The highly protected overseas large reserves have also started to become competitive, and the "culprits" turn out to be these two?

How can lithium batteries avoid repeating the pitfalls of the photovoltaic industry's inward competition?

On November 28, the Ministry of Industry and Information Technology led a meeting, inviting the 12 most representative companies in the power battery and energy storage battery industry chain, ranging from separators, positive and negative electrode materials, to battery cells and system integration. BYD Chairman Wang Chuanfu, CATL Vice Chairman Li Ping, and EVE Energy Chairman Liu Jincheng were all present.

From the photos released by the Ministry of Industry and Information Technology, Wang Chuanfu is seated in the middle, directly facing the leaders, looking quite serious. For BYD, which is accustomed to making inroads in the new energy vehicle sector, the focus of this discussion is not on "competing for sales," but on how to "stop the price" in power and energy storage batteries.

A few days earlier, CATL Chairman Zeng Yuqun publicly lamented: "We are not only 'competing' domestically but also 'competing' internationally. This year, competition among Chinese companies in major markets in Europe, America, and the Middle East is particularly fierce, especially in large GWh-level projects." Zeng's remarks were actually pointed. Market rumors suggest that BYD has "snatched" a significant overseas project from CATL at a very low price.

The issue is becoming increasingly clear—overseas large energy storage is heading down the same path of inward competition as photovoltaics. So, who is the real "culprit"?

0 1 The Beautiful Era of Non-Competition in Overseas Large Energy Storage

If we rewind to three or four years ago, the main players in overseas large energy storage projects were more often system integrators and power companies.

Whether in Texas or California in the United States, or in the UK and Germany, early large energy storage projects were often led by local utility companies in the bidding process, with delivery entities being system integrators like Fluence and Tesla, while battery cell manufacturers were more in a "behind-the-scenes supply" position.

According to estimates from multiple institutions, global annual new installed capacity for energy storage is expected to rise rapidly from around 20 GWh in 2021 to about 70 GW in 2024, with projections nearing 100 GWh by 2025, the vast majority of which will be grid-side and commercial energy storage projects.

As the scale increases, product prices have also been declining along a relatively smooth curve.

From the battery cell perspective, the average battery pack price for lithium-ion batteries has remained just above $100 since 2021, experiencing a brief rebound in 2022 before falling back to slightly above $130/kWh in 2023, and further dropping below $120/kWh in 2024.

From the system perspective, according to statistics from European industry organizations, new battery storage installations in Europe are expected to exceed 20 GWh in 2024, with cumulative installations surpassing 60 GWh. The comprehensive cost of utility-scale projects generally remains in the range of €300–400 per kWh, allowing projects to provide investors with a moderately high internal rate of return.

At that time, overseas large energy storage, while competitive, was more about "structural cost reduction"—relying on economies of scale, technological advancements, and declining financial costs, with prices steadily decreasing and the market steadily expanding, making it difficult to describe as "inward competition."

02 Cliff-like Price Drop Begins After Battery Cell Companies Enter the Market

The turning point occurred when Chinese battery cell manufacturers began to personally enter the market on a large scale to "engage in systems."

On one hand, there is the accelerated decline in battery cell prices. Since 2024, under the dual effects of falling lithium prices and the release of production capacity, the price of LFP battery cells for energy storage has dropped below 0.5 yuan/Wh. Some institutions estimate that by mid-2024, the average price of energy storage LFP battery cells has fallen to 0.41 yuan/Wh, equivalent to about fifty-something dollars per kWh. There are also price consulting firms tracking that in the third quarter of 2024, global LFP battery cell prices once fell to fifty to sixty dollars per kWh, with some transactions even lower.

On the other hand, the price of the entire system has seen a "stampede" downward in large tenders. At the end of 2024, a certain 16GWh energy storage centralized tender in China saw system quotes (based on 4-hour LFP system) generally fall within the range of 60–80 dollars per kWh, with an average price of over 60 dollars, far below the global average level for that year.

This time, the ones stepping forward to grab orders are no longer just system integrators, but battery cell manufacturers holding large-scale production capacity and possessing integrated design capabilities.

The most typical case is the large storage order from Saudi Arabia that attracted global attention earlier this year. The Saudi Electricity Company (SEC) awarded a large energy storage project of 2.5GW/12.5GWh to a Chinese company. Public information shows that the winning bidder is not only responsible for supplying battery cells and systems but also for design, installation supervision, testing, and subsequent operation and maintenance.

From a business model perspective, this is no longer "supplying to system integrators," but rather battery cell manufacturers directly replacing the original integrators to become the general contractor for the project.

This change quickly transmitted to the pricing level.

Battery cell manufacturers have several natural advantages—large production capacity, low marginal costs, and relatively low capital costs. During the phase of capturing market share, they can fully accept "compressing profit margins for scale," and even package the entire system at prices close to the factory price of the battery cells for certain projects.

For the overseas large storage market, as more and more owners directly tender to battery cell manufacturers, system integrators are either forced to follow suit and reduce prices, giving up profit margins, or simply withdraw from certain markets. The logic of the price war thus forms a closed loop.

If early overseas large storage was "competition among system integrators," then now, in multiple GWh-level projects in Europe, the Middle East, and Southeast Asia, the competition has clearly transformed into a "price war among battery cell manufacturers."

03 Cost Reduction Does Not Equal Loss

It is important to emphasize that Chinese companies driving down storage costs are, in fact, an important force in the global energy transition, rather than an original sin.

Over the past decade, it has been precisely through the large-scale manufacturing of Chinese photovoltaics and lithium batteries that the global cost of photovoltaic electricity and energy storage systems has significantly decreased, making it possible to discuss "equal pricing for solar and storage" and the replacement of coal power. Statistics from several European think tanks and international organizations show that from 2010 to 2024, the cumulative decline in battery storage costs has exceeded 90% The problem is not about "low prices," but rather "how low and to what extent."

The truly beneficial cost reductions for high-quality development come from improvements in technological efficiency, optimization of production organization, and collaboration in the supply chain, such as battery cells with longer cycle life, systems with higher energy density, more standardized container designs, and more reasonable operation and maintenance models. These types of cost reductions can simultaneously enhance the full lifecycle value of a project.

However, some extreme low prices currently appearing in overseas large-scale energy storage rely more on another approach:

One part involves pushing prices close to the factory price of battery cells, leaving almost no reasonable profit at the system level;

Another part involves "subtracting" from operation and maintenance and warranty, by compressing warranty periods, reducing spare parts configurations, and weakening long-term services, in exchange for "attractive quotes" during bidding.

In the long run, energy storage projects are infrastructure with a lifespan of 20 years or even longer. Excessively squeezing profits from the system integration and service segments may secure orders in the short term, but in the long term, it will weaken operational capabilities and safety redundancies, laying hidden dangers for future accident rates, downtime rates, and disputes.

The Ministry of Industry and Information Technology emphasized in this symposium that it is necessary to "govern irrational competition in the power and energy storage battery industry in accordance with laws and regulations, strengthen capacity monitoring, early warning, and regulation, increase supervision and inspection of production consistency and product quality, and guide enterprises to scientifically layout capacity and reasonably and orderly 'go overseas'." This has actually pointed out the boundaries: cost reductions are permissible and necessary, but they must not breach safety, quality, and reasonable profit bottom lines.

0 4 Who is "involution"? The dual role of the battery cell leader

From the current industrial landscape, the "direct driving force" behind the involution in overseas large-scale energy storage indeed comes more from battery cell manufacturers.

On one hand, Chinese battery companies hold an absolute advantage in the global energy storage field. Research has shown that Chinese companies account for nearly 90% of global energy storage system capacity, with market shares exceeding 80% and 70% in the U.S. and European markets, respectively. This scale and bargaining power enable them to determine the price range in overseas bidding.

On the other hand, the fierce price war in the power battery sector is also transmitting pressure to the energy storage side. In 2024, CATL actively reduced prices in the new energy vehicle price war, leading to a significant pressure on battery business revenue for the first time in nearly a decade, with net profit growth dropping to a near-low level in recent years. Against the backdrop of pressure on power battery profit margins, transferring some capacity and competitiveness to the energy storage business has become a common choice for almost all leading battery companies.

In this situation, when battery cell manufacturers simultaneously act as "upstream suppliers" and "system general contractors," a tendency can easily emerge: in project quotations, they use their own cost and cash flow capacity as a benchmark, pushing prices to levels that other industry segments find difficult to bear.

Taking this year's large order in Saudi Arabia as an example, the winning company in the 2.5GW/12.5GWh project needs to undertake system supply and long-term operation and maintenance, and the market generally believes that the quoted price level is highly competitive. Such projects serve as a demonstration of technical strength and financing capability for a single enterprise; however, the signal to the global market is that GWh-level projects can accept extremely low unit prices When the demonstration effect is formed, it is difficult for other battery cell manufacturers to stand by. Therefore, at the symposium held by the Ministry of Industry and Information Technology, there was both a sense of helplessness about "rolling abroad" and concerns about the competitive order of overseas large-scale energy storage.

0 5 Structural Changes in Overseas Large-Scale Energy Storage: From "System Competition" to "Battery Cell Competition"

From the development path of overseas large-scale energy storage, several structural changes are currently taking place.

First, the shift in market focus. Multiple research institutions predict that by 2025, global new energy storage will approach 250GWh, with China and the United States remaining the main players, but emerging markets including Europe, the Middle East, Australia, and Latin America are also experiencing astonishing growth rates. These regions mostly welcome lower-cost energy storage projects to support the large-scale grid connection of renewable energy.

Second, the reshaping of cost structures. In Europe, the comprehensive cost of many projects in 2024 is still around 300–400 euros per kWh, but starting in 2025, new project quotes have already dropped to the range of 90–100 euros per kWh. In China and some Gulf countries, due to the extensive use of Chinese battery cells and systems, the actual implementation costs are even lower.

Third, the change in industry dominance. In the past, system integrators were involved early in projects, taking on complex tasks such as solution design, grid connection coordination, and operation and maintenance management, acting as the "director" of the entire value chain. Now, in many overseas projects, battery cell manufacturers directly undertake system design and project management, while system integrators are compressed to "outsourced construction teams" or even completely exit.

In the short term, owners and local governments can enjoy lower bidding prices, and battery cell manufacturers also gain market share overseas; however, in the long term, if the system integration segment continues to be squeezed, the industry may lose a number of professional companies with engineering experience, knowledge of grid operations, and familiarity with local regulations, which is not good news for an industry like energy storage that has strong engineering attributes.

0 6 How to Prevent a Repeat of the Tragedy? Three Buffers Against Lithium Battery Involution

Carbon Number Energy Storage believes that, compared to photovoltaics, the lithium battery industry chain also has an excess problem, but it does not necessarily lead to the same severe "price crash."

From the length of the industry chain, lithium batteries have a chain that is clearly longer than photovoltaic battery components, spanning resources, materials, battery cells, BMS, PACK, system integration, and recycling, with more participants and a more complex transmission mechanism. When a single link encounters a price shock, other links can absorb part of the shock through technological upgrades, product structure adjustments, and service extensions, making the industry's "buffer layer" thicker.

From the competitive landscape, there are super giants like CATL in the midstream battery cell sector, forming a structure of "one super and many strong." Whether in the field of power batteries or energy storage batteries, if leading enterprises clearly state that they will "not engage in vicious price wars" on large overseas projects, and have supporting industry self-discipline and credit constraints, it is difficult for price wars to spiral out of control. Zeng Yuqun mentioned in a public speech that the industry has achieved "world's first," and the next step is to pursue "high-quality development of the world's first," which, to some extent, is sending such a signal From the perspective of application scenarios, lithium batteries' important downstream sector—power batteries—are almost entirely in a highly market-oriented and open competitive environment. The competition among new energy vehicle companies is exceptionally fierce; battery companies must not only cooperate with vehicle manufacturers to optimize costs but also provide products with higher safety and longer lifespan to achieve premium pricing. This game relationship is starkly different from the photovoltaic components that rely more on a single channel of centralized power station bidding.

These differences do not guarantee that the lithium battery industry will not experience a photovoltaic-style "price avalanche," but at least provide three important buffers.

The key lies in whether industrial policies can provide clear boundaries at the right time, whether leading enterprises can proactively abandon the extreme strategy of "exchanging price for volume" on key projects, whether financial institutions can view excessively priced projects as risks rather than "low-cost advantages," and whether industry associations can establish basic quoting and warranty bottom lines.

0 7 The True Direction of the Lithium Battery Enterprise Symposium

Returning to the Ministry of Industry and Information Technology's symposium.

From the list, the 12 participating companies almost cover the entire industrial chain of power batteries and energy storage batteries: there are membrane leaders like Enjie, material companies like Rongbai Technology, BTR, and Tianci Materials, as well as major cell manufacturers like CATL, BYD, Zhongchuang Xinhang, Yiwei Lithium Energy, Guoxuan High-Tech, and Xinwanda, along with system integration and solution providers like Trina Solar's energy storage division and Haicheng Energy Storage.

From the statements made, the Ministry did not shy away from the term "involution," but rather explicitly proposed to "comprehensively rectify 'involution-style' competition" and "govern irrational competition in accordance with laws and regulations," and included "scientific layout of production capacity and reasonable and orderly 'going abroad'" in the work priorities.

For Chinese lithium battery companies that have already expanded their footprint to Europe, America, the Middle East, and Latin America, this is not only a "reminder" of domestic industrial policy but also a "preview" of the competitive methods in overseas large-scale energy storage.

The overseas large-scale energy storage sector has begun to experience involution, seemingly driven directly by cell manufacturers, but the deeper reason lies in the strong demand for "low-cost Chinese solutions" amid the global energy transition, combined with the domestic capacity expansion cycle, which together shape today's price landscape.

Moving forward, how to maintain cost advantages while avoiding a repeat of the extreme involution seen in photovoltaics will test not only the strategies of individual enterprises but also how the entire industry can write a "2.0 version of world-leading" high-quality development model after becoming "number one in the world."

In this sense, the Ministry of Industry and Information Technology's symposium is both a mobilization against involution and a repositioning of the logic of overseas large-scale energy storage competition: truly valuable "going abroad" is not about transferring the price war from domestic to foreign markets, but about delivering reliable, sustainable, and long-term return energy storage solutions as a new Chinese advantage to the global energy system.

Source: Gan Tan Hao Energy Storage

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