CITIC SEC's 2025 Energy Storage Industry Investment Strategy: Focus on shaping the competitiveness of the industrial chain.

CITIC SEC has released a research report stating that the energy transition has resulted in a clear demand for energy storage. With the rapid growth of new installations globally, shaping the competitiveness of the industry chain has become the main focus. On the demand side, both domestically and internationally, the demand for energy storage, especially large-scale and commercial energy storage, is showing a rapid growth trend, driving an increase in shipments. In the industry chain, short-term energy storage systems still face certain price pressures. In this situation, the key to shaping competitiveness lies in the capabilities of grid-side integration, localized solutions, and technological upgrades. It is suggested to pay attention to PCS manufacturers for large-scale energy storage, system integration manufacturers with solution capabilities, and some component suppliers. CITIC SEC's main points are as follows: Energy transition is driving global energy storage demand up Several factors are driving global energy storage demand up, including increasing electricity consumption, increasing penetration of renewable energy sources, improvements in grid structure, and decreasing battery costs. It is expected that with the restructuring of production capacity, the electrification, and the advancement of AI among other factors, global electricity consumption is expected to maintain stable growth. Energy transition and the increasing penetration of renewable energy sources have caused fluctuations in renewable energy electricity production, affecting the grid, which can be effectively addressed by energy storage systems. Considering upgrades to domestic power systems, aging issues in power systems in Europe and America, and the backwardness of power systems in some countries, energy storage systems are needed to support grid systems. In addition, the decline in lithium carbonate and battery prices has created conditions for the economic viability and broader application of energy storage. Since early 2023, the price of energy storage systems has decreased by more than 60%. It is expected that the global new energy storage installations will reach 168/224 GWh by 2024-2025, with a year-on-year growth rate of 66%/34%, showing different characteristics in different countries and regions. Domestic energy storage installations are expected to maintain high growth, with continuous improvement of business models Looking at the domestic energy storage tender situation, new installations are expected to maintain rapid growth. From January to October 2024, domestic front-end energy storage tenders amounted to 76.6 GWh, mainly including energy storage on the power generation side and the grid side, with an 86% year-on-year growth. Considering economic issues, the proportion of grid-side energy storage is continuously increasing. In addition, given that certain regions can achieve a certain level of economic viability, the number of filings for commercial and industrial energy storage in China has significantly increased, reaching 30.9 GWh from January to September 2024. The factor that will have the greatest impact on the development of the domestic energy storage industry is the advancement of electricity market reform, which includes capacity-based electricity pricing mechanisms, ancillary service markets, and time-of-use electricity pricing, among others. It is expected that the above-mentioned factors will be effectively promoted with the increasing penetration of renewable energy sources, creating more space for the development of the energy storage industry. It is expected that new domestic energy storage installations will exceed 80 GWh and 110 GWh in 2024 and 2025, respectively, with an average annual growth rate exceeding 60%. Strong growth in overseas energy storage demand with distinct regional characteristics The overseas energy storage market is experiencing strong growth, especially in the areas of large-scale and commercial energy storage, with different countries showing different characteristics. Looking at the Middle East, under the influence of various factors such as installation planning and resource endowment, the projected new energy storage installations in the Middle East in 2024 and 2025 are expected to be 7.8/10.6 GWh, respectively. With the decline in interest rates and the resolution of project approval blockages, the construction progress of energy storage projects in the United States is expected to accelerate. According to WoodMackenzie's forecast, the United States is expected to add 34/45/51 GWh of new energy storage installations from 2024 to 2026, totaling 130 GWh, with a CAGR of over 20%, of which about 90% will be front-end energy storage. With the increasing penetration of renewable energy installations and the support of electricity market mechanisms, Europe's energy storage installations are also expected to increase significantly. It is projected that from 2024 to 2026, Europe will add 28/36/61 GW of energy storage, with growth rates of 63%/29%/69%, and a CAGR of 52% from 2024 to 2026, with over 60% being front-end energy storage. The rapid growth of overseas energy storage markets also provides a broader market space for the development of the domestic energy storage industry. Domestic industry advantages are evident, competitiveness is key The domestic energy storage industry chain has obvious advantages, including batteries, PCS, system integration, and temperature control systems. Over the past two years, the prices of energy storage systems have continued to decrease, with prices falling from 1.5 yuan/Wh in early 2023 to less than 0.6 yuan/Wh for some domestic energy storage systems. This situation is partly due to the decline in raw material prices and increased competition. In this context, considering the diversity of market demands and technological requirements, the key to shaping competitiveness in the industry chain lies in the capabilities of grid-side integration, localized solutions, and continuous technological advancements. Enterprises with competitive advantages will have a significant edge in future market competitions. Investment strategy: Global energy storage deployment demand is rigid, with a vast long-term industry space. Developed economies face issues of aging grids, blockages, and expansion, while emerging economies require support for electricity and power grids, with energy storage being an essential tool to support the grids of developed and emerging economies. In China, the market demand and installation outlook are relatively high, but downstream difficulties in closing the business model, price pressures on the industry chain, and a fragmented competitive landscape are challenges. The United States has a weak power grid infrastructure, a mature electricity market mechanism, and high market barriers, being a front-end large-scale storage market with both growth potential and high certainty, with high market barriers. Europe remains one of the most potential markets for new energy, with front-end energy storage taking over home storage in 2024 to unleash growth potential, leading to a dispersed competitive landscape. The Middle East has a clear attitude towards energy transition, and energy storage is synchronously scaled up as post-cycle support for new energy to support grid expansion and off-grid operations, with a concentrated competitive landscape, where winners are mainly domestic integrators. China has a complete energy storage industry chain from PCS, lithium batteries, temperature control systems to integration, with some companies being the most important suppliers in the global energy storage market, and some component companies have also entered the overseas market, including Tesla and others.Enterprise. Combining the above industry trends, it is recommended to grasp the opportunities for high-speed growth in the energy storage industry around four main lines: 1) Energy storage PCS link; 2) Domestic and foreign large energy storage systems and EPC links; 3) Domestic and foreign household energy storage systems links; 4) Energy storage temperature control and fire safety links.Risk factors: Price fluctuations in the industrial chain; the dilution of revenue in the electricity market leading to demand slowdown risks; domestic and international electricity demand lower than expected; electricity market reform falling short of expectations; early exit of subsidies in related industries; restrictions on overseas expansion, etc.