Home energy storage system, also known as battery energy storage system, is a rechargeable energy storage battery at its core, usually based on lithium-ion or lead-acid batteries, controlled by a computer and coordinated with other intelligent hardware and software to achieve charging and discharging cycles. Home energy storage systems can usually be combined with distributed photovoltaic power generation to form home photovoltaic storage systems, and the installed capacity is experiencing rapid growth.
Figure: Home photovoltaic energy storage system
Source: Jiaogu Solar, Dongfang Securities
Development Trends of Home Energy Storage Systems
The core hardware equipment of a home energy storage system includes two types of products: batteries and inverters. From the user's perspective, home optical storage systems can reduce electricity bills while eliminating the negative impact of power outages on normal life; From the perspective of the power grid, household energy storage devices that support unified scheduling can alleviate the power shortage during peak hours and provide frequency correction for the power grid.
Figure: Cost Structure of Home Photovoltaic Energy Storage System
From the perspective of battery trends, energy storage batteries are evolving towards higher capacity. With the increase in household electricity consumption, the charging capacity of each household gradually increases, and the system can be expanded through modularization. At the same time, high-voltage batteries have become a trend.
From the perspective of inverter trends, there is an increasing demand for hybrid inverters suitable for incremental markets and off grid inverters that do not require grid connection.
From the perspective of terminal product trends, the current trend is mainly based on split units, which are used in combination with battery and inverter systems, and gradually develop towards integrated machines in the future.
From the perspective of regional market trends, the differences in power grid structure and electricity market result in slight differences in mainstream products in different regions. The European grid connection mode is the main mode, while the United States has more grid connection and disconnection modes, while Australia is exploring the virtual power plant mode.
Why does the overseas household energy storage market continue to grow?
Benefiting from the dual wheel drive of distributed photovoltaic and energy storage penetration, overseas household energy storage has grown rapidly.
The energy transformation in overseas markets is imminent, and the development of distributed photovoltaics has exceeded expectations. In terms of photovoltaic installation, Europe has a high degree of external dependence on energy, and local geopolitical conflicts have exacerbated the energy crisis. European countries have raised their expectations for photovoltaic installation. In terms of energy storage penetration rate, the increase in energy prices has led to an increase in household electricity prices, and the economic efficiency of energy storage has improved. Countries have introduced subsidy policies to encourage households to install energy storage.
Taking a 4.68kw photovoltaic and 5.8kwh/6kw Wotai energy storage system in the UK as an example, the total investment is about 10000 pounds, equivalent to a unit price of 17.61 yuan/w. Among them, photovoltaic systems account for 32%, with modules costing 3.08 yuan/w and photovoltaic inverters costing 2.56 yuan/w. The energy storage system accounts for 35%, with a unit price of 4.97 yuan/wh. Other materials+installation fee of £ 3400, accounting for 33%.
Overseas market development and market space
The United States, Europe, and Australia are currently the main markets for household energy storage. From the perspective of market space, it is expected that 58GWh of new installed capacity will be added globally in 2025. In 2015, the annual new installed capacity of global household energy storage was only about 200MW. Since 2017, the global installed capacity has grown significantly, with a significant increase every year. By 2020, the global new installed capacity reached 1.2GW, a year-on-year increase of 30%.
We estimate that assuming a 15% energy storage penetration rate in the newly installed photovoltaic market and a 2% energy storage penetration rate in the stock market in 2025, the global household energy storage capacity space will reach 25.45GW/58.26GWh, and the combined growth rate of installed energy from 2021 to 2025 will be 58%.
Figure: Annual New Installed Capacity of Global Household Energy Storage (MW)
Data source: IHS Markit, Oriental Securities Research Institute
Europe and America are global markets with growth potential. From the perspective of shipment volume, according to IHS Markit statistics, the global new household energy storage shipment volume in 2020 was 4.44GWh, a year-on-year increase of 44.2%. Among them, Europe, the United States, Japan, and Australia are among the top, accounting for 3/4 of global shipments. In the European market, the German market is developing rapidly, with Germany's shipment volume exceeding 1.1GWh, ranking first in the world. The United States also has a shipment volume exceeding 1GWh, ranking second. Japan's shipment volume in 2020 was nearly 800MWh, far exceeding other countries, ranking third.
Figure: Global Household Energy Storage Shipments in 2020 (MWh)
Data source: IHS Markit, Oriental Securities Research Institute
Which links in the industrial chain will benefit?
The battery and PCS are two major components of household energy storage systems, which benefit the household energy storage market. According to our calculations, in 2025, 25.45GW/58.26GWh of new household energy storage capacity will be installed, corresponding to 58.26GWh of battery shipments and 25.45GWh of PCS shipments.
It is expected that by 2025, the incremental market space for batteries will be 78.4 billion yuan, and the incremental market space for PCS will be 20.9 billion yuan. Therefore, enterprises with a high proportion of energy storage business, large market share, wide channel layout, and strong brand power in the industry will benefit.
Overall, there are three types of enterprises in the industrial chain:
(1) Integrator, only brand, all equipment outsourced. Usually, purchased battery cells and inverters are integrated into products sold under their own brand, with comprehensive sales channels and strong brand power, such as Tesla, Sonnen, etc.
(2) Inverter manufacturers, either selling inverters separately or purchasing integrated battery cells/all-in-one machines, benefit from their brand and channel accumulation in the photovoltaic inverter industry and can quickly expand. The core of the energy storage system lies in the control of the inverter over the battery, that is, the communication between the inverter and the battery. Inverter manufacturers have a deep understanding of power electronics technology and have more advantages.
(3) There are two modes of participation for battery cell manufacturers. One is to supply battery cells to downstream brand merchants without participating in product integration and without revealing brands, such as Penghui Energy, Ningde Times, Yiwei Lithium Energy, etc. Battery cell manufacturers have diverse business fields and rich application scenarios. On the one hand, they can benefit from the rapid growth of the home storage industry, and on the other hand, they can collaborate with other businesses; Another mode is to produce battery systems that are sold separately or to simultaneously purchase inverter modules to complete hardware integration and software design, such as BYD and Paineng Technology.
Currently, there are two major trends in the business models of industry chain participants: firstly, inverter and cell manufacturers are integrated downwards, and product integration can strengthen control over sales channels and improve profitability. Secondly, some manufacturers focus on equipment supply, which can expand to more customers and a wider range of application scenarios to win by quantity.