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!
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