Since 2023, the battleground of pricing has grown fiercer, with the cost of lithium carbonate plummeting, signaling an escalation in the price wars of ESS tender projects. Amidst industry fluctuations, pricing has emerged as the paramount concern, with ESS quotes repeatedly hitting record lows. Consequently, many enterprises find themselves grappling with razor-thin profit margins.
According to TrendForce’s database, March 2024 saw a sustained surge in ESS winning capacity in China, adding a substantial 4.6GW/12.8GWh compared to the previous month.
In March 2024, ESS bid prices varied depending on their storage capacity, with an overall downward trajectory evident, particularly in the case of four-hour ESS bids, which hit yet another all-time low.
Bid Prices of ESS in March
Raw material prices for storage battery are expected to remain stable.
At the outset of 2024, battery prices experienced a decline. Our data indicates that lithium carbonate prices have dropped to levels not seen since the first half of 2021. Moreover, the fluctuation rates of lithium carbonate prices have noticeably narrowed, leading us to anticipate an end to the price fluctuations and a forthcoming period of stability.
Lithium carbonate prices have dropped to a low level not seen since the first half of 2021
Despite persistent challenges such as industry competition and overcapacity, domestic ESS manufacturers can find solace in the stability of costs. This stability is poised to alleviate pressure on equipment manufacturers and provide downstream project owners with clearer revenue forecasts. Consequently, the era of the "low-priced competition" strategy may draw to a close with the introduction of new products.
The decline in lithium carbonate prices has significantly weakened its impact on battery costs. In January 2023, lithium carbonate constituted 51% of the total cost of LFP storage batteries, a figure that plummeted to 24% by January 2024. Additionally, other key raw materials such as anode materials, iron phosphate, and electrolytes have all experienced price declines to levels unseen since 2021, with price fluctuations abating.
Therefore, as raw material prices stabilize, both the pricing system of the energy storage industry chain and the anticipated revenue of downstream project owners are expected to become clearer and more stable.
The decrease in ESS prices has been moderate.
In March, the price disparity between ESS and batteries has continued to shrink. The average price of a 280Ah/0.5C storage battery hovered around 0.38 yuan/Wh in March 2024. According to our data, the average winning price for a 2-hour ESS is approximately 0.63 yuan/Wh, resulting in a price gap of around 0.25 yuan/Wh. This represents a significant reduction in the price gap. Despite the incomplete statistics on our winning projects in March, we maintain that the margin profits for ESS integrators are constrained, as evidenced by the bidding prices from other periods.
The price disparity between ESS and batteries has continued to shrink Unit: RMB/Wh
With current prices, the profitability of ESS integrators is at rock bottom. Upon calculating the costs of ESS, it becomes evident that integrators may incur losses if they solely rely on purchases at the prevailing bid prices.
Furthermore, integrators who purchase batteries continue to experience narrow gross margins. For instance, if the selling price of a battery ranges from 0.65 to 0.70 yuan/Wh, the corresponding gross margins hover around 4.3% to 11.1%. Consequently, the decline in ESS prices is constrained.
Due to its relatively high technical barriers and more robust structure, PCS maintains a stable pricing system. According to ICC's data, the prices of domestic utility-scale storage PCS and centralized PCS have remained steady at 0.215 yuan/W and 0.145 yuan/W respectively since Q4 2023. Even if there are slight subsequent price decreases, these are primarily attributed to reductions in the prices of IGBT and other raw materials, as well as cost reductions stemming from technological advancements. As a result, we anticipate manufacturers to uphold their gross profit margins in the future.
PCS prices for ESS have been stable since Q4 of 2023 Unit: RMB/W
Currently, amidst intense market competition, rapid capacity expansion, and a proliferation of similar products, the industry's development is putting system enterprises to the test in terms of comprehensive cost reduction and efficiency enhancement, scaling production capacity, and overall operations improvement.
Examining the development strategies of leading enterprises, it's evident that they are driving cost reduction and technological innovation across every production segment. Furthermore, their market supply expectations are returning to normal levels. It's believed that after periodic fluctuations, the industry will transition into a phase of high-quality development, with outstanding companies spearheading technological innovation and breaking free from product homogeneity.
