The ESS (Energy Storage System) business is emerging as a “blue ocean. in South Korea.” This is because as the Korean government is strongly moving forward with energy conversion policies to expand the proportion of new and renewable energy such as solar power and wind power generation, ESS holds the key to raising the efficiency of these unstable renewable energy sources.
As a result, the industrial world is intensifying competition to make ESSs a future growth engine. Companies are moving into various fields related to ESSs such as systems and lease.
The Ministry of Trade, Industry and Energy (MOTIE) announced the Implementation Plan for Renewable Energy 3020', which aims to ramp up the percentage of renewable energy generation which stood at 4% as of the end of last year to 20% by 2030. According to the plan, the power distribution market, ESS and fuel cell will be fostered to expand distributed power, and grid-type ESS installation will be expanded from 0.4GW in 2017 to 1GW in 2030 with the aim of complementing the shortcomings of renewable energy.
It is necessary to expand ESSs to replace coal and nuclear power generation with renewable energy generation whose electric power production fluctuates depending on changes in the environment such as weather and climate. This is because electricity generated from renewable energy generation facilities can be stored in an ESS and can be used at an appropriate time such as peak time.
In addition, the government is implementing a policy to require power generation companies to compulsorily install ESSs. The government is pulling out all the stops to distribute ESSs such as giving RECs (renewable energy certificates) at the highest level to ESSs related to solar power generation.
In particular, the government has been focusing on expanding the ESS market since last year by leasing ESSs to small and medium-sized enterprises (SMEs) suffering from a shortage of funds in cooperation with private financial companies.
ESS, Key to Raising Proportion of Renewable Energy Generation
The growing importance of stable power supply is fueling demand for ESSs. An ESS can be called a kind of a 'large battery system' which stores electric power and supplies it when demand for electric power suddenly increases or power is in short supply. Particularly, it is garnering attention that it can store electricity when electricity charge is low, and can use stored electricity when electricity is expensive such as peak time.
ESSs applies to all of the generation area that produces electricity, the transmission and distribution area that transfer generated electricity and the consumption area that actually uses delivered electricity. Using the ESS in the power generation and transmission and distribution areas can save reserved power, thereby optimizing power management. By controlling power load at peak time, it is possible to prevent excessive investment. Especially, ESSs make it possible to improve and stabilize the quality of electric power from renewable energy generation which has trouble controlling power generation. Power users can use ESSs as an emergency power source to minimize damage due to a blackout.
It is expected that these advantages will make ESSs one of the key elements for implementing next generation power grids such as Smart Grid. In the industry, it is said that ESS technology will meet power demand with the capacities of existing power generation facilities only when ESS technology is completed.
Large Korean Businesses Taking Part in Rapidly Growing Global ESS Market
ESSs are divided into those for electric power, households, and commercial purposes. In particular, as the government is expected to raise charges for electric power for industrial use in accordance with the 8th electric power supply and demand plan, demand for ESSs for electric power is on the upgrade.
Commercial ESSs are used for telecom equipment and data centers where continuous power supply is required. An uninterruptible power supply (UPS) is already in use but ESSs are also used for additional emergency situations. The main purpose is to prepare for power outages. Recently, hybrid products that combine the advantages of both devices have also been released.
There is also a growing interest in home ESSs. They are installed with photovoltaic power generation equipment that can easily produce electric power at home in order to prepare for power failure or reduce electric charges. The home ESS market is forecast to grow at a faster pace than the overall ESS market. In the ESS industry, market researcher B3 predicts that the global ESS market which hit about 83,000 units in 2016 will grow at a CAGR of 16% to about 146,000 units by 2020.
The Ministry of Trade, Industry and Energy predicts that the global ESS market will grow from US$ 2.56 billion in 2016 to US$ 15 billion in 2020 and finally decuple to US$ 29.2 billion in 2025. According to the Korea Energy Corporation, the cumulative capacities of installed ESSs of the entire world climbed from 0.7GW in 2014 to 1.6GW in 2016, a 2.3-fold increase. The capacities of ESSs installed in Korea were second to those of the US.
It is clear that the expansion of the ESS market is good news for companies developing related business. In particular, the reason why an outlook for Korea's ESS industry is bright in overseas markets is that Korea's ESS industry has battery technology which is a core technology for ESSs. Korea ranks in battery markets of countries around the world by accounting for more than 50%. Recently, US Tesla and Chinese BYD have been hot pursuit of Korean battery companies so it is pointed out that Korean battery companies should be thoroughly prepared for intensifying competition.
The ESS business is largely classified into three types -- batteries that store electric power, apower conversion systems (PCSs) that convert power into direct current or alternating current and power management systems (PMSs) that coordinate entire facilities. Each company is pushing forward with business in connection with its own technology. LGE, Samsung SDI, SK Innovation and other battery makers led by the ESS market in the domestic large companies have been throwing their hats in the ring one after another. Currently, LG Chem, Samsung SDI, Hyosung, SK D&D and Hanhwa Energy are doing business in the ESS sector.
Which Company Will Be Final Winner in ESS Battery Race?
In the field of ESS battery, LG Chem and Samsung SDI are frontrunners. LG Chem is assessed as the world's best company in terms of ESS battery competitiveness. The company ranked first in 2013 and 2015 in ESS battery competitiveness evaluations announced by global market research company 'Navigant Research'. In addition, LG Chem filed 59 patent applications in the ESS sector over the past 10 years from 2007 to last year, claiming first place with a wide cap with other companies. The company also produced ESS batteries of 710 MW by the end of the third quarter of 2017 based on production volume, standing first in the world.
Of course, LG Chem has been successfully landing big orders in the global market. In October 2015, LG Chem succeeded in exclusively supplying batteries to an ESS project of Steag, Germany's fifth largest power generator. The supplied battery with a capacity of 140 MWh is the largest in Europe. 10,000 households use 140 MWh for one day. The volume can charge more than 7,600 units of the new Volt at the same time.
Samsung SDI also produced ESS batteries of 695MW by the third quarter of 2017, thereby placing second in the world. Samsung SDI is closely trailing LG Chem by expanding its supply of ESS batteries. Samsung SDI supplied the world's largest battery for ESSs to an ESS in California in February of last year. The total capacity of the ESS is 350MWh enough to replace a natural gas-fired power plant and Samsung SDI covers 240MWh, 70% of the total. This is the amount of power that can be used for four hours by 40,000 households.
Samsung SDI batteries were supplied to a 100MW/129MWh ESS that Tesla built in Jamestown, Australia and the ESS started operation last month. Samsung SDI is planning to actively expand its ESS market mainly in Europe.
LG Chem and Samsung SDI, which are running neck and neck to be the number-one company in the global ESS battery business, are also having a duel in the home ESS market.
LG Chemical received attention as a battery supplier for a home ESS launched by global furniture maker IKEA last year. In the industry, it is said that LG Chem’s collaboration with IKEA made a significant contribution to the latter’s overseas advancement.
Samsung SDI exhibited its household ESS module lineup at the Inter Solar Europe 2017 held in Munich last year. "We are interested in ESS batteries with a focus on home ESSs," a Samsung SDI official said. "We expect to be able to achieve tangible results in the home ESS sector starting in 2018."
Competition Heating Up in PCS and PMS Sectors
Various companies are competing in the PCS and PMS sectors. The core of ESSs is the ability to accurately calculate electricity usage patterns and optimize PCS and battery capacities.
Hyosung is one of early runners in the renewable energy ESS total solution market. The company is leading the ESS business at home and abroad based on PCS technology developed with its own technology.
Hyosung has strengthened its entry into the global ESS market including supplying a 250 kW ESS to the Agricultural and Fishery Product Center in Guri of Gyeonggi Province in 2012 and completing the installation of a 400 kW ESS for the Hong Kong Power Authority. In 2014, the company built a stand-alone photovoltaic power plant in Mozambique of Africa.
In addition, while participating in a project to decrease carbons on islands by installing 1 MW ESS on Gapha Island of Jeju Province, Hyosung also installed an ESS with a 1.25 MW capacity, the largest capacity in island areas on Gasa Island in Jindo-gun of South Jeolla Province, thereby supplying enough electric power to locals on the island. The company is continuing its ESS business such as recently installing an 18 MWh solar ESS which is the largest solar power ESS in the nation in the solar power generation complex of Yeongheung Headquarter of Korea South-East Power Co.
SK D&D, a subsidiary of SK Gas, entered the ESS business in earnest in the second half of last year. The company is expanding its ESS business by recently striking a deal to build ESSs with capacities of 110 MWh in four business sites of Daesung Industrial Gas including Daejeon, and Gumi with Daesung Industrial Gas.
SK D&D is engaging in the developer-type service business that can reduce electric charges by utilizing ESSs for customers who use industrial electric power much. The company is aiming to top the industrial ESS market by building ESSs with capacities of 700MWh with total solutions for the entire ESS business from financing to installation, operation and maintenance. "We are drawing attention from businesses with a business structure that pays 100% of ESS construction costs and shares money from saved electric charges," SK Gas said.
SK D&D will strengthen its capacity to analyze energy consumption patterns and extend its business scopes to power platforms such as P2P and VPP down the road particularly based on ESSs.
Hanwha Energy recently decided to build a 19MWh ESS on the site near the Haetbitt Nuri Solar Power Plant (11MW) in Saemangeum Industrial Research Park, and integrate the solar power plant with the ESS. In particular, the company will develop PMS and power station monitoring system software, core software for effective control and stable operation of ESSs and apply it.
Hanwha Energy won a project to build an ESS-linked photovoltaic power plant in Guam in July of last year. According to the contract, the company will construct a 60MW power plant that can supply electric power to approximately 40,000 households in Guam for one year. The project will cost US$150 million (about 168 billion won). Hanwha Energy is scheduled to start construction in July of this year. Hanwha QCell, a subsidiary of the Hanwha Group, will supply monocrystalline solar modules for the generation of 89.6MW electric power to this project.
"We are aggressively going ahead with ESS projects in connection with solar power projects in the US and Australia," said a representative of Hanwha Energy. “In the global market, we will secure references in various application fields such as peak reduction, demand management and output stabilization among others with differentiated core competitiveness in power supply projects based on distributed power such as renewable energy.”
LGIS entered the renewable energy business in earnest by constructing solar ESS facilities at its Cheongju plant last year. The company possesses related technologies such as photovoltaic modules, PCS for ESS, and system control software, so will target both domestic and overseas markets by harnessing such technologies.
LSIS is building an ESS-linked photovoltaic power plant with the goal of completing it in February at Hwajeon Factory in Hwajeon-dong in Gangseo-gu, Busan. The 910kW power plant will be equipped with a 2.8MWH ESS. The plant will generate sales of 330 million won annually by producing 1140MWh annually and selling it to KEPCO.
Last year, LSIS completed the 28MW Chitose Solar Power Plant in Japan with KEPCO and began the full-scale commercial operation of the plant. The power station, located near the New Chitose International Airport, is the first ESS-linked convergence solar energy power plant in Japan. Chitose Solar Power Plant is the first overseas solar power plant project of KEPCO and the first EPC and O&M project for an ESS-linked solar power plant of LSIS.
Electric power generated by the plant with about 130,000 solar modules and a 13.7 MWh ESS will be sold for 40 yen per kWh through Hokkaido Electric Power through a PPA for 20 years.
Doosan Heavy Industries & Construction completed a 300 KW solar power plant linked to a 1 MWh ESS on the roof of its main office in Changwon, Gyeongsang Province in late August of last year. In particular, Doosan Heavy Industries & Construction has carried out all construction processes including the design of the power plant, the installation of equipment, and test operation and is in charge of operation, repair and maintenance. Doosan Heavy Industries & Construction plans to sell all electricity generated by the power plant to KEPCO, and trade it in the spot market, too.
KEPCO is carrying out the ESS rental business linked to new and renewable energy. The rental business of KEPCO installs and leases large-capacity ESSs to a site of a new and renewable business operator, and receives ESS rental fees for a certain period from the renewable business operator.
KEPCO plans to rent out to an ESS with a 26MWh battery and a 5MW power conversion unit to Yeongam Solar Power Plant for 10 years. The company is planning to expand such projects this year.
Shipbuilder Hyundai Heavy Industries will build a 51.5MWh industrial ESS center at Ulsan Headquarters to save more than 10 billion won (US$9 million) a year. Hyundai Electric Company, separated from Hyundai Heavy Industries, will boost the competitiveness of its smart energy solution brand Integrit by managing and analyzing data generated during the operation of the ESS center.
In addition, Lotte Chemical, a petrochemical company, and OCI, a solar power equipment company, have added ESS manufacturing to their business objectives, signaling their expansion into the ESS business.