Samsung SDI and LG Chemicals, Leading Korea’s Global Advance as a Great Power in the ESS Field

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Global ESS Market is expected to grow at a compounded annual growth rate of 45% through 2025.

Global ESS market is expected to grow at a compounded annual growth rate of 45% through 2025. As well as the growth rate, the ESS market is anticipated to rapidly grow into a meaningful market for battery makers with a capacity of 17.3GWh and US$4.2 billion in value.
Korea’s ESS market grew from 265MWh in 2016 to 1.2GWh in 2017 with strong policy support, such as strengthening incentives for the ESS-exclusive rate system and weighting five times of REC (Renewable Energy Certification) to ESS linked with renewable energy and, in 2018, will grow almost four-fold to 4.7Gwh. This means Korea will account for almost 50% of the global ESS market.
Korea has the experience of having already contributed to the expansion of the global market even in the ESS market, which replaces the frequency regulation reserve. Korea is expected to contribute to expansion of the global market in the peak-control ESS market or the ESS market linked with renewable energy.
Unlike the forecast of the market research institutes, Korea’s ESS market is expected to grow continuously in 2019 to some extent following the substantial growth in 2018. However, the incentive enhancement of the ESS-exclusive rate system, which is the current growth engine of Korea’s ESS market growth, is scheduled to terminate at the end of 2020. That is to say, even if ESS is installed in 2019, payback can be only on a five-year level, and in case the ESS price drops lower than the current price by 10~15%, it may be reduced to the four-year level. Therefore, sufficient economic feasibility can be secured.
In addition, if you install the ESS linked with renewable energy by 2019, you can receive five times REC weight. As the weight will be reduced four-fold after 2020, the installation demand can increase greatly before the weight goes down. This is because IRR (Internal Rate of Return) will drop by at least 4.0% point if the weight goes down four-fold.
The ESS linked with renewable energy has the highest REC sensitivity. REC price is expected to rise due to change of the REC weight following the recent RPS policy. In other words, it is forecast that the expected profitability of the ESS project will likely become considerably stable and the investment will be able to be boosted accordingly.
The recent growth of the domestic ESS market has been driven mainly by the installation of ESS based on the exclusive rate system. Among them, most of the markets are those where the companies with high electric power demand invest directly in their own funds. However, in the future, it is expected that PEF will be able to contribute to market expansion through investment in the commercial buildings, etc., based on the profitability of ESS so far.
Researcher Lee Hak-mu of Mirae Asset Daewoo Co., Ltd. commented, “The biggest beneficiaries of the faster than expected ESS market growth are Samsung SDI and LG Chem, two leading Korean battery makers.”
This researcher forecasts that Samsung SDI will record KRW1.4 billion in sales of mid- to large-sized batteries for ESS in 2018, growing almost three-fold compared with the previous year. The contribution to sales is about 16%, and the operating profit contribution is 34%. Samsung SDI uses ESS lines mixed with EV lines, making it easy to respond to rapidly growing customer demand and possible to improve profitability by increasing the rate of operation of mid- to large-sized batteries.
LG Chem is also a global top-tier battery maker and has been maintaining good relations with major customers in the United States and Europe, thereby expecting to benefit from the growth of the ESS market in the future.

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