Ma Jinpeng: The Profile of the Top Brand in Domestic Industrial and Commercial Energy Storage Solutions in My Eyes for 2025
Recently, I attended the 7th Energy Storage Carnival and the release of the global shipment ranking of Chinese energy storage companies for 2024, organized by the Energy Storage Leading Alliance in Wuhan. The event saw participation from battery manufacturers, system integrators, investors, and asset operators. After reviewing the published statistical data, I felt a mix of emotions. During the evening banquet, a leader from a newly listed energy storage company in China gave a speech and became emotional while discussing the industry’s competitive pressures, yet the company’s financial performance for 2024 was commendable. Many attendees were leaders of companies facing net profit deficits, leaving me with complex feelings.
The development of new energy storage in China has indeed progressed in just two years, mirroring the decade-long journey of photovoltaic and wind energy. It seems we have not fully experienced the favorable phases from policy-driven to market-driven channels. While the development of photovoltaics and wind energy can be likened to “crossing a river by feeling the stones,” energy storage appears to be a case of those who have already crossed the river now setting the rules, sometimes lacking patience or experiencing market distortions driven by supply-demand relationships.
From this conference and discussions with industry peers, I distilled several key points:
- The annual shipment rankings for domestic industrial and commercial energy storage from 2022 to 2024 have seen significant changes, indicating that the industry landscape is still far from settled.
- Including the 472Ah square cell released on-site, various specifications of cells including 2XX, 3XX, 4XX, 5XX, and 6XX are now available for delivery, surpassing the bewildering variety of photovoltaic module specifications.
- One company unveiled a 125 kW / 261 kWh energy storage cabinet, with conventional sales prices dropping to nearly 0.5 yuan per watt-hour, while system integrators are struggling with low profitability, with very few turning a net profit.
- I emphasized during the afternoon forum that “the sustained profitability of system integrators is the foundation for the sustainable and healthy development of the industry, ensuring the continued operation of energy storage investors and asset operators.” The energy and power industry’s evolution indeed seeks to orderly and continuously reduce costs per kilowatt-hour or unit energy consumption; however, it seems that while valuable discussions occur on stage, orders are pursued offstage at prices close to BOM costs, leading to a frustrating cycle.
- There are signs of differentiation in the roles of investors, asset operators, and system integrators. Specialized asset operators are emerging from a rough market development towards refined competition. Companies like Xingji Yuneng and Huagong Energy are leveraging their expertise in load characteristics, demand management, power sales integration, and demand-side response to earn significant revenue beyond peak-valley price differences.
I see this as a positive industry phenomenon.
Furthermore, the ultimate form of industrial and commercial energy storage should be the virtual power plant (VPP), while overall energy management on the distribution side represents the ultimate positioning for investors and asset operators. Companies should refrain from establishing a separate power department.
It has been over a year since I last wrote about “My View on Domestic Industrial and Commercial Energy Storage…” In this time, the development of industrial and commercial energy storage in China has experienced ups and downs. Various aspects, including development cycles, costs, profit-sharing ratios, delivery timelines, financing costs, and contract payment periods, are all under intense scrutiny. However, as a sector that has achieved a viable technical and economic closed-loop, it still shows signs of sustainable development.
In 2024, I took approximately 150 business trips, most of which involved communication and exchanges with investors, developers, and operators. This interaction has updated my understanding of the industry, giving me fresh insights from the perspectives of energy storage investors and asset operators.
Looking ahead to 2025, I want to express my view on the characteristics of what I believe will be the top brand in domestic industrial and commercial energy storage solutions.
Reflecting on 2024, several issues have become apparent:
- There is a tendency to prioritize investment over operations. Early investors were too reliant on the single revenue stream from peak-valley price differences. Policy changes can lead to operational data falling short of expectations, further complicating efforts to achieve conservative revenue growth through meticulous operations. This issue is exacerbated by the fact that the profit-sharing ratio in projects can reach as high as 9:1 or even lead to a 5:5 split in certain regions, with owners sometimes defaulting and demanding adjustments to these ratios.
- There are concerns regarding the reliability of technical indicators. Issues such as charging and discharging efficiency, capacity retention rates, equipment online rates, fault recovery times, and the adaptability of solutions to various scenarios have faced skepticism. Last year, several integrators exited the market, raising concerns about sustaining operations for 15 years under EMC requirements.
As we enter 2025, both national and local governments have introduced a series of energy and power policies aimed at accelerating the construction of a new type of power system and promoting the sustainable, high-quality development of new energy. According to the International Energy Agency, China has moved into the third phase of a six-phase low-carbon power system transition, characterized by increasing difficulties in balancing supply and demand for electricity, necessitating systematic improvements in the flexibility of the power system.
Past reliance on capacity leasing from renewable energy sources has proven unsustainable for energy storage development. The 136 document is expected to guide energy storage from a cost-centered approach to a value-centered one, while the acceleration of the power spot market and the potential widening of price differentials will significantly enhance the absorption of renewable energy.
Looking forward to the next few years leading up to 2025, what should domestic industrial and commercial energy storage product and solution suppliers focus on? It is certainly not about continuously reducing prices; in the long run, price competition does not benefit investors, operators, or product and solution suppliers. We must consider which solutions to pursue to become the leading brand in the coming years.
To summarize, the value proposition of a top brand must always return to the financial models of investors and asset operators, providing solutions with the lowest cost per kilowatt-hour while safeguarding better financial metrics for investors, including overall return on investment, static payback period, and cumulative net cash flow over the entire lifecycle.
These key financial indicators rely on various aspects from project development to project recovery, covering static investments, operation and maintenance costs, capacity assessments, revenue guarantees, financing viability, state of health (SOH) retention, charging and discharging efficiency, depth of discharge (DoD), fault rates, recovery times, insurance measures, algorithm strategies, and operating friendliness (EMS), along with recovery and residual value management. This is the foundation for a solution provider’s value proposition.
First, we must return to multidimensional considerations for optimal static investment in projects. The market supply chain is now exceptionally clear; it is relatively easy to determine the BOM cost of equipment. The comparison often comes down to the bargaining power of the supply chain. However, different components and cell choices lead to varying prices, lifespans, and performances. Additionally, warranty costs come into play, as many companies are hesitant to take on orders for just a few cabinets due to the risk of losing profits after several service calls.
I have discussed with many investors that once a project’s return rate meets expectations, it is not merely about driving down equipment prices; profit margins must also be considered. Equipment manufacturers need to maintain profitability. In pursuit of orders, there may be compromises on configuration and quality, increasing the likelihood of operational issues. This could result in operational revenues from energy storage plants failing to cover losses and liabilities that arise.
It is essential to avoid a speculative mentality. Currently, there is no absolutely perfect safety solution in energy storage systems; all are works in progress aimed at increasing safety measures. Safety is indeed a cost that must be invested in. Investors are understandably looking for better returns, but industrial and commercial energy storage is inherently a highly financial asset, necessitating a balance between static investment management and refined operational management.
Abandoning speculative attitudes may sometimes require learning from mistakes, as value transmission is not an easy task. For instance, last month, a 9.8 kWh residential energy storage system in a villa in Europe experienced an overcharge explosion, resulting in near-total destruction of the villa. What if a 1,000 kWh or 10,000 kWh system were to malfunction? The consequences could be dire.
One of our investment partners has a business philosophy: “I need the company providing solutions to have a gross margin of over 15%. If equipment manufacturers are thriving, it reflects better on our investment.” I resonate with this perspective.
The table below outlines the tax-inclusive cost of the BOM components for a 125 kW / 261 kWh energy storage cabinet (if you purchase cells at 0.3 yuan, that is your inclusive cost). Selling below 0.55 yuan will inevitably result in widespread product substitution, creating significant risks in quality and safety. If companies aim to achieve profitability, they need to consider what price point is viable.
Second, we must build a closed-loop and secure operational management capability. Operations management is critical; it is similar to managing communication equipment, where both preventive maintenance and corrective repairs are equally vital. Equipment failures often start from minor issues, which can cascade into larger problems if not addressed. Preventive maintenance can help reduce or eliminate minor damage before it escalates into more serious faults, consequently lowering repair costs.
Generally, planned work is three to four times more efficient than unplanned work. Preventive maintenance in energy storage systems allows for advance planning, preparation of materials, and spare parts, resulting in more efficient repairs. Conversely, post-failure repairs require urgent diagnosis and sourcing of tools, increasing downtime and repair costs significantly.
It is critical to recognize that maintenance during the warranty period is not sufficient. Cloud platform monitoring and regular on-site maintenance are both essential. Without periodic checks, issues such as debris accumulating inside the cabinets could easily go unnoticed.
From this perspective, investors should closely scrutinize the operational management processes, tools, personnel configurations, and management levels of product and solution suppliers. Do not underestimate service metrics such as failure rates and recovery times; in energy storage operational models focused on demand control, the ability to reduce demand charges can translate to significant savings.
In future operational scenarios, as a foundational asset, energy storage systems are key to maximizing revenue through effective management. Clearly, the stability and operational capabilities of equipment will be among the core competitive points for future leading brands.
Third, we must construct an evolving capacity assessment capability. Capacity assessment is critical for investor returns, and with the diversification of earnings in industrial and commercial energy storage, it must consider more than just 15-minute load data. It must incorporate time-of-use pricing, demand charge management, and the collaborative configuration of primary energy (distributed photovoltaics, dispersed wind energy), load management, and secondary energy (new energy storage).
Moreover, the acceptability of capacity assessment methods and tools by financing institutions will be another capability that solution providers need to develop. The scientificity and practicality of these tools must be aligned with the perspectives of asset operators. Capacity assessment is increasingly integrated into operational thinking, which requires a deep understanding of enterprises, distribution networks, load characteristics, and process characteristics, facilitated by intelligent tools and continuous iterations through project investment and operational practices.
Fourth, we must build capabilities that enhance the financing viability of projects for investors. Currently, private investors primarily rely on financing leasing companies, with annual financing rates ranging from 6% to 7.5%. The overall sentiment is that financing costs are high, and achieving non-recourse financing is challenging.
Top brand product and solution companies have the opportunity to leverage their solution advantages and robust financial backing to proactively collaborate with industry financing institutions, offering investors more accessible and cost-effective financing options. Reducing financing costs from 7% to 4% can significantly contribute to healthier industry chain development compared to simply lowering equipment prices.
This can create a positive cycle where integrators profit, investors worry less, and returns are assured. Financial solutions can be conceptualized from two perspectives: one benefiting investors and another benefiting users (electricity consumers).
Fifth, we need to establish refined operational capabilities for projects. Industrial and commercial energy storage, whether as standalone financial assets, crucial dispatch elements in integrated energy systems, or core assets in virtual power plants, increasingly relies on refined operations for revenue preservation and growth.
Optimal combinations of diversified revenue and supporting algorithms are the soul of operations. Current mainstream control strategies for industrial and commercial energy storage primarily rely on fixed-time peak and valley price differentials for charging and discharging. This model struggles to adapt to dynamically changing load demands and the power market.
Algorithms enable multiple optimizations that lead from capacity planning to revenue enhancement, maximizing the benefits of peak-valley price differentials while integrating demand charge savings strategies and maximizing the self-consumption rate of green energy. By incorporating load predictions and historical data, AI can help delineate power output curves.
Based on multiple constraints and objectives, the optimization process considers peak-valley price differentials, battery degradation factors, and charging/discharging efficiencies to achieve global optimal charging and discharging strategies. This capability model is what asset operators are working to build and implement.
I know of a startup asset operator in the industrial and commercial energy storage sector that manages several demand-billing energy storage stations in Jiangsu. Over the past year, 63% of their annual revenue came from peak-valley price arbitrage, while 37% stemmed from demand charge savings. They sometimes discharge during valley hours to reduce demand, resulting in an 18% increase in revenue compared to solely relying on peak-valley price arbitrage. The question remains: should they continue this strategy?
Recently, I have engaged in extensive discussions with asset operators. Most choose to build their own asset operation management platforms (EMS). However, many manufacturers’ EMS platforms are primarily data displays, lacking algorithm integration. Although some manufacturers are striving to build operational capabilities, achieving a balance between equipment and operational excellence is challenging. It is unlikely that manufacturers can create an all-inclusive integrated solution covering every aspect from cells to recovery.
For investors, the best solutions should comprise a series of tightly coupled value combinations. Top brand product and solution providers should leverage their self-developed systems and collaborate with excellent asset operator partners, combining resources with recycling organizations and digital twin technology suppliers to form comprehensive solution capabilities that offer optimal solutions for investors.
Consider why Apple does not manufacture its own batteries or screens, opting instead to source from suppliers. Opening boundaries, integrating advantages, and establishing an ecosystem for products through joint development should be the best approach for constructing solutions for investors. The compound application of AI, BI, blockchain, and digital twins requires collaborative efforts across the value chain.
Every company has its unique strengths. For instance, investment in renewable energy assets emphasizes the ability to secure sustainable low-cost financing. Companies lacking this capability should proceed with caution, as mismatched capabilities can lead to poor outcomes. While innovation is essential, the pace of innovation may be even more critical in today’s landscape.
Companies with robust integration and collaborative abilities have the potential to provide clients with better and timelier solutions.
Sixth, we must enhance core technical indicators of energy storage systems, such as SOH, charging/discharging efficiency, and DoD. Current cell manufacturers typically promise lifespan metrics based on standard operating conditions, but the reality often falls short due to degradation factors and operational variances. Data from energy storage plants that have been operational for several years typically show that after approximately 5,500 cycles (around 8 years), system capacity deteriorates to 70%. Therefore, financial models for investors must account for replacement costs of around 0.4-0.5 yuan per watt-hour.
This situation highlights the need for energy storage systems to be viewed not merely as cell replacements but as complete system renewals. It’s analogous to purchasing an electric vehicle and being informed it can travel 700 kilometers under standard conditions, but only achieves around 490 kilometers in real-world scenarios. Investors are increasingly demanding assurances on actual operating metrics within a ten-year window.
By employing cells with superior technical parameters, such as those achieving 15,000 cycles, we have the opportunity to extend the lifespan of energy storage systems to 15 years, ensuring that clients can be promised a capacity retention rate of no less than 70% by the end of the 15-year period, which is invaluable for investors.
From a financial modeling perspective, considering the environmental characteristics of regions like Zhejiang, Guangzhou, Jiangsu, and Hunan, we find that comparing two cycles per day to one cycle per day yields significant optimization in static payback periods, overall return on investment, and cumulative net cash flow across the entire lifecycle.
Additionally, charging/discharging efficiency and depth of discharge are crucial for the throughput capacity and efficiency of energy storage systems, whether for peak-valley arbitrage, spot market trading, or demand-side responses. These indicators remain vital for system integrators to continuously improve.
Seventh, we need to establish insurance and risk management capabilities for energy storage systems. Recent policies from financial regulatory bodies have emphasized the need to broaden insurance coverage for new energy storage projects, which aims to promote the healthy development of the industry.
For instance, commercial general liability insurance in the energy storage sector is valuable for transferring financial responsibilities resulting from incidents that may occur during energy storage operations. Coverage includes risks associated with site operations, product liability, operational risks during construction and installation, and post-completion operational risks.
Energy storage systems face multiple risks, including fires, explosions, battery degradation, and equipment failures. Past accidents within the sector have heightened awareness of these risks, which will lead to a greater focus on insurance solutions among storage companies and project investors. To ensure stable operations and investment security, all parties involved should actively seek insurance solutions, with top brand product and solution providers proactively integrating insurance products into their offerings.
The incorporation of comprehensive commercial liability insurance and capacity degradation insurance will likely enhance trust from investors.
Eighth, we must build capabilities for recovery and residual value management of energy storage systems. Many product and solution providers now claim to offer full lifecycle solutions. Discussing full lifecycle solutions involves two key aspects: whether the provider has the sustainable development capability for 15 years and whether the business model is truly closed-loop.
For instance, the recovery of energy storage batteries ties directly to the financial parameters set for investors and directly impacts return rates. The establishment of a recovery mechanism can also yield numerous positive effects, such as preventing potential environmental pollution, avoiding resource wastage, and mitigating safety hazards associated with improperly disposed batteries.
Currently, leading recycling companies have achieved over 99.3% recovery rates for core metal materials in battery products. In 2023, a leading lithium battery company globally recycled 100,000 tons of used batteries, regenerating 13,000 tons of lithium carbonate with a lithium recovery rate of 91% and even higher rates for nickel and cobalt.
Providing a robust recovery mechanism is vital for closed-loop solutions and empowering investors in this sector.
Looking ahead, we must consider several new market changes for 2025:
- There will be a demand for energy storage solutions accompanying existing distributed solar power stations. According to the State Energy Administration’s recent regulations, distributed photovoltaic projects registered before a certain date will continue under prior policies, but after a specific date, larger commercial distributed solar projects will only be allowed for self-consumption or participation in spot trading.
- Rapid growth in industrial and commercial energy storage is expected in foreign markets, particularly in regions like Europe and North America, which embrace highly market-oriented electricity pricing and clear economic models.
- Large-scale industrial and commercial energy storage projects will become the norm, with single-cluster, single-management container solutions emerging as the primary choice for medium-high voltage connections.
The shipment ranking for domestic industrial and commercial energy storage from 2022 to 2024 reflects significant volatility, indicating that the industry landscape is still far from established. This is a competition of comprehensive capabilities and value combinations. The ultimate market leaders may not yet be evident, and the journey ahead will test determination, perseverance, altruism, and a deep understanding of the industry.
As Warren Buffett aptly said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” With increased self-regulation and a greater respect for safety, guiding technology with a focus on minimizing costs per kilowatt-hour will enable the industry to develop more sustainably and healthily.
As I write this, the sun is gradually breaking through the clouds outside, shining brightly on the photovoltaic panels on the roof. I would like to conclude this report with a line from poetry: “Shouldering the burden, we march on, our efforts will not be in vain.” My team and I will advance the industry with these principles in mind. You can expect our upcoming solution releases.
