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Friday Briefing: Europe and US set for battery manufacturing race, with China far ahead


This Friday Briefing looks at the battery manufacturing race that Europe and the US are set to get into, with both currently trailing far behind leader China.

Our colleagues at PV Tech report today that the European Parliament has approved the European Union (EU) Net Zero Industry Act, aimed at supporting the domestic production of clean energy technologies.

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It’s been a while coming, and it’ll be a while longer yet before the EU’s answer to the US Inflation Reduction Act (IRA) comes into effect. PV Tech scribe Simon Yuen writes that the act is expected to become law this summer, but its provisions will be effective from 2026.

Nonetheless, it’s likely to be warmly welcomed by the European energy storage industry, just as it has by the solar industry manufacturers’ group European Solar Manufacturing Council (ESMC).

As you likely already know, Europe was stealing a march on its Transatlantic ally, with dozens of battery gigafactories in development, mostly for electric vehicle (EV) battery production, when the IRA turned the situation on its head.

The US has since overtaken Europe, thanks to the IRA’s tax credit incentives, weighted towards projects built, and products manufactured, using domestic content.

We’ve heard that European manufacturing plans are far from dead in the water, and several plants are in construction or, in the case of Northvolt’s Northvolt Ett gigafactory in Sweden, already producing batteries.

However, it is indisputable that Europe has been deprioritised as a destination for investors in the battery value chain, losing out in the short term, at least to the US.

What sort of shape the Net Zero Industry Act (NZIA) will take is yet to be seen, as is whether it can be effective, but it most likely can’t come soon enough for Europe’s ambitions, in both an energy transition sense as well as industrial competitiveness.

This week, the US Department of the Treasury has finalised its rules on tax credit transferability for eligible energy technologies, which of course include energy storage. While the industry has been overwhelmingly positive in reaction to the IRA, it has been a continuing theme that clarity is needed on some of the details to really unlock rapid forward momentum.

Also this week, the International Energy Agency (IEA) produced its first-ever ‘special report’ on batteries and their importance to the global energy transition, focusing on stationary storage, as well as EVs. Again, while many hold the view that the IEA has traditionally lagged far behind industry and wider society in recognising the potential of clean energy technologies, the report and the IEA’s view that batteries are critical to meeting climate targets are certainly welcome.

You can read more about the report from our news coverage yesterday, which also took in BloombergNEF’s ‘H1 2024 global energy storage outlook’ report.

One big takeaway, however, was that while around 85% of the world’s battery cell production is today based in China, around 40% of new battery production capacity announcements are in other places, most predominantly the US and Europe.

China’s head start is a pretty long one, as hardly needs pointing out. Two major Chinese players in the energy storage industry, Sungrow and EVE Energy, have just put out their annual reports for 2023, almost coinciding with Tesla’s release of its Q1 2024 results.

Tesla and Sungrow were both in the top five global BESS system integrator rankings from both S&P Global and Wood Mackenzie last year for projects deployed to date as of July 2023. Tesla logged 14.7GWh of BESS deployments for the full year, it said in January, keeping it ahead of Sungrow’s 10.5GWh shipped.

But EVE Energy said it delivered more than 26GWh of battery products during 2023 to the energy storage industry. To be clear, EVE Energy makes battery cells, racks and modules that are delivered to third-party OEMs, as well as making complete and partial BESS solutions, and EVE is not an integrator working on projects, so the comparison with Tesla or even Sungrow is not at all like-for-like. But it is illustrative of just how big the head start held by China’s battery and BESS industry is.

Happy Friday!

This week on ESN Premium

Has CATL cracked the battery ageing code? Industry reacts to ‘zero-degradation’ BESS claims

Lithium-ion battery OEM CATL’s claim that its latest BESS product has no degradation for the first five years of use has provoked much discussion across the industry, with some sceptical of its merits.

The China-based firm made the claim a week ago about its new grid-scale battery energy storage system (BESS) DC block product, Tener, which has 6.25MWh of energy per 20-foot container.

Lithium-ion battery cells typically degrade – lose their energy storage capacity – by 10-20% in the first five years of operation, which is then offset by adding new units to maintain capacity, otherwise known as augmentation. If true, the breakthrough has huge ramifications for energy storage applications and the technology’s cost-effectiveness.

‘Forecast everything, then optimise everything’: GridBeyond CEO on €52 million Series C fund raise Premium speaks with Michael Phelan, CEO of energy management solutions provider GridBeyond, following its closing of a €52 million (US$55.53 million) Series C funding round.

The Ireland-headquartered company uses its artificial intelligence-driven software platform to optimise and monetise energy assets, adding them to its Grid Edge Virtual Power Plant, or in the case of large-scale battery energy storage systems (BESS), serving as route-to-market provider.

Phelan speaks in a wide-ranging interview about GridBeyond’s secret sauce for distributed energy resources (DERs) aggregation, how it amassed battery storage expertise through a focus primarily on behind-the-meter (BTM) commercial and industrial (C&I) assets, and how its new investors add technological capabilities and geographical reach.

Canadian Solar: Storage ‘more complex’ than solar when it comes to localising manufacturing

The energy storage arm of Canadian Solar said the technology ‘has more complexity than solar’ when it comes to nearshoring manufacturing away from China, and localised battery cell manufacturing could be part of the long-term strategy to leverage domestic content incentives.

Asked about US IRA’s domestic content investment tax credit (ITC) incentives and broader approach to manufacturing, Canadian Solar subsidiary E-Storage’s VP commercial Jeff Roy told “Our strategy takes into consideration that energy storage presents more complexity in terms of policy and manufacturing compared to solar.”

ERCOT market saturation ‘already happening’

Market saturation in the Texas, ERCOT ancillary services market is already happening as the BESS buildout accelerates, has heard.

Texas is the US’ second-largest market for battery energy storage system (BESS) deployments after California, with transmission system operator (TSO) ERCOT anticipating 9.5GW of grid-scale BESS online by October 2024.

Operators have enjoyed a lucrative ancillary services market to-date with strong revenues from Reg-Up and Reg-Down and Responsive Reserve Service (RRS) to which ERCOT Contingency Reserve Service (ECRS) was recently added.

“In some hours of the day we are already there with market saturation,” optimiser Gridmatic’s VP business development David Miller told at this year’s Energy Storage Summit USA event, last month.

22 May 2024
London, UK
At the time of writing, Europe had had its most successful year in terms of Power Purchase Agreements (PPAs) with a record 7.8GW of renewable energy contracts signed. As we gather in May 2024 for the third edition of the Renewable Energy Revenues Summit, the energy landscape continues to evolve rapidly, influenced by the beating drum of climate change, volatility around power prices and the need to decarbonise power procurement as well as generation.
22 October 2024
New York, USA
Returning for its 11th edition, Solar and Storage Finance USA Summit remains the annual event where decision-makers at the forefront of solar and storage projects across the United States and capital converge. Featuring the most active solar and storage transactors, join us for a packed two-days of deal-making, learning and networking.
18 March 2025
Austin, Texas
The Energy Storage Summit USA is the only place where you are guaranteed to meet all the most important investors, developers, IPPs, RTOs and ISOs, policymakers, utilities, energy buyers, service providers, consultancies and technology providers in one room, to ensure that your deals get done as efficiently as possible. Book your ticket today to join us in 2025!

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