Disruptions arising from Iran conflict accelerating demand for BESS, with Chinese battery manufacturers’ shares soaring – meanwhile, gas price increases will lead to LNG projects being scrapped and replaced with BESS assets
Disruptions to oil and gas supplies caused by the conflict in Iran will prove to be a catalyst for a prolonged period of growth in both demand for battery storage and battery manufacturing. The Chinese battery manufacturing industry, in particular, is expected to be one of the key beneficiaries. Earlier this month, Shanghai Stock Exchange-listed Ningbo Deye Technology Co. said that its net profit for the first quarter is expected to increase to between 1.1 billion and 1.2 billion yuan ($176 million), representing a year-on-year increase of up to 70 per cent, with the rise in share prices attributed to the global energy crunch caused by events in Iran. As a result, shares in the company increased by the daily limit of 10 per cent in Shanghai the day after the announcement was made. Meanwhile, fellow Chinese battery manufacturing company CATL’s stock price reached an all-time high in the last month. In total, China’s top battery makers – namely CATL, BYD and Sungrow – have gained more than $70bn in market capitalisation since the conflict in Iran began. Last month it was reported that shares in those three companies had comfortably outperformed shares in oil majors such as Chevron, ExxonMobil and BP since the outbreak of the war.
Replacing LNG plants with renewables and BESS
Elsewhere, soaring gas prices caused by events in Iran mean plans for LNG-fired power plants are being scrapped, with a view to instead developing renewable energy projects. In one of the most notable recent examples, it was revealed that Vingroup has informed Vietnam’s government that it wants to tear up a proposal to build what would be the country’s largest LNG power plant and, instead, build a hybrid renewable energy asset that would include an enormous battery energy storage system. It was not specified what renewable energy would be used but the cost of the battery energy storage system [BESS] project has been estimated at a colossal $25 billion.
Solar plus BESS represents major growth opportunity
Meanwhile, it has been predicted that the Iran conflict will lead to a surge in the deployment of solar assets coupled with battery storage. Fitch Ratings has forecast that the major overseas growth opportunity for Chinese BESS manufacturers in light of the Iranian war is likely to be “solar power plus battery storage systems, particularly in emerging markets that rely on imported energy and have not yet secured stable, reliable electricity supply”. In an effort to capitalise on such opportunities, Chinese BESS manufacturers are looking to expand their global footprint via foreign direct investment. The US is not an attractive market for Chinese companies due to high tariffs, supply-chain restrictions and regulatory risks, so Europe is now a major focus. This was highlighted in the last week when Chinese lithium-ion battery and energy storage systems manufacturer Hithium signed a formal investment commitment to establish a manufacturing facility in Spain’s Navarre region. The deal, which was signed in the presence of the Spanish prime minister Pedro Sanchez, will represent an investment of approximately €400 million. In a veiled reference to regulatory uncertainty in the US market, when announcing the deal, Dr. Qi Tang, Hithium’s managing director of strategy development office, said that Spain offered the “right commercial atmosphere for us and for other Chinese companies”.
Batteries should be ‘absolute priority’ for EU
Calls for the wider deployment of battery storage in Europe have also ramped up with research from SolarPower Europe showing that the European Union’s solar fleet offset more than €110 million of gas imports per day during the period 1-17 March. Solar Europe also said that cumulative savings for Europe during the period 1-31 March had reached €3.77 billion. Commenting on the data, Dries Acke, deputy CEO of SolarPower Europe said, accelerating battery storage build-out should be the “absolute priority” for EU decision-makers. He added: “Battery storage stands out as the swiftest and most effective option to prevent expensive gas from setting electricity prices.”
Chinese battery manufacturers are certainly capturing the early gains from the fallout from the Iran conflict. But the bigger picture is a scenario where factors such as Europe’s urgency to upscale storage deployment, emerging markets’ dependence on energy imports and the trend for capital to move into solar-plus-storage means BESS could become the backbone of electric grids sooner than was initially anticipated.
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