June 29, 2018

Electrical Energy Storage Europe Conference - Shortages of Cylindrical Li-Ion Cells Appear

005930 KS, 051910 KS, 1211 HK, 6752 JP, SIE GR, TSLA
By Sylvain Gavard
Stronger-than-expected global demand for energy storage systems from the solar residential and commercial sectors is leading to shortages of cylindrical lithium-ion cells, and storage system prices are expected to stop declining in 2019.

OTR Global attended the 2018 Electrical Energy Storage Europe exhibition (EES Europe) held in Munich June 20-22. Discussions focused on energy storage systems demand, pricing, the competitive landscape and key issues affecting demand and the supply chain.

European, Worldwide Demand Beats Expectations
More than 50,000 attendees crowded the expo floor at this year’s Electrical Energy Storage exhibition in Munich, Germany. Six of seven exhibitors who OTR Global spoke with on the expo floor said current demand for energy storage solutions in Europe was stronger than their January expectations, and several attendees who are active worldwide said global demand was beating their expectations.

Sources said the main drivers were increasing demand from private and small commercial solar PV installations, a slight increase in demand from the e-mobility segment, and decreasing energy storage prices amid increasing electricity prices globally. Only one source at the conference said utilities' or large industries' demand for large energy storage systems was driving demand. A provider of production equipment for lithium battery cells said, “Our business is selling machines and assembly lines for cells, and we have a lot more orders than expected, especially for line automation equipment, because our customers have more orders than they expected. The storage buzz is now turning into a real storage business.” A PV installer said, “In Europe and the U.S., there is a clear fear of rising energy prices. In Europe, every other private solar system is now installed with a storage solution. That’s because grid parity for solar installations is there; there are now really good mature energy storage solutions on the market, and solar investors in the private segment and the small business segment love to go for self-consumption. In Africa and Asia, there is also much development aid that supports solar PV demand, and this in turn also motivates some governments to invest in large energy storage solutions, like the large energy storage containers from Siemens [AG]."

Shortage of Cylindrical Li-Ion Cells, Tensions Likely to Strengthen in 2019
Several sources said leading cell providers were already limiting their customers’ orders of lithium-ion (Li-Ion) cylindrical cells, or even canceling them. A battery integrator said, “There is no shortage for prismatic cells and pouch cells, but there is a lack of cylindrical Li-Ion cells in some segments like e-mobility. Cell producers stopped selling to smaller clients, and Panasonic [Corp. (6752 JP)] for example cut its client list into less than half.” An energy storage producer said, “Panasonic canceled some contracts, Samsung [Electronics Co. Ltd. (005930 KS)] doesn't take new clients, LG [Chem Ltd. (051910 KS)] has hardly any supply for new clients, and there are no new cell producers in close sight.” According to several sources, shortages are not primarily caused by a shortage of lithium or cobalt, but from limited assembly line capacity. One said, “The bottleneck in my mind is not the raw material -- lithium -- but the processing of it, transforming it into cells. Processing the cells afterward is easy, even if it’s often not automated enough yet.”

Sources said supply tensions for Li-Ion cells might worsen in 2019 if demand from the e-mobility segment strengthens while demand from the solar segment continues to increase because of falling solar PV prices following the cancellation of solar subsidies in China, or if geopolitical tensions in Africa limit the production of cobalt, which is required for the production of Li-Ion cells. An energy storage systems producer said, "Cell shortages are already visible, but problems are solvable, for example by changing the cell type and so on. But if e-mobility and solar energy storage ramp up at the same time, the lack of cells will become dramatic." An energy storage systems producer said, “Cobalt is a risk, in my opinion. The only region where it can be mined is the middle of Africa, in what’s called the cobalt belt.”

Price Drops Expected to Stabilize in 2019
Sources said overall costs for energy storage installations were down between 10%-20% yy because of pressure from companies like Tesla Inc., LG and BYD Co. Ltd. (1211 HK), but they expect prices to be mostly stable in 2019 because of strong demand and shortages of cylindrical Li-Ion cells that have already started to appear. An energy storage systems producer said, “There still is pressure on prices, driven for example by Tesla and their 8,000 euro offer for their 12 kWh Powerwall -- although they can’t deliver.” A solar PV and battery storage solutions installer said, "As many of my colleagues, I think the time of the strong price drops is over, mostly because of cell shortages. The next challenge to keep low prices will be automation, like what happened in the solar PV industry.”

Sonnen, LG, BYD Most Favored 
Sonnen GmbH topped the list of the energy storage producers expected to gain share, with sources citing a technological competitive advantage due to its use of lithium-iron (Li-Fe) cells instead of lithium-ion cells, and the brand also appearing trendier to customers because of an electricity-sharing platform for owners of Sonnen systems. A PV and energy storage installer said, “What gets more and more attention is degradation, which is important when you want to use the storage device for10 years and longer. We admit that Li-Fe is much better than Li-Ion on this aspect, with Sonnen on the safe side there.” An energy storage systems producer said, “Sonnen is one of the market leaders, with about 21% of the German market and about the same in the global market. Only LG is bigger.” LG ranked second in the list of the brands expected to gain share in the market, mostly on price, although BYD is getting close to them with attractive pricing and handy installations (this being a key success factor for household installations, installers said). A PV and energy storage installer said, “LG’s solutions look ugly and are dirty to install, but they are successful thanks to price and brand reputation. They have to be careful, though: In some segments I really see BYD on their heels. BYD is cheap and nice in stacking modules.”

Frustration with Tesla's Lack of Availability Growing
Tesla topped the list of the brands expected to lose share, cited by four of seven sources as losing share despite attractive pricing, because of their lack of technological innovation, perceived poor service and lack of availability. A Western solar PV manufacturer said, “What I wouldn't take is Tesla. We worked with them, but they are unreliable and they offer no service. It’s just a fancy brand.” A PV and energy storage installer said, “Tesla is losing its own game. Customers wanted them because the brand is trendy and looks cool, not for its technology. But Tesla cheated their distributors and their partners by making a certificate obligatory for all Tesla Powerwall installers  -- and after they had 350-400 client addresses, they kicked all the distributing and system partners out. Now, they can't deliver all those mini-size orders and they don't manage to provide service to them." An energy storage systems producer said, “I have two partners who both ordered some dozens of Powerwalls from Tesla -- one at the end of last year, the other in spring this year -- and nothing has arrived yet. Tesla now talks about delivery maybe in 2019!” Another said, “I don't know what's going on with Tesla. They get all of Panasonic’s cells, and they also build their own cells, but clients tell us their orders are not delivered. I don’t get it. Anyways, their technology is stone age compared to Sonnen’s, or Deutsche Energie Versorgung GmbH’s Senec, especially with regard to cooling systems.”

Lithium-Iron Batteries Most Promising for Solar Installations
All sources said they expect lithium to remain the leading technology for energy storage solutions, citing space, weight, and safety advantages against competing technologies like nickel-metal hydride batteries (NiMH), lead-acid batteries, and redox flow batteries. Among lithium technologies, several sources said they expected lithium-iron (Li-Fe) to gain share against lithium ion (Li-ion) in the solar segment, as they offer better performance, are safer, and don’t not require cobalt, whose supply is dependent on geopolitical tensions in Africa. A solar PV and energy storage installer said, “NiMH and lead-acid batteries have memory effects [they lose their maximum energy capacity with time] or are too heavy. Redox-flow will stay a niche because it's heavy and requires space. Fuel cells, because of hydrogen under high pressure, are mostly considered to be dangerous -- for a private use at least. I don't see any really competing technology for lithium yet, and none at all for lightweight or mobile solutions.” An energy storage systems producer said, “Li-Fe batteries don’t require cobalt, unlike Li-Ion batteries, they are safer, make lots of cycles without degradation, and they can deliver great peak performance. They are larger and heavier than Li-Ion batteries, so it’s not viable in the e-mobility segment, but for energy storage in a cellar or a garage, who cares?”

What: 2018 Electrical Energy Storage Europe (EES Europe) Exhibition
When: June 20-22, 2018
Where: Munich, Germany
Who: Suppliers, manufacturers, distributors and professional users of stationary energy storage solutions and battery systems. The conference was attended by more than 450 suppliers of products for energy storage technology and systems from Europe, the United States and Asia.