The TL;DR
The battery manufacturing industry has encountered significant challenges in 2024, primarily due to a slowdown in electric vehicle (EV) sales. This decline has squeezed margins and reduced revenues for key players in the sector. However, a silver lining has emerged with the remarkable growth of the stationary storage market, as highlighted by BloombergNEF (BNEF).
This year, the stationary storage market has surged by 61%, driven by a sharp reduction in the cost of turnkey energy storage systems, which dropped by 43% compared to the previous year. In China, prices for two-hour energy storage systems reached a record low of $115 per kilowatt-hour in February 2024, facilitating increased adoption. The shift in the annual output of lithium-ion batteries has been notable, with stationary energy storage surpassing consumer electronics as the second-largest application for battery production. Although the stationary storage market is still smaller than the EV sector, its growth rate is outpacing that of EVs. The demand ratio of EV batteries to stationary batteries has narrowed significantly, from 15-to-1 to 6-to-1 over the past four years.
Several key factors have contributed to the expansion of the stationary storage market. Regulatory mandates, especially in China, require the co-location of energy storage with solar and wind projects, driving demand. In the United States, the Inflation Reduction Act and various state-level policies have provided substantial support. Additionally, countries across Europe, including Germany and Italy, as well as regions like Australia, Japan, and Latin America, are implementing measures that favour energy storage growth.
BNEF's projections indicate a significant shift in battery chemistry preferences over the next few years. By 2030, Nickel Manganese Cobalt (NMC) batteries are expected to hold only 1% of the market, as cheaper and potentially safer Lithium Iron Phosphate (LFP) batteries gain dominance. This transition is already evident in the growing market share of LFP batteries, driven by increased manufacturing capacity, particularly in China.
Battery Energy Storage Systems (BESS) were initially used primarily for ancillary services such as voltage support and frequency regulation. However, as these markets have become saturated, the focus has shifted towards energy-shifting applications. BNEF forecasts that energy-shifting will account for approximately 70% of all demand by the end of 2024, especially in China, where provincial mandates increasingly require the pairing of solar projects with energy storage.
The future of battery demand is closely tied to the recovery of the EV market and the price trends of raw materials like lithium carbonate. The sharp decline in lithium prices, which have dropped by about 80% from their 2022 peaks, has led to delays and cancellations of planned investments by miners and refiners. For example, Albemarle, a US-based chemical company, has paused its $1.97 billion lithium refinery project in South Carolina. Similarly, several Australian lithium companies have suspended expansion plans or closed mines in response to the market downturn.
The oversupply of lithium-ion battery manufacturing capacity, particularly in China, where production has far exceeded demand, presents additional challenges. BNEF reports that global manufacturing capacity is on track to reach 7.9 terawatt-hours by 2025, significantly outpacing the forecasted demand of 1.6 terawatt-hours. This oversupply is expected to lead to further price declines and increased pressure on margins, making it difficult for new entrants to compete.
While the EV battery market faces ongoing challenges, the stationary storage sector is experiencing rapid growth, driven by favourable policies, declining costs, and shifts in battery chemistry. As market dynamics continue to evolve, the stationary storage segment is poised to play an increasingly important role in the global energy landscape, even as the broader battery industry navigates the complexities of supply and demand imbalances.