Entry into the U.S. Large-Scale Energy Storage Market Achieved with Shipments, Third-Party PCS Supplier Model Favored by Owners
PCS Shipments Achieved in the U.S. Market, Strong Demand Growth Expected Next Year with the Surge in Installations
On September 27, 2024, the company announced the official delivery of its first US energy storage project. The 140.8MW energy storage power station supplied this time is located in southern Texas, USA. The project includes a total of 44 sets of 3.2MW string energy storage converters and boosters from Neng Electric, which adopt a highly integrated design and full-load multiple protection functions. The shipment will be completed in Q4. After the project is connected to the grid, it will serve as an independent energy storage power station to assist the power system in stable operation, peak load regulation and frequency regulation.
The US market attaches great importance to product after-sales, operation and maintenance, and full life cycle use. Before the official delivery of the project, the company’s North American Service Center in Texas was officially opened on September 13, preparing for the continued development of the company’s US business.
Company Delivers First Energy Storage Project in the U.S. with a Capacity of 140.8MW
According to data from the U.S. Energy Information Administration (EIA), from January to October 2024, the U.S. installed 7.39GW of pre-meter energy storage, with a year-on-year increase of 62%. Considering that the average duration of new large-scale storage in the United States has increased to more than 3 hours, the capacity scale is at least 22GWh. According to the American Clean Power Association (ACP), the U.S. energy storage pipeline has increased to 33.4GW in 2024Q2, of which the capacity of early-stage projects has increased by 69% and the capacity of projects under construction has increased by 46%. ACP believes that this trend can be maintained for 3-5 years.
This year, the U.S. Department of Commerce’s “301” tariffs on all batteries and parts exported from my country will increase tariffs from 7.5% to 25%. The tax rate adjustment for battery parts (non-lithium) and 48v 60v 72v electric vehicle lithium-ion batteries will start in August, and the tax rate for lithium-ion non-electric vehicle batteries will start in January 2026. That is, the tax rate adjustment for power batteries will take effect from August, while the tax rate adjustment for energy storage batteries will start in January 2026. This is mainly due to the lack of lithium iron phosphate battery production capacity in the United States, and a certain exemption period has been given.
According to Wood Mackenzie’s forecast, the United States will add 12.7GW/36.7GWh of new energy storage this year, including 11GW/32.7GW h of large-scale energy storage. With the expectation that the United States will increase energy storage tariffs in 2026, it is expected that there will be a rush to install energy storage in the United States next year, with new installations expected to be more than 50GW h, and a growth rate of more than 40%. It is expected that more than 1GW of PCS products will be delivered to the United States. Under the background of rush installation, it is expected that the company’s PCS shipments to the United States in 2025 will reach more than 2GW.
U.S. Market Increasingly Prioritizes ‘Domestic Manufacturing’; ‘Third-Party Component Supplier + Local Integrator’ Model Favored by Owners Without Affecting Domestic Manufacturing Subsidies
According to Wood Mackenzie statistics, the top three home energy storage battery system integrators in North America in 2023 will be Tesla, Sungrow, and Fluence, which together account for approximately 65%-70% of the total North American share.
Since the beginning of this year, the shipments of local integrators such as Tesla and Fluence have grown rapidly. In addition to the high growth rate of installed capacity and good demand in the US market itself, it is also due to the fact that US owners and integrators attach more and more importance to “Made in the USA”. According to the US IRA policy, the basic level of ITC subsidies is 30%. If the “local manufacturing” requirements are met, an additional 10% subsidy can be obtained.
Among the leading energy storage integrators in the US market, Tesla’s Megapack for the US market is mainly produced in its Lathrop Energy Storage Super Factory in the US, and its PCS is mainly developed by itself. Sungrow is fully integrated on the AC side, and its PCS is developed by itself. Fluence and other integrators mostly outsource their PCS, and previously used European brands such as SMA and PE. With the continuous growth of new energy storage installations in the United States and the limited delivery capacity of European brands, North American owners and integrators have a tendency to turn to purchasing Chinese brand PCS.
Since PCS accounts for a small proportion of the value of the entire energy storage system (about 10%~15%), and the proportion of local manufacturing required by the IRA “local manufacturing” clause is not very high, only requiring 40% in 2024 and before, and 45%/50%/55% in 2025/26/27 (calculated at cost). Therefore, the integrator’s outsourcing of PCS has little impact on whether it can enjoy the additional 10% ITC subsidy provided by “local manufacturing”. It is expected that PCS exports to the United States will be subject to fewer restrictions.
The United States is a high-premium market. According to WoodMackenzie data, as of Q2 2024, the price of grid-side energy storage systems in the United States is still as high as $1116/kW. Even considering the average duration of about 3.5 hours, the price per Wh is as high as about $0.32/Wh, which is more than 2 RMB/Wh in RMB.
According to feedback from the industry chain, the price of energy storage PCS in the US market is as high as RMB 0.4-0.5/W, more than double that in China. Even considering the increase in later costs such as operation and maintenance, the gross profit margin is still above 40%. It is estimated that the profit per W of PCS in the US market reaches RMB 0.07-0.1/W (about RMB 0.03/W in China). The generous unit price and profit of the US energy storage market are expected to boost the company’s performance further.
Booming Energy Storage Market in the Middle East: Intense Competition Among Giants, PCS Set to Be the Biggest Beneficiary
Booming Energy Storage Market in the Middle East: Solar + Storage Becomes the Preferred Choice for Energy Transition
The Middle East market has seen many large projects this year. In April, BYD won the bid for a 2GWh energy storage order for the first phase of Saudi Electricity Company’s SEC project. On July 15, Sungrow and Saudi Algihaz successfully signed the world’s largest energy storage project with a capacity of 7.8GWh. The project will start delivery in the second half of 2024 and will be connected to the grid at full capacity in 2025. Earlier, there was also the 1.3GWh microgrid photovoltaic storage project in the Red Sea New City built by Huawei.
In the second half of this year, Saudi Electricity Company (SEC) launched a tender for a project with a total capacity of 2.5GW/10GWh for Saudi Arabia. The project will be divided into five energy storage power stations, distributed in different cities, with a capacity of 500MW/2GWh per station, mainly playing the role of load time shifting, black start, frequency regulation, and voltage stabilization.
Recently, on November 4, Saudi Power Procurement Company (SPPC) issued a prequalification invitation letter, planning to build the lithium io battery energy storage system with an installed capacity of 2GW/8GW h. The project will be divided into four sub-projects, distributed in different provinces of Saudi Arabia, with a scale of 500MW/2000MWh. It will gradually replace the load regulation task of thermal power. The main functions of this project are load time shifting, black start, frequency regulation, voltage regulation and other functions. At the same time, as an important part of the “2030 Vision”, it is an important step for Saudi Arabia to accelerate the adjustment of its energy structure and reduce its dependence on fossil fuels.
At present, many GWh-level large-scale projects in the Middle East are undergoing preliminary work. In addition to the above-mentioned SEC Phase I 2GWh project and Algihaz 7.8GWh project (also known as SEC Phase II project), which have been won by BYD and Sungrow respectively, the SEC Phase III 10GWh project, SPPC (Saudi Power Procurement Company) 8GWh project, and UAE Masdar 20GWh project are still in the bidding process or other preliminary work.
In addition to government agencies such as Saudi Electricity Company SEC and Saudi Power Procurement Company SPPC, there are also a large number of energy storage projects led by enterprises. Take ACWA Power (Saudi International Power and Water Company), the leader of Middle East power energy, as an example. As early as 2019, the company had proposed to reach a target of 150GW of installed power generation capacity by 2030, of which 85% would be renewable energy. In the first half of 2021-2024, ACWA Power completed an investment of 134.3 billion Saudi riyals in the Middle East, including 8.26GW of photovoltaic power, 0.24GW of wind power, 600 tons/day of green hydrogen, 2051m3/day of seawater desalination, 3.6GW of combined cycle gas turbine (CCGT) power station, and 100MW of integrated gasification combined cycle (IGCC) power station.
Recently, ACWA Power has also signed multiple energy storage projects. The company has investment projects in the Middle East, Central Asia and China, mainly in Saudi Arabia, the United Arab Emirates, Uzbekistan, Azerbaijan and other countries. As the main promoter and implementer of the “Saudi Arabia Vision 2030”, the photovoltaic and energy storage space in the Middle East is expected to be further opened up.
In addition to Saudi Arabia’s ACWA Power, the 5GW/20GWh ultra-large energy storage project led by the Abu Dhabi Future Energy Company (Masdar) in the UAE is also in the bidding process and is expected to provide clean electricity for data centers.
Chinese companies are highly competitive and active in the Middle East energy storage market at the integrator level. In addition to the traditional energy storage integration leader Sungrow, powerful energy storage battery cell and photovoltaic module companies such as CATL, BYD, JinkoSolar, and Envision Energy are competing for the Middle East energy storage market. In addition to Sungrow, which has the ability to manufacture photovoltaic inverters and energy storage PCS and has been engaged in full integration of energy storage systems for a long time, battery companies such as CATL, BYD, and Envision Energy have previously focused on DC-side energy storage battery compartments, while photovoltaic module companies such as JinkoSolar need to purchase key components such as energy storage batteries and energy storage PCS for self-integration. Faced with the exit of giants on the integration side, the pattern may change to a certain extent, but the company sticks to its identity as a PCS supplier. As the global third-party PCS leader, it is expected to gain a large share of the Middle East market.
