The lowest bidder wins the order. Is energy storage unprofitable or does it have amazing gross margins?

Since the beginning of this year, the energy storage industry has been caught in a situation of "ice and fire".

On the one hand , the energy storage industry is developing fast enough, and the "involution" also proves to a certain extent that there is enough market demand, market opportunities and development space. On the other hand , the prices of battery cells and systems continue to fall below the bottom price, and technology is accelerating iteration and upgrading. For small and medium-sized enterprises with weak competitiveness and risk resistance, they are at risk of being "shuffled out" at any time.

Under such circumstances, large energy storage tender owners frequently set maximum prices and designated suppliers, and the bidding threshold has been raised continuously. For example, the 0.5C 314Ah energy storage cell procurement announcement released by the Southern Power Grid recently showed that its procurement scale was 100MW/200MWh, with an estimated procurement amount of 61 million yuan and a unit price limit of 0.305 yuan/Wh . In addition, it is required to complete the supply and commissioning within 30 days after signing the contract and receiving the supply notice. This means that the tender owner has put forward "hard" requirements on the price and delivery time limit of the supplied products, and manufacturers that do not meet the standards will miss this tender.

It is worth noting that data shows that the current tax-inclusive price range of 314Ah energy storage cells is 0.30-0.36 yuan/Wh, with an average price of 0.33 yuan/Wh , which means that the price limit of 0.305 yuan/Wh in this bidding by the Southern Power Grid is infinitely close to or even lower than the cost price. In this regard, many practitioners have raised questions. The frequent price limits that are infinitely close to or even lower than the cost are not "exploitation" of energy storage companies by the bidding owners?

01

Do those who offer the lowest prices have stronger competitiveness in “taking orders”?

In the bidding market, lower bids seem to be more likely to win the favor of owners.

Recently, the Inner Mongolia Energy Group announced the results of the bidding for the procurement of energy storage system equipment for four energy storage projects totaling 2.91GWh. The bidding results show that the pre-successful bidders for the bidding project are Xuji Electric, Ganfeng Lithium Battery, BYD and Haibosichuang , and the quotations given by all bidding companies range from 0.301 yuan to 0.671 yuan/Wh.

Judging from the bids of the successful bidders , two of the projects were pre-bid at the lowest price, and the pre-bid prices of the other two projects were also among the top three low prices in the opening bids. The details are as follows.

It is reported that the pre-successful bidders for Section 2 and Section 3 are the bidders with the lowest bids in the sections. In Section 2, the bids of 21 bidding companies ranged from 0.500 yuan to 0.599 yuan/Wh, and Ganfeng Lithium Battery ranked first with a bid price of 0.500 yuan/Wh . In Section 3, the bids of 19 bidding companies ranged from 0.498 yuan to 0.608 yuan/Wh, and BYD ranked first with a bid price of 0.498 yuan/Wh .

In Section 1, 23 companies offered bids ranging from 0.301 yuan to 0.609 yuan/Wh, and Xuji Electric was pre-bid with a bid price of 0.495 yuan/Wh, which was one of the top three low bids . Similarly, in Section 4, 18 companies offered bids ranging from 0.552 yuan to 0.671 yuan/Wh, and Haibosichuang was pre-bid with a bid price of 0.584 yuan/Wh , the second lowest price.

It can be seen that "low price" seems to have become a tried and tested competitive means for energy storage companies to "win orders". Although continuous cost reduction is inevitable for the development of the industry, Liu Jincheng of Yiwei Lithium Energy believes that "the cost reduction of energy storage systems in the future will not rely mainly on the reduction of battery cell costs, but on the reduction of system standardization costs."

In terms of battery cell prices, the average price of energy storage batteries has dropped from 0.9 yuan to 1.0 yuan/Wh at the beginning of 2023 to the current 0.3 yuan to 0.4 yuan/Wh, a drop of two-thirds. Regarding the future trend, Liu Jincheng said, "In the future, the price of energy storage batteries should remain stable, or even a little higher, which is healthy for the industry." " The industry should focus on technological innovation and performance improvement to enhance the market value of energy storage batteries, and can no longer rely on blindly lowering prices to compete. "

At the same time, relevant persons in charge of CATL also expressed similar views, believing that the stage of rapid decline in lithium battery costs has passed. In the future, when there are no major fluctuations in raw material costs, companies will have to rely more on technology upgrades, process improvements, industrial chain cooperation and new scenario development to further tap the potential for cost reduction.

02

Price falls below 0.6 yuan/Wh, industrial and commercial energy storage "low price" competition emerges

Following the pace of large-scale storage bidding prices continuously falling below the reserve price, the recent topic of industrial and commercial energy storage price bottom line breaking through 0.6 yuan/Wh has also become a hot topic.

At the EESA Energy Storage Exhibition, the most obvious feature was the "price war". The Aqua-E series of industrial and commercial storage products launched by Clou Electronics , a subsidiary of Midea Group, used the slogan " Take it home at 0.598 yuan/Wh ", which attracted a lot of attention and topics. It is reported that the price of the A-type battery is 0.598 yuan/Wh , and the price of the version using the CATL battery is only 0.68 yuan/Wh .

Another "unknown" Zhejiang company, Wocheng New Energy, quoted a low price of 0.58 yuan/Wh , and offered preferential conditions of " 0 yuan experience, payment 6 months after installation ", but the industry mostly took a "wait and see" attitude towards this. Some analysts believe that its price positioning is obviously not enough to be equipped with the current mainstream A-grade battery cells, and can only use the second-tier manufacturer brands. As for its competitiveness, it depends on the specific orders it receives.

It is understood that the current quotations of first-tier industrial and commercial energy storage manufacturers are basically above 0.7 yuan/Wh , including CRRC Zhuzhou Institute, which is famous for its "low prices". The comprehensive unit price of industrial and commercial energy storage products newly announced at the end of July is also around 0.7 yuan/Wh. Previously, the low price holder for industrial and commercial energy storage cabinets was still Mingmei New Energy at 0.72 yuan/Wh.

It is worth mentioning that in September last year, Sungrow launched the new PowerStack 200CS series of industrial and commercial liquid-cooled energy storage systems. At that time, the price of a single product was 1.56 yuan/Wh . Combined with the current price, it is obvious that the price reduction in the past year has exceeded 50%.

03

Energy storage profits are still considerable

Whether it is large-scale storage or industrial and commercial energy storage, it is not uncommon to see prices "cut in half" in the energy storage field. The extreme "involution" has made the industry exclaim "unprofitable" for a long time, but judging from the semi-annual reports recently released by energy storage industry chain companies, it seems that their profits are quite considerable and "tempting".

The company with the highest profit margin is Sungrow Power Supply, which is firmly in the top spot as an energy storage system integration manufacturer. In the first half of this year, its energy storage system gross profit margin was as high as 40.8% , and its relevant person in charge said that " there is no ceiling for energy storage for the time being, and it is expected to maintain a relatively high growth rate in the future ."

In terms of business coverage, its overseas operating income is almost equal to that of the domestic market, and its overseas markets cover many regions such as Europe, America, the Middle East, and Asia Pacific . Recently, it has frequently signed large overseas orders, such as a supply agreement for a 1.4GWh PowerTitan 2.0 liquid-cooled energy storage system with Penso Power, a British renewable energy and energy storage company, and BW BW ESS, an investment company, and reached an energy storage system order of over 1GWh with Spearmint in the United States , and signed an energy storage project order with Saudi Arabia ALGIHAZ with a capacity of up to 7.8GWh . The total scale of these three projects alone has reached 10.2GWh .

As for battery companies , in the first half of this year, the gross profit margin of CATL's energy storage battery system was 28.87%, a year-on-year increase of 7.55%; the gross profit margin of EVE Energy's energy storage battery reached 14.38%; the gross profit margin of Gotion High-tech's energy storage battery system was 23.87%; the gross profit margins of Narada's domestic and foreign energy storage systems were 24.29% and 32.22% respectively.

At the same time, overseas markets are increasingly becoming the "wealth code" for leading energy storage companies seeking high profits and high returns. At a time when the global energy storage market is gradually releasing greater demand, not only the leading energy storage companies, but also the majority of second- and third-tier manufacturers can find their correct positioning, delve into products and services, and perhaps "roll" out a new world with their own competitive and differentiated routes.