From Mineral Resources to System Integration: A Cost Barrier for Energy Storage in China

In the fierce competition of the global energy storage industry, China has built a difficult to replicate "mineral battery application" full chain advantage with its complete supply chain and unique cost advantage, becoming one of the countries with the lowest energy storage costs in the world. This cost advantage is not only reflected in the upstream materials and midstream manufacturing processes, but also in the strong competitiveness of China's energy storage industry driven by economies of scale.

In terms of upstream materials, China has 60% of the global lithium resource processing capacity and 70% of the lithium iron phosphate cathode production capacity. This means that China has a huge say and control in the core raw materials of energy storage batteries. Thanks to this advantage, Chinese companies such as CATL and BYD have been able to effectively reduce the production cost of battery cells through vertical integration strategies. These enterprises have achieved a significant reduction in battery cell costs through independent research and innovation, continuously optimizing production processes and procedures, laying a solid foundation for the cost moat of China's energy storage industry.

The midstream manufacturing process is also an important source of China's energy storage cost advantage. The integration cost of energy storage systems in China is about 30% lower than that in European and American countries, which makes Chinese enterprises highly competitive in the international market. In 2023, the price of domestic 2-hour energy storage systems has fallen below 0.8 yuan/watt hour (Wh), which is highly attractive globally. The technological innovation and scale effect of Chinese enterprises in energy storage system integration are the key to achieving this low cost. By optimizing system design, improving production efficiency, and reducing material loss, Chinese companies have successfully controlled the integration cost of energy storage systems at an extremely low level.

The scale effect further consolidates the cost advantage of China's energy storage industry. In 2023, China's new energy storage installed capacity will reach 21.5 gigawatts (GW), accounting for 45% of the global market. This huge market size enables Chinese companies to dilute marginal costs during mass production, further reducing the overall price of energy storage systems. At the same time, economies of scale have also promoted technological innovation and industrial upgrading, forming a virtuous cycle in terms of technology and cost for China's energy storage industry.

In summary, China's energy storage industry has built a full chain advantage from mineral resources to system integration, relying on a complete supply chain and unique cost advantages. This advantage is not only reflected in the low cost of upstream materials and midstream manufacturing processes, but also in the competitiveness that is difficult to replicate in the short term driven by economies of scale. In the future, with the deepening of global energy transformation and the continuous growth of energy storage demand, China's energy storage industry will continue to leverage this cost advantage and make greater contributions to global energy transformation and sustainable development.