Energy storage enters the "assetization" era, battery cells face a new round of challenges and differentiation!

This year, the energy storage industry has fully exploded. In this process, social capital has played an indispensable role. Document No. 136 has unleashed market forces, independent energy storage has triggered exploration by industrial funds, cases of commercial energy storage ABS and similar REITs are emerging frequently, the National Development and Reform Commission has introduced policies for energy storage asset REITs, and the financing capability of large overseas energy storage has been promoted. More and more social capital is participating in the development and investment of energy storage station assets. The wave of "assetization" in energy storage is rapidly approaching. This is vastly different from the earlier years, especially during the era of mandatory energy storage allocation. As the core of energy storage stations, the "assetization" wave will inevitably push energy storage cells to face a new round of challenges, especially in technological innovation. Whether actively or passively, how to meet the new demands of savvy investors and how to provide better cells to create better energy storage assets is crucial. Large Cells Become a Definitive Trend This year, large energy storage cells have attracted much attention. Compared to the first generation 280Ah and the second generation 314Ah, the next generation 500Ah+ large cells bring many significant advantages: higher energy density, higher integration efficiency, and lower system costs, which can help energy storage assets achieve higher investment returns. Taking CATL's 587Ah cell as an example, the initial energy conversion efficiency reaches 96.5%, and the cell energy density reaches 434Wh/L, which is a 10% improvement over the 314Ah cell, with system energy density increasing by 25% and the full lifecycle investment return rate improving by 5%. Large size has become an attractive means to enhance the value of energy storage assets. Now, whether it is 587Ah or 684Ah, large cells are rapidly being pushed to the market. Among them, CATL's 587Ah cell has already completed 2GWh of shipments, with an expected total shipment of 3GWh for the entire year of 2025. This also marks the official entry of the next generation 500Ah+ large cells into the stage of large-scale commercial use, and they are expected to achieve accelerated penetration due to continuously optimized energy density, system costs, and full lifecycle investment return rates. If the 500Ah+ large cell is an inevitable trend, then what size is considered optimal? This discussion has sparked a prolonged "large cell debate" this year. Objectively speaking, it is unlikely that larger cells are always better. Whether it is winding technology or stacking technology, there is always a critical point for the improvement of system performance and the reduction of costs with larger sizes. Exceeding this critical point will result in diminishing positive effects compared to negative effects, making it not worth the cost. As for how each company judges this critical point, it varies from person to person. Some emphasize cell production schemes, some emphasize system integration, and some emphasize specific application scenarios, etc. CATL's 587Ah cell is said to have found a golden balance point based on legal norms, whole station matching, system integration, and electrochemistry. As for what size is optimal, only time will tell. Safety and Reliability Become More Sensitive For any asset, safety and reliability are always the first bottom line For the next generation of 500Ah+ large battery cells, this may be even more sensitive. Larger sizes do indeed bring improvements in energy density, but they face more severe safety challenges. From the perspective of battery cell design, it exacerbates the accumulation of heat and high-temperature gases, while self-discharge accounts for as much as 70% of failures in energy storage cells. We know that the larger the cell capacity, the more energy is released during thermal runaway, generating more combustible gases, which makes it easier to cause explosions, fires, and thermal propagation. Especially for 1000Ah+ compared to 500Ah+ cells, safety designs need to be redone, and the difficulty of safety design will increase exponentially. Currently, the industry is keen on pursuing larger sizes and capacities, but it must be clearly recognized that any so-called innovation that ignores the safety and reliability of energy storage cells will be a deviation from the essence of the product. All innovations must be based on safety. However, the safety and reliability of battery cells require substantial R&D investment, technical support, experience accumulation, and practical validation, which cannot be achieved overnight. CATL's efforts in this regard are based on in-depth research into the safety of large battery cells and the intrinsic safety of materials, constructing a technical system that includes safe electrolytes, non-diffusion anodes, and heat-resistant isolation membranes, addressing safety deterioration caused by size from the source of heat generation. Its 587Ah cell has achieved a safety failure rate at the PPB level (one in a billion). Lithium batteries are also constrained by the "barrel theory," meaning that the overall performance of the cell is not determined by the longest board but by the shortest board. For safety, there are no scores of 99; there are only 0 and 100. Any savvy investor will pursue certainty and stability in cash flow and returns over the entire lifecycle, with considerations of safety and reliability always being the top priority. The ability to resist degradation needs more attention Compared to well-known metrics like energy density, cycle life, and low-temperature performance, degradation is an easily overlooked indicator. In the "assetization" era, energy storage stations need to pursue more durable outputs, and the ability to resist degradation is a crucial parameter for achieving this goal. A lower degradation rate means that the battery capacity of the energy storage station degrades more slowly, resulting in a longer lifespan and lower cost per cycle, naturally leading to better economic benefits. A longer lifespan can also better match the lifecycle of energy storage cells with the project cycle of energy storage stations, thereby reducing the necessity of replacing batteries in between, further enhancing the overall cycle benefits of the energy storage station. Regarding the topic of "degradation," Morgan Stanley recently conducted a study on battery degradation in electric shared vehicles, which is also relevant as "production materials" worth referencing for energy storage stations. The research results indicate that the degradation rates of two models equipped with CATL power batteries (Sample 11 and Sample 12) are significantly lower than those of other models. Under similar nominal endurance ranges, CATL batteries can support longer actual endurance, exhibiting better anti-degradation properties. Taking models with a range of 500km as an example, after running 200,000 kilometers, models equipped with CATL batteries have significantly more endurance compared to competitors. This is quite an interesting perspective. A low degradation rate is equivalent to increasing the initial capacity, which is akin to lowering the initial cost per watt-hour, thereby significantly enhancing the return on investment for energy storage stations, while also allowing for faster capital recovery of storage assets, shortening the payback period. Morgan Stanley also pointed out in its research report that in the commercial energy storage market, the cost per cycle is more valuable than simply the cost per kilowatt-hour, as it directly reflects the economic efficiency of the battery over its entire lifecycle, thus explaining why CATL's energy storage systems can achieve better economic benefits than its peers. This may be the first evaluation of the "assetization" capability of energy storage in the entire market. It reminds me of another example: in the Zhangbei Wind-Solar Storage Transmission Demonstration Project, which was put into operation in 2011, there were four energy storage battery suppliers at that time. According to subsequent tracking, some have already ceased operations, while others frequently changed batteries; only CATL did not change batteries throughout the process, and even after 14 years of operation, the recovered battery capacity still reached 90%. Over a longer time frame, "anti-degradation" is crucial. Morgan Stanley's research on independent energy storage projects in California and commercial energy storage in China shows that the IRR in slow degradation scenarios is significantly higher than in fast degradation scenarios. For example, in California's independent energy storage projects, the difference is 10 percentage points. This highlights the importance of "anti-degradation capability" for asset returns. Morgan Stanley even believes that the ability to control degradation will become a key determinant of future product differentiation and pricing differences. The anti-degradation capability, especially after the issuance of Document No. 136 in the "assetization" era, has become more apparent and sensitive in market value, with investors paying more attention and potentially impacting the value orientation of the next generation of energy storage cells. Whether for power batteries used in shared mobility or energy storage batteries used in energy storage stations, in the "assetization" era, "anti-degradation capability" is an important influencing factor on the economic viability of battery assets, becoming even more evident over time and should not be underestimated by long-term investors. If safety and reliability are the baseline for energy storage assets, then battery degradation determines the upper limit of returns on energy storage assets, and this will become increasingly apparent in the "assetization" era. A true KPI. Today, the energy storage industry is entering a vigorous "assetization" era, with energy storage stations shifting from low-quality deployments to high-quality development. Savvy investors are "voting with their feet," paying more attention to how to choose better cells to create superior energy storage assets, and are expected to reshape the value logic and competitive landscape of the next generation of cells. ** Risk Warning and Disclaimer The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk