ESS batteries are at the forefront of a seismic shift in China’s lithium battery industry, with major battery producers investing heavily in energy storage systems to counter slower growth in the electric vehicle (EV) market. In the first three quarters of 2024, China’s lithium battery shipments soared to 786 gigawatt-hours (GWh), a significant increase from 605 GWh in the same period last year, according to the Shenzhen-based research institute GGII.
Rapid Expansion in Energy Storage
ESS battery shipments have emerged as the key growth engine. From January to September 2024, ESS battery deliveries climbed to 216 GWh, marking a staggering 70% surge from the 127 GWh shipped during the same period in 2023. By comparison, EV battery shipments rose by a more modest 20%, reaching 533 GWh from 445 GWh in the prior year.
This shift comes as Chinese manufacturers grapple with a maturing EV market and falling production costs for lithium batteries. “We are seeing much higher production of energy storage batteries in China this year and expect the future growth rate in the energy storage market to remain fast-paced,” a Chinese cathode producer source told Fastmarkets.
China’s strategic emphasis on advanced energy storage aligns with its ambitions to create a more resilient power grid. Compared to renewables like wind and solar, ESS batteries offer advantages such as shorter production times and greater deployment flexibility, according to market analysts.
Investment in Infrastructure and Production
The pace of investment in ESS capacity is gaining momentum. EVE Energy Co., one of China’s leading battery manufacturers, reported a remarkable 95% increase in ESS battery deliveries in the third quarter of 2024, shipping 14.8 GWh compared to 7.58 GWh in the same period in 2023. Although its EV battery shipments increased only slightly—by 1% to 7.2 GWh—the company’s overall lithium battery output grew 50% year-on-year, reaching 22 GWh.
For the first three quarters, EVE’s total shipments hit 56.44 GWh, up 55% from last year. Notably, ESS batteries accounted for 35.73 GWh, representing an almost 110% jump from 2023 levels. EVE’s strategic pivot reflects a broader trend across China’s battery sector: an aggressive push into energy storage amid growing global demand.
CATL Leads the Charge
Contemporary Amperex Technology Co. Ltd. (CATL), the world’s largest battery maker, remains a dominant player in both ESS and EV markets. CATL’s ESS shipments have consistently outpaced its EV battery growth, reflecting shifting market dynamics. In 2023, CATL’s ESS deliveries surged 46.8% to 69 GWh, far exceeding the 32.6% rise in EV battery shipments, which reached 321 GWh.
CATL’s third-quarter shipments totaled 125 GWh, a 15% rise from 110 GWh in the previous quarter. ESS now makes up roughly 24% of CATL’s overall battery capacity, underlining the strategic pivot. From 2018 to 2023, the company’s ESS revenue exploded from 189 million yuan ($27 million) to nearly 60 billion yuan ($8.6 billion), now comprising 15% of total revenues. Its gross margin from ESS deliveries, at 23.79%, even surpassed margins for EV batteries.
CATL’s global footprint continues to expand. The company will supply battery cells to Tesla’s Megapack plant in Shanghai, which aims to produce 10,000 units annually, offering a combined 40 GWh of storage capacity.
Global Ambitions and Emerging Markets
China’s battery makers are also aggressively targeting international markets. EVE’s deal to supply 19.5 GWh of LFP lithium batteries to American Energy Storage Innovations (AESI) exemplifies this strategy. Meanwhile, BYD, another major player, is expanding into Latin America. Since 2017, BYD has secured contracts for large-scale ESS projects in Brazil and Mexico.
In early October 2024, Spain’s Grenergy Renovables announced financing for the first phase of a major ESS project in Chile, marking BYD’s largest ESS venture to date, with a capacity ranging from 1.1 to 3 GWh. According to industry analysts, BYD delivered 28.4 GWh of ESS batteries globally in 2023, second only to CATL.
The Road Ahead
The global appetite for ESS continues to surge, driven by the push for renewable energy and grid stabilization. In 2023, global ESS shipments reached 185 GWh, up 53% from 121 GWh in 2022, per data from SNE Research. As competition intensifies in the Chinese market, manufacturers are eyeing growth in emerging regions like the Middle East and Africa.
Liu Jincheng, EVE’s CEO, highlighted the vibrant demand in these markets, emphasizing the role of ESS in the future energy landscape. As the sector evolves, China’s ESS battery makers are poised to play a crucial role in global energy transitions.
