(Yicai Global) Nov. 11 -- Although battery storage power stations are on the rise in China, largely driven by their role in stabilizing the intermittent energy supply generated by renewable energies, the relentless rise of the cost of batteries is putting a damper on the sector, Yicai Global has learned.

Battery costs keep increasing as the price of raw materials goes up and concerns about the profitability of battery power plants are causing commissioners to take a wait-and-see stance, industry insiders said to Yicai Global. Batteries account for between 50 percent and 60 percent of the total cost of such stations.

“We were recently contacted by a business that wanted to cooperate with us on new style energy storage stations, but we had to stay cautious due to the very high battery prices,” Hu Esheng, director of the China Photovoltaic Industry Association and market director at Guangdong Fivestar Solar Energy, told Yicai Global.

Worries about the cost of new-style energy storage power stations need to be reduced by technological advances, said Lin Boqiang, director of the China Institute for Studies in Energy Policy at Xiamen University.

Battery life is another problem, Hu said. “Batteries will not work for more than 10 years, no matter how good they are, and he is not sure whether it will be worth buying more new batteries at that time.

Battery storage power systems help to stabilize grids by reducing imbalances between electricity demand and supply. They can help regulate voltage fluctuations and supply power during peak usage times. They can adjust the intermittent energy supply generated by renewable energies such as wind and solar.

And they have become increasingly popular amid China’s green agenda. Newly installed capacity of battery storage power plants is expected to reach 47 million kilowatts between 2021 and 2025, said Yue Fen, deputy secretary general of the China Energy Storage Alliance, citing preliminary estimates from local governments.

Tight Supply

But batteries are in tight supply. “We contacted several battery manufacturers. They all asked us to wait as there is a shortage,” an executive with a new energy storage company told Yicai Global. Our orders are now scheduled to be delivered at the end of next year.

The shortfall is partly due to strong overseas demand. “Chinese firms sold more than 36 gigawatt hours of batteries in the first half, with nearly 80 percent to foreign markets,” Yue said. “The sales of most manufacturers this year have already surpassed that of the whole of 2021.”

“The majority of our orders are from overseas,” said Li Dan, vice president of Shenzhen BAK Power Battery, one of the country’s top 10 battery makers. “Energy storage batteries account for about 20 percent of the company’s total battery capacity and the utilization rate is quite high.”

Expansion Plans

As a result, battery makers are hiking output. As of September, there were 26 battery production expansion projects announced this year with total investment of nearly CNY300 billion (USD42 billion), according to incomplete statistics.

“We compete not only in the speed of construction, but also in the size of the project,” an insider at another battery manufacturer in Shenzhen told Yicai Global.

Editors: Tang Shihua, Kim Taylor