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2019.12.31
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Current Status and Prospects of Korea's Energy Storage System Industry

Korea's ESS products have experienced unprecedented growth thanks to the government’s renewable energy policies.


Introduction


Energy storage, or ESS, is the capture of energy produced at one time for use at a later time. It consists of energy storage, such as traditional lead acid batteries or lithium ion batteries and controlling parts, such as the energy management system (EMS) and power conversion system (PCS). Installation of the world’s energy storage system (ESS) has increased from 0.7 GWh in 2014 to 4.8 GWh in 2018. This number is expected to grow to 70.5 GW in 2025. The global ESS market in 2017 was about USD 2.42 billion. This amount is expected to increase to USD 15 billion in 2020 and USD 19.9 billion in 2025. During that period average annual growth rate will maintain at 30 percent. Battery-type ESS is being actively adopted, especially lithium ion batteries, due to its great potential for growth. This is largely due to its transformation efficiency and environmental friendly traits. Experts forecast the global lithium ion battery market to expand from 1.8 GWh in 2016 to 8.5 GWh in 2020 and 16.2 GWh in 2024.


Korea’s ESS accumulated capacity: 2/3 of that of U.S. in 2018


As of 2018, Korea's ESS installation level increased by 2.91 GWh or 10 percent of the world’s annual installation and reached to 3.63 GWh. Its accumulated capacity is about two thirds of that of the United States. Considering that Korea’s land mass is only about 1 percent of that of the U.S., the volume of Korea's ESS installation is enormous. Korea's lithium ion battery production is one of the world’s highest and continues to increase rapidly. In particular, major Korean companies like LG Chem Ltd., Samsung SDI and SK Innovation’s total production capacity is 65 GWh which will be expanded to 326 GWh in 2023. During that period, the annual average growth rate will be 50 percent.


ESS annual Installation Ranking of Major Countries (2018)

ESS annual Installation Ranking of Major Countries
Ranking Country Share (%)
1 U.S. 36.8
2 Germany 12.7
3 Japan 11.8
4 Australia 11.0
5 S.Korea 10.2
6 UK 3.4
7 Italy 2.7
8 China 2.6
Others 8.8
Total 100
*Source: DOE, Hana Institute of Finance (2019)

Relatively low competitiveness overall


Korea’s ESS industry takes up a large share in the global market, but its overall competitiveness is relatively lower than major global companies. In the area of fundamental technology, Korea’s competitiveness level is about 82 to 85 percent of that of the world’s best. Its parts and material competitiveness stands at about 79 to 84 percent. Its manufacturing technology is relatively higher, standing at approximately 88 percent. However, the overall price level of Korea’s ESS industry is generally about 25 to 27 percent higher than those of other global companies. Compared with the explosive expansion of the domestic ESS installation capacity, Korea has recently suffered from fire accidents at ESS sites perhaps because the instability of ESS systems. Therefore, LG Chem and Samsung SDI’s sales performance has drastically dropped since the middle of 2018. As a result, Samsung SDI announced its plans to invest KRW 200 billion to secure ESS system safety, and experts expect that these companies will recover their sales levels in 2020.


Comparison of Competitiveness by ESS Size (2017)

Comparison of Competitiveness by ESS Size (2017)
Type Leading Companies Competitiveness
(Top country=100)
Prices
(USD/MWh3))
Global Domestic Fundamental technology Parts/materials Manufacturing technology Global Domestic Difference
Medium/Large ABB, SMA/
Younicos, Parker
Hyosung, Posco, IntechFA 82 79 88 950 700 27%
PCS SMA, Schneider, Panasonic/
Nichicon, Ideal Power/
Outback
IntechFA, Sebang, Kukje com.,
T-Factory, Yujin EneFarm
85 84 88 390 490 25%
*Source: INI R&C (2017), Supporting policy and strategy for strengthening of industrial eco-system of ESS industry, March 2017.

Major Korean companies penetrating the global market


Major ESS companies in Korea are active players in the global market. LG Chem and Samsung SDI are front runners. Hanhwa Energy and LSIS have developed a new business model that combines photovoltaic and energy management systems. For the successful realization of this project, they are pursuing cooperation with KEPCO, a major electricity supplier in Korea. The power conversion system (PCS) is a crucial part of ESS installation. Experts estimate that the PCS share makes up about 25 percent of the value of ESS. Destin Power is the strongest company in this field, while Kokam is chosen as the highest ranked global company by Bloomberg and Navigant Research. Recently the Volkswagen Group announced the signing of MOUs with LG Chem, Samsung SDI and SK Innovation to supply its production of 22 million electric vehicles in the next 10 years.


Recent domestic/global activities of Korea's ESS Companies

Recent domestic/global activities of Korea's ESS Companies
Companies Project/Strategy
LG Chem - Provided accumulated capacity of 3.8 GWh globally until Dec. 2017
- Supply battery for VW’s EV production in next 10 years (22 million vehicles in total)
Samsung SDI - Provided 240 MWh of ESS (70% of total installation capacity) in California in Feb. 2017
-Invest KRW 200 billion to investment to secure ESS system
-Supply battery for VW’s EV production in next 10 years (22 million vehicles in total)
SK Innovation - Announced active participation in ESS business and developing a new ESS solution
-Supply battery for VW’s EV production in north America since 2022
Hanhwa Energy - Final contractor of the USD 140 million project of hybrid system of 55 MW + ESS 208 MWh presided by HECO (Hawaiian Electric) in Jan. 2019
Doosan Heavy Industry -Awarded the 2019 project award at the World Solar Energy/ESS Conference (acknowledged by its successful installation of 10 MWh on the California Beacon site)
SK D&D -Top domestic developer
-Operating industrial ESS facility of 70 MWh in 8 sites
-Differentiated competitiveness in ESS system based on strategical alliance with GridWis which is strong in PMS
Destin Power - Expanding sales: KRW 54 billion in 2018 from KRW 17.8 billion in 2017
Kokam -Accumulated capacity of 237 MW globally
-Merged to SolarEdge
-Expanding its production capacity to 1 GWh from 120 MWh thru investment of KRW 100 billion
KEPCO - World’s largest 376 MW frequency regulation facility in Nov. 2017

Government strongly supports in ESS demand and R&D technology development


The Ministry of Trade, Industry and Energy (MOTIE) has introduced many efficient support measures to boost Korea’s domestic ESS demand. These include the mandatory installation of ESS in public buildings and the revision of special ESS price reduction. For public buildings, there are mandatory measures enforcing a minimum of 5 percent ESS installation for electricity contracts over 1 MW. Recently the government is establishing the 4th Energy R&D Plan in which it will help to develop new energy technology including new energy material which enhances material competitiveness of Korea’s ESS industry.


By Daejong Gwak (djgwak@kiet.re.kr)
Research Fellow Korea Institute for Industrial Economics and Trade (KIET)


< *The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA. >


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