Over the past few weeks, CheckWatt’s Dan-Eric Archer and Erik Wallnér have been traveling around China, primarily to meet with manufacturers of inverters, PCS (Power Conversion Systems), and batteries.
While there is ongoing development around virtual power plants in Europe, America, and Australia, CheckWatt is relatively early—even from a global perspective—when it comes to connecting batteries at scale in the residential and C&I (Commercial & Industrial) segments. In this process, it is essential to work closely with manufacturers, both in terms of technical integration and to contribute insights into how the European electricity market is evolving. During the trip, we had meetings with around fifteen manufacturers in eastern and southern China.
From meetings with manufacturers and site visits to both factories and large installations, we gathered several insights, which we’d like to share here.
Visit to the World’s Largest Battery Manufacturer
CATL is the world’s largest battery manufacturer with a market share of around 40 percent. We went on a tour of one of their production lines for battery cells, which somewhat resembled a newspaper press—except instead of paper and ink, they apply anode and cathode materials on rolls of copper and aluminum, which are then cut and stacked with a separator film in between. We also visited their test center, where they evaluate battery performance under temperature, humidity, and crash tests.
CATL is heavily focused on improving battery lifespan. In their latest product category for large-scale battery systems, TENER, they promise zero degradation for the first five years. Conversations with representatives from their European division revealed that they test their cells for a 20-year lifespan based on one charge-discharge cycle per day. This doesn’t necessarily mean the entire system will have the same guarantee or lifespan—for example, PCS systems currently have shorter lifespans, according to CATL. One takeaway is that the cost of cycling a battery—which we at CheckWatt use to prioritize between different use cases and services—is likely to remain relatively low going forward. It may ultimately be little more than the cost of the energy loss during charging/discharging and a minor wear cost.
According to CATL, two-hour batteries (C-rate 0.5) are the most common solution globally in the utility segment. We predict the same trend in Sweden as batteries are increasingly used for energy-intensive services such as FCR-N, mFRR, trading on wholesale electricity markets, as well as local flexibility to local grid owners. Based on our discussions, the percentage cost increase from 0.5C to 1C is greater than from 0.25C to 0.5C.
From our visit to CATL, it’s clear that sodium-ion is far from competing with lithium-ion iron phosphate. CATL currently operates a pilot line for sodium-ion battery cells, but they estimate that the cost is 2 to 3 times higher than for lithium iron phosphate. Lithium would need to become significantly more expensive for sodium-ion to be competitive. Sodium-ion also has lower energy density, meaning higher costs for auxiliary installation materials and non-active components in battery systems.
Visits to Inverter Manufacturers
Most of our visits were to inverter manufacturers, across both the residential and C&I segments. The residential market is mature, with a few large players operating across nearly all major global markets. On the battery side, the C&I segment is much newer. Several manufacturers described the market as just starting, with up to a thousand companies in China alone engaged in PCS and related component manufacturing required for turnkey solutions. Overall, the market environment is tough for manufacturers—competition has increased sharply in recent years, while solar PV build-out (which drives inverter sales) is expected to slow down in many major global markets this year.
Most manufacturers we visited are, to some extent, developing their own operating modes to optimize battery charging and discharging behind the meter, based on solar generation, local electricity prices, and household consumption patterns. However, the global trend is that more and more of a battery’s potential value lies outside the meter—for instance, in grid balancing services for system operators, wholesale electricity trading and local flexibility markets.
At CheckWatt, we have been early in integrating with various manufacturers in the residential and C&I segments to make these value streams accessible to battery owners. However, most manufacturers are also working with other virtual power plant actors in places like Australia, North America and Central Europe. A key difference between developing services behind the meter and combining services behind and in front of the meter is the much greater complexity in the latter—due to regulatory compliance, business relationships and pre-qualification processes involving national system operators, balance responsible parties and grid operators. For example, Sweden alone has over 150 grid operators, while Germany has around 800.
Electrification of China’s Vehicle Fleet
Between site visits and partnership meetings, the trip also gave us first-hand experience of the transformation happening in China’s vehicle fleet. About half of all cars sold in China this year are expected to be fully electric, which was evident in the cities we visited. Buses, taxis, and scooters are almost entirely electrified, and we rode in many electric car models we had never heard of.
According to locals we spoke with, it’s possible to buy an electric car in China today for as little as 100,000 SEK (approximately €8,500). This is of course inspiring, but also makes concerns about the future competitiveness of Europe’s automotive industry seem very real.
