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Thanks to their low cost and efficiency, Korea's ESS products have experienced unprecedented growth
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 and 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 700 MWh in 2014 to 1,629 MWh in 2016. 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. The global ESS market in 2016 was about USD 2.56 billion. This amount is expected to increase to USD 15 billion in 2020 and USD 29.2 billion in 2025.
Korea’s ESS installation status: the second largest in the word
As of 2016, Korea's ESS installation level increased by 52.4 MWh and reached 291.4 MWh, or 18 percent of the world market share. Its share is slightly over half of the United States’ market share. Considering that Korea’s land mass is only about 1 percent of that of the United States, the volume of Korea's ESS installation is huge. Even other developed countries such as Japan, Germany and Italy are far behind Korea. 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. produces 591 MWh, while Samsung SDI’s production level is 544 MWh, which is larger than those of other global major companies like China’s BYD (188 MWh) and the U.S.’ Tesla (186 MWh). The domestic ESS market increased to USD 263.1 million in 2016 and the country’s ESS export also grew rapidly to USD 400 million last year.
ESS Installation Ranking of Major Countries
| Ranking | Country | No. of projects | Installation (MW; market share) |
|---|---|---|---|
| 1 | USA | 292 | 570.6 (35%) |
| 2 | Korea | 55 | 291.4 (17.9%) |
| 3 | Japan | 47 | 254.6 (15.6%) |
| 4 | Germany | 38 | 122.2 (7.5%) |
| 5 | Italy | 31 | 56.2 (3.4%) |
| Total | 1,629.1 (100%) | ||
Relatively low competitiveness overall
Korea’s ESS industry takes up a big 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 83 percent of that of the world’s best. Its parts and material competitiveness stands at about 80 percent. But its manufacturing technology is higher, standing at approximately 88 percent. Korea’s ESS industry also boasts strong price competitiveness. The prices of the country’s ESS products are generally 21 to 27 percent lower than those of other global companies.
Comparison of Competitiveness by ESS Size (2017)
| Type | Best Companies | Competitiveness (Top country=100) |
Price (USD/MWh) |
|||||
|---|---|---|---|---|---|---|---|---|
| Global | Domestic | Fundamental technology | Parts/material | Manufacturing technology | Global | Domestic | Difference | |
| Small |
SMA (Germany), NEC, Kyocera, Panasonic (Japan) |
Samsung SDI, LG Chem, LSIS | 83 | 80 | 88 | 1,120 | 882 | 21% |
| Independent | ABB (Switzerland), Younicos, SMA (Germany), Parker, GE, AES (USA) | Hyosung, LSIS, LG CNS, Woojin Industrial Electricity, Destin Power, LG Chem, Samsung SDI | 82 | 79 | 88 | 950 | 700 | 27% |
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 Q Cells 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. PCS can be thought of as a system that receives electricity from a power generating source within the ESS, and converts the form of electric energy for battery storage or sends it to another system. Experts estimate 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.
Global Market Penetration of Major ESS-Related Companies in Korea
| Companies | Recent Project/Strategy |
|---|---|
| LG Chem | - 1 GWh (the world’s largest) supply in AES ESS project - 140 MWh frequency regulation ESS supply in six western Germany's project in 2015 |
| Samsung SDI | - MV ESS, frequency regulation ESS, renewable energy-related ESS project in North America, South Asia in cooperation with KEPCO |
| SK Innovation | - Personnel increase in the part of EV secondary battery |
| Hanhwa Q Cells | - Business model development combining photovoltaic system |
| LSIS | - Business model development combining photovoltaic system and EMS - Export of new energy business model in cooperation with KEPCO in September 2016 |
| LG CNS | - 40 MWh ESS system contract in Guam Electricity Authority |
| Doosan Heavy Industry | - M&A of Won Energy Systems (USA) to strengthen ESS capability in July 2016 - USD 6 million supply contract in October 2016 - 2.4 MWh (the largest in Korea) ESS installation on KEPCO's main office building |
| Bosung Power Tech | - Smart grid station including 1 MWh ESS on KEPCO's main office building - 48 MWh(the world largest) ESS on Gyeongsan power plant |
| Destin Power | - The largest domestic ESS PCS supplier - Total 91 MWh ESS supply as follows * 1.5 MWh peak load PCS in LG Chem's Ochang site * 56 MWh frequency regulation PCS on KEPCO's electrical substation * 16.8 MWh ESS-linked PCS in GS E&R's Youngyang wind power project * 1 MWh energy-independent island project * 200 kWh microgrid project etc. |
| Kokam | - The third global ESS company chose by Bloomberg in 2017, the fourth global competitive ESS company chose by Navigant Research in 2016 |
| KEPCO | - The first 8 MWh ESS installation in 2014 |
| Ulsan city | - 7 MWh ESS in industrial site in 2017 June |
Additional Market Creation of KRW 200 billion Expected
The Ministry of Trade, Industry and Energy (MOTIE) has introduced many efficient support measures to boost Korea’s ESS industry. 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. Experts forecasts that an additional market creation of KRW 200 billion (USD 176.2 million) and 244 MWh of power will take place in 2020 if ESS is introduced to existing buildings.
By Daejong Gwak
Korea Institute for Industrial Economics and Trade (KIET) Research Fellow / djgwak@kiet.re.kr