From the smarter E Europe taking place in May to RE+ in September, the global energy storage market has shown the world its vigorousness, with businesses inventing actively to consolidate its stance in the supply chain. Running from October 19 to 21 at the Nangang Exhibition Center in Taipei, the Energy Taiwan 2022 included five topics: PV Taiwan, Wind Energy Taiwan, Smart Storage Taiwan, Emerging Power Taiwan, and Net-Zero Taiwan. Among which, the Smart Storage Taiwan saw the most significant growth. In the first half of the year, Taipower received massive amount of applications for ancillary services and feeder lines, reflecting the effectiveness of Taiwan’s supports to the energy storage industry whilst transitioning towards a net-zero future.
A closer look at the supply chain will find Taiwan seeing the most shortage and relies heavily on imports in the cell and PCS sectors, both crucial ESS components. This leads to problems regarding system integration and O&M. For now, most developers and investors choose international or local vertical integrators, such Delta Electronics, Tesla, and Fluence. As businesses scramble to explore the fast-growing market, it is with utmost importance to invest strategically, establish irreplaceable stance in the supply chain, and seek the right solution with the least risks.
Empowering business in a heated market
As of October 21, Taiwan has connected 76.2 MW of regulation reserve capacity to the grid. InfoLink expects to see 100-120 MW, optimistically 150 MW, being connected to the grid this year. Taipower’s information provided earlier this month shows it expects to connect 200 MW of dReg capacity to the grid this year. It will be challenging to meet that expectation, considering past grid-connection experiences and capacity of verification. Still, the ESS verification system to be implanted by the end of the year will effectively encourage businesses to connect projects to the grid in advance.
Taiwan seems to have comprehensive sectors across the supply chain, but it lacks experience in cell and PCS manufacturing, system integration, and large-scale project development, especially system integration. Even with Delta Electronics, a leading company of the region, Taiwan still has very limited capacity and experience and must rely on international manufacturers. It is common for most local electromechanical equipment manufacturers and developers to cooperate with Fluence, Wärtsilä, Sungrow, etc., consolidating industrial advantages and strengthening integration and maintenance capabilities.
The financial sector and investors also voiced out opinions regarding Taiwan's energy storage industry at the exhibition. For banks, safety, solution providers, corporate qualifications, and actual achievement of project development are the key considerations. For investors, safety is also a priority, followed by O&M services and IRR. Therefore, it is very important to first obtain actual performance experience, regardless the size of the project. At the same time, through the cooperation of overseas Tier-1 integrators, companies should cultivate relevant capabilities and long-term strength to thrive in Taiwan's energy storage industry.
Wait-and-see or be the first mover?
Taiwan's energy storage system has been relatively stable in terms of price and cells. The delivery time of most cell-related equipment has been shortened to 3-6 months. However, supply is still short for key components, such as PCS, transformers, and booster stations. Some PCS companies have longer delivery time up to ten to twelve months. Overall, supply tightness of the entire energy storage supply chain will not ease until the second half of next year.
In addition, Taipower has stopped accepting dReg feeder applications this month, repeatedly calling on companies to develop E-dReg instead. On a seemingly robust market, most companies are still hesitant towards E-dReg, considering poor IRR and the lack of any result of actual performance. Such hesitancy also appears to the solar-plus-storage plan proposed by the Ministry of Economic Affairs. The first tender failed after receiving only eight bids, mostly at TWD 11-14. The second tender, which took place this month, turned out pretty much the same, with capacity potentially exceeding 50 MW, and bidding prices within TWD 10.
Given immature market and trading mechanism, equipment price hikes and short supply, most companies are in a holding pattern towards E-dReg ancillary services and the development of solar-plus-storage. Although rash actions are risky to business operation, the fast-growing market does not wait.
Against this backdrop, InfoLink provides analysis from two aspects. The first is the market. In Taiwan, energy storage market will reach 20 GWh by 2030. There will be ample room for the development of long-term, renewable-integrated storage, such as solar-plus-storage and E-dReg, both will be definite trends by then. The energy storage market in China and the U.S. serves great reference. China makes storage integration mandatory as installed renewable energy capacity surge.
The second is supply chain. Currently high equipment prices are not likely to see evident changes in the short term. Any decline over this coming year will be rather subtle. InfoLink does not expect cell prices to return to 2021’s level until 2024.
Considering the market, supply chain prices, as well as the bidding mechanism of Taipower's ancillary services after the excess supply, the earlier businesses invest, the more advantages they will acquire.