into energy storage, these companies can cater to a wider array of customer demands.

Beyond conversion

For China’s vertically integrated PV ingot, wafer, cell, and module makers, the move into battery production is a bigger leap. Some have already made significant strides into energy storage by leveraging their market expertise, and have established downstream channels. Jinko exemplifies this trend and is now part of a growing cohort.

Risen Energy, a PV module manufacturer currently advancing heterojunction cell and module technology, entered the energy storage market as early as 2018, through its subsidiary SYL Battery. By 2022, SYL Battery had achieved global shipments exceeding 1 GWh of energy storage products with a remarkable annual growth rate that surpassed 500%.

In January 2023, SYL Battery announced a substantial investment in a 10 GWh battery factory in Ninghai County and secured a significant, 15 GWh lithium ferro-phosphate (LFP) battery cell supply agreement with Chinese lithium ion battery supplier Hithium.

Trina Solar made its initial foray into energy storage in 2020, establishing a joint venture company to develop an LFP cell production line, a battery pack assembly base, and a containerized battery assembly facility.

By the end of 2023, Trina Solar had outlined plans for more than 10 GWh of energy storage manufacturing capacity, complemented by essential components such as BMS, PCS, and EMS systems. Trina’s offering now includes containerized energy storage systems, behind- and front-of-meter batteries, and microgrid systems. In 2022, Trina Solar’s energy storage subsidiary successfully shipped around 2 GWh of products globally.

Canadian Solar made an early entry into the energy storage sector, positioning itself as an integrator of energy storage systems and a project contractor with a global focus. In 2022, Canadian Solar shipped approximately 1.8 GWh of energy storage systems, with plans to scale up its capacity to 10 GWh by the end of 2023, and 20 GWh by the end of 2024.

By the close of 2023, Canadian Solar disclosed that it had secured more than $2.6 billion in energy storage orders as of November that year, spanning key renewable energy markets worldwide including the United States, Europe, Japan, Australia, and South America.

According to data from GGII, a Chinese industry research entity, a total of 16 Chinese energy storage system integrators each achieved global shipments exceeding 1 GWh in 2022. This group included prominent PV companies such as Sungrow, Trina Solar, SYL Battery, and CSI Energy Storage, all of which have their foundations in the PV industry.

Strategic shift

The diversification into energy storage serves a strategic purpose for solar manufacturers. With the PV production segment in oversupply, energy storage has emerged as a lucrative revenue stream for some solar enterprises – offering a new avenue for profitability in the evolving energy landscape.

The support of the Chinese government is an important driver. Energy storage will play a pivotal role in achieving China’s “30-60” emissions-reduction goals of hitting peak emissions in 2030 and carbon neutrality in 2060. The Chinese government has been actively involved in regulating and fostering the growth of energy storage manufacturing. This commitment is demonstrated through the ongoing introduction of flexible and actionable policies and regulations at both national and provincial levels. Key government bodies such as the National Development and Reform Commission (NDRC), the National Energy Administration (NEA), and the Ministry of Industry and Information Technology are at the forefront of issuing such policies, to align with regional needs.

Policies released by central government departments often serve as high-level strategies, such as the national five-year plans that outline strategic directions for the energy storage sector. For instance, the guidance on accelerating the development of new types of energy storage, issued in 2021, set a clear target of achieving 30 GW of new energy storage installations by the end of 2025.

Similarly, the implementation program for the development of new types of energy storage in the fourteenth five-year plan, jointly released by the NDRC and NEA in 2022, established key objectives for energy storage development across areas including technological innovation, pilot demonstrations, scaled expansion, institutional mechanisms, policy support, and international collaboration.

In both cases, “new types” of energy storage refers to systems that generate electricity output, excluding pumped hydropower. In China, lithium ion-based energy storage dominated the market in 2022, with a share of 94.5% of the total new installations.

While national policy sets the strategic direction for China’s energy storage sector, provincial regulations are more pragmatic. In 2022, a staggering number of energy-storage-related policy documents – more than 600 – were issued by both central and provincial governments in China, as reported by the China Energy Storage Alliance (abbreviated to CNESA). These policies cover aspects such as energy storage planning, implementation programs, trading mechanisms, technology research and development, and safety standards. In 2023, more than 110 policies and regulations specifically focused on subsidy policies for energy storage were released by more than 22 provincial departments.

Policy challenge

Despite the considerable effort being made to establish an enabling policy landscape, challenges remain. A lack of clear policy illustrating how best to integrate energy storage with renewable energy projects has hindered deployment. In many regions, such systems are limited to regulating the power generated by such projects and are unable to actively participate in grid frequency and peak regulation after connection. This inefficiency leads to under-utilization and even prolonged idling of energy storage capacity, affecting project financial models and undermining investment attractiveness.

The complexity of stakeholder interests has impeded the establishment of a robust energy storage trading mechanism for independent facilities. The energy storage capacity leasing market remains at a nascent stage with many projects initiated as pilots but struggling to achieve profitability. Coordination among stakeholders and the development of effective trading mechanisms are essential for the sustainable growth of the energy storage sector in China.

On a positive note, grid operators appear to be open to the role of energy storage in integrating renewable power into electricity networks. The declining prices of raw materials, particularly lithium, has significantly contributed to reducing battery costs, accelerating rollout.

Policy remains a critical issue for the energy storage market amid a belief that every challenge will eventually be resolved through policy intervention.

The NEA projects that the country’s installed capacity of electrochemical energy storage will have reached around 20 GW/43 GWh in 2023, which would mark a 200% increase from 2022. CNESA forecasts growing demand for storage as China’s renewable energy capacity expands, with the installed capacity of energy storage set to surpass 35 GW/65 GWh during 2024.