Summary
- Power Construction Corporation of China drew 76 bidders for its tender of 16 GWh of LFP battery energy storage systems
- Bids averaged $66.3/kWh, with 60 bids under $68.4/kWh
- China’s grid, industry, and transportation are electrifying and decarbonizing rapidly
- Western battery firms may struggle to compete with Chinese prices, leading to potential bankruptcies
- Battery prices are plummeting while hydrogen prices are not budging, indicating that electrification will win over hydrogen fuel usage.
Article
The Power Construction Corporation of China recently drew 76 bidders for its tender of 16 GWh of lithium iron phosphate (LFP) battery energy storage systems (BESS). The bids averaged $66.3/kWh, with 60 bids under $68.4/kWh. This tender covers supply, system design, installation guidance, 20-year maintenance, and safety features, with the systems expected to be built in 2025-2026. This price point is significant and indicates a rapid decline in the cost of battery energy storage systems.
The declining prices of BESS in China have several implications for the world. China’s electrification and decarbonization efforts will be accelerated with cheaper batteries, leading to cheaper grid storage, buffering batteries for chargers, commercial and industrial solar applications, and more. This will help China reduce its carbon emissions and move towards a cleaner energy future. The rapid adoption of EVs and energy storage systems in China will have a significant impact on the global market.
The domestic price points for BESS in China create challenges for western manufacturers. With BESS being imported into western markets at such low prices, it will be difficult for western firms to compete. The USA’s 25% tariff on Chinese electric vehicle batteries does not apply to grid storage, behind-the-meter storage, or industrial site storage, giving Chinese manufacturers a competitive advantage. This will likely lead to the decline of western battery firms and a shift in the global market towards Chinese products.
Battery prices are expected to continue to fall, making them more cost-effective for a range of applications, including EVs, grid storage, and maritime transport. This will lead to a decline in oil sales globally as electrification becomes more prevalent. The USA’s shale oil industry, in particular, will face challenges as the cost of extraction rises and demand for alternative energy sources increases. Canada’s oil sands industry will also struggle to compete on the global market.
In contrast to battery prices, hydrogen prices are not expected to decrease significantly, with future projections showing an increase in costs. This, combined with declining electricity rates and the rise of carbon pricing, suggests that electrification will be the winning solution for decarbonization. Countries and industries that continue to invest in hydrogen may face challenges in the future as electrification becomes more cost-effective and efficient.
Overall, the trends in battery and hydrogen prices, as well as electricity rates, indicate a shift towards electrification and a decline in fossil fuel usage. This shift will have significant implications for various industries and countries, with those embracing electrification likely to benefit the most in terms of cost savings and emissions reductions. The cleantech revolution is gaining momentum, and the choices made in the coming years will shape the future of energy and transportation on a global scale.
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