Battery manufacturers have faced challenges this year, with companies like LG Energy Solutions, Samsung SDI, and Panasonic’s battery division reporting lower revenues and profits. Even CATL, the world’s largest battery maker, experienced its first quarterly profit decline earlier this year. The main reasons for this downturn include a slowdown in the growth rate of electric vehicle sales, leading to reduced battery volumes, fierce competition, and price cuts to maintain market share.
Electric vehicles are the largest source of battery demand, but the industry is now grappling with overcapacity issues. In China alone, battery manufacturing capacity reached 2.2 terawatt-hours at the end of 2023, nearly double the 1.2 TWh of global demand expected for 2024. However, there is a growing area of interest in the stationary storage market, which has seen significant growth over the last two years. BloombergNEF analysts predict that this trend will continue, with energy storage installations expected to rise by 61% this year. Prices for turnkey energy storage systems have decreased by 43% from the previous year, leading to a substantial increase in deployments.
China has become a key player in this space, where energy storage applications surpassed consumer electronics as the second-largest application for battery production last year. Global energy storage installations, including residential, commercial, and utility-scale projects, now represent a larger share of total battery demand, increasing from 6% in 2020 to an expected 13% this year. The ratio of EV battery demand to stationary battery demand has fallen significantly, from 15-to-1 to 6-to-1 over the past four years. This shift indicates that stationary storage is becoming an increasingly important segment of global battery demand, growing at a faster rate than the EV segment.
In BloombergNEF’s latest Electric Vehicle Outlook, expected EV battery demand over the next four years was revised downward due to lower forecasts in key markets such as Germany, Italy, and the United States. However, the overall forecast for lithium-ion battery demand remained steady, thanks to higher expectations for the stationary storage market.
Tesla’s recent results also reflect this trend. While the company’s EV sales declined in the second quarter, its energy generation and storage division deployed 9.4 GWh, more than doubling the 4.1 GWh installed in the first quarter. This puts Tesla on track for a significant increase over the 14.7 GWh deployed in all of 2023.
Previously, many energy storage projects focused on ancillary services in power markets, such as regulating grid frequency. Although these services can be profitable, they are relatively small markets that have increasingly reached saturation. This year, however, two-thirds of all storage installations are being used for energy-shifting applications, such as price arbitrage and integrating renewable energy sources. This marks a substantial increase from previous years and is driven by new provincial mandates in China requiring wind and solar projects to be paired with energy storage.
As battery manufacturers look for new markets to address excess capacity, creative solutions are emerging. At a recent industry trade show, BNEF analysts observed a significant number of residential energy storage systems designed to fit on balconies, paired with solar PV systems in Europe. While these are niche applications, for now, they highlight how industries adapt under pressure. The outlook for battery demand will remain closely linked to EVs, but the stationary storage market is becoming increasingly important as one part of the energy transition slows while another accelerates.
