Recently, Tesla announced that the Shanghai Energy Storage Super Factory project successfully passed the completion acceptance on December 27. It took only 7 months from the start of construction in May to completion. According to Tesla's strategic plan, the Megapack produced by Tesla Shanghai Super Factory is mainly for the international market to meet the needs of the global energy storage market. At present, the factory has started trial production and is expected to be officially mass-produced in early 2025.

From the perspective of the global market, the investment return rate in more mature energy storage markets such as Europe and America is much higher than that in China. Similarly, customers have very high requirements for energy storage systems, and have high requirements for whether the products provided by energy storage companies can be connected to the grid on schedule and whether they can operate stably in the long term. The reason why Tesla accelerated the completion of the official mass production schedule of the Shanghai Energy Storage Super Factory is naturally to target the largest piece of cake in the European and American markets.

According to Tesla's financial report, in the third quarter of 2024, Tesla's power generation and energy storage business revenue was US$2.376 billion, a year-on-year increase of 52.4%, and the gross profit margin of the energy storage business reached 30.5%, a record high. In contrast, the gross profit margin of Tesla cars is only 17.1%. It can be said that the energy storage business, especially large-scale storage, has become Tesla's most eye-catching profit growth point in 2024.

By 2025, Europe's large-scale storage are expected to grow by more than 85%

In the European large-scale storage market, as the proportion of renewable energy increases, the bottleneck problem of grid connection becomes increasingly prominent. According to IEA statistics, countries such as Denmark, Ireland, Germany, Spain and the United Kingdom, where renewable energy accounts for a relatively high proportion, have a degree of impact of new energy access on the power system at the fourth stage or above. This means that renewable energy meets almost all demand in certain periods and even generates a large surplus. Therefore, the grid connection capacity of European countries has become scarce, and the demand for the allocation of flexible resources has increased. As an important flexible resource, the demand for large-scale storage systems has also increased.

Data shows that Italy's installed capacity in Q3 2024 was 0.5GW/1.8GWh, of which large-scale storage installed capacity was 0.3GW/1.3GWh, continuing the high growth year-on-year, while household storage installed capacity of 0.2GW/0.5GWh was still under pressure. Italy's demand for large-scale storage has increased significantly since the EU subsidies, and is expected to be an important increase in European demand in 2025.

In November 2024, Germany's large-scale storage installed capacity was 176MWh, a year-on-year increase of 162.3%. From January to November 2024, the cumulative installed capacity of large-scale storage was 545MWh, a year-on-year increase of 82%; from January to November 2024, the cumulative installed capacity of household storage was 4.07GWh, a year-on-year decrease of 18%.

In the third quarter of 2024, the UK's new installed capacity was 293.9MW/423.3MWh, with a year-on-year decrease of 15% and a month-on-month increase of 16%. The year-on-year decline in installed capacity narrowed quarter by quarter. Since 2024, the UK's installation has slowed down due to the delay in grid connection and the decline in terminal profits, but the low point of terminal profits has passed and installation has gradually recovered.

In 2024, the introduction of support policies for large-scale storage in many European countries has accelerated significantly. For example, capacity market bidding projects in Italy, Spain, Greece and other countries have been continuously implemented, and large-scale storage has been rapidly increasing. According to the forecasts of SolarPowerEurope and LCP Delta, the installed capacity of large-scale storage in Europe is expected to be 7.4GWh in 2024, an increase of more than 200% year-on-year. It is expected that by 2025, the deployment of large-scale storage in Europe is expected to achieve an increase of more than 85%.

In addition, the European electricity reform further encourages flexible resources such as energy storage to participate in capacity market transactions. Large-scale storage is expected to turn more to electricity price arbitrage and capacity market, and the diversification of income is expected to promote economic improvement. The parity of photovoltaic storage further opens up long-term demand space and provides a strong guarantee for the long-term development of the large-scale storage market.

In terms of the European household storage market, in 2024, European residential electricity prices will fall with natural gas prices, resulting in the impact on the internal rate of return (IRR) and demand of household storage terminals. Taking the typical 5kW photovoltaic + 10kWh energy storage system product on the market as an example, when the terminal electricity price in Europe is 0.4EUR/kWh, it is more economical to have photovoltaic storage than to have photovoltaic storage without storage. However, in October 2024, the terminal electricity prices in Germany, Italy and the United Kingdom dropped to 0.3915/0.3136/0.3592 euros/kWh respectively, which weakened the economic advantages of household storage.

Although the decline in electricity prices and destocking have had a certain impact on the household storage market, European governments have still introduced policies to support the development of the household storage market. For example, Italy will stop subsidizing photovoltaic grid-connected electricity prices from 2024, encouraging residents to consume and install energy storage on their own; Austria will exempt all household photovoltaic systems below 35kW from value-added tax, and the policy will be valid for two years; Ukraine implements a tax-free policy for energy equipment and provides zero-interest loans to individuals who purchase photovoltaic storage equipment. The introduction of these policies will stimulate the growth of household storage demand to a certain extent.

According to SPE's forecast, the installed capacity of household storage in Europe will reach 8.7GWh in 2024, a year-on-year decrease of 27.2%. With the gradual completion of destocking and the decline in interest rates, it is expected that the demand for household storage in Europe will resume stable growth in 2025.

By 2028, U.S. grid-side energy storage capacity will more than double

In recent years, the U.S. energy storage market has shown strong growth momentum. According to the U.S. Energy Storage Monitoring Report recently released by the American Clean Power Association (ACP) and Wood Mackenzie, the United States added 3.8GW/9.9GWh of energy storage projects in the third quarter of 2024, an increase of 80%/58% year-on-year. Among its new projects, more than 90% of the projects are grid-side energy storage projects, with household use accounting for about 9% and commercial and industrial (C&I) accounting for about 1% (the exact figures of MWh and MWh are slightly different).

In Q3 2024, the new installed capacity of energy storage in the United States was 3.8GW/9.9GWh, with a year-on-year increase of 60%. Among them, large storage installed capacity was 3.4GW/9.2GWh, with a year-on-year increase of 60%, and the average investment cost of 2.95 yuan/Wh remained high, and 93% of the projects were located in Texas and California. Household storage installed capacity in Q3 was 0.37GW/0.65GWh, with a year-on-year increase of 61% and a month-on-month increase of 51%. California, Arizona, and North Carolina are in the leading position. Due to the current shortage of household storage batteries in the United States, it is impossible to install them simultaneously with household photovoltaics, but the new installed capacity in these three states still increased by 56%, 73%, and 100% compared with Q2. In terms of industry and commerce, the installed capacity in Q3 2024 was 19MW/73MWh, and the capacity decreased by 11% year-on-year, and the demand has not yet been restored.

It is worth noting that the demand for energy storage in the residential and commercial sectors in the United States has begun to grow rapidly. More and more households and commercial users choose to install photovoltaic energy storage systems to increase energy self-sufficiency, reduce electricity bills, and provide backup power when the grid is out of power.

Among them, the US government has played a key role in promoting the development of the energy storage market. In 2024, the US government significantly reduced the installation cost of photovoltaic energy storage systems by providing incentives such as the solar investment tax credit (ITC). In addition, state governments have also implemented a series of policy measures such as subsidies and tax breaks, further promoting the growth of the energy storage market. It is expected that by 2028, the installed capacity of grid-side energy storage will more than double, reaching a total of 63.7GW; the new capacity of household projects and CCI projects in the same period will reach 10GW and 2.1GW respectively. The forecast is slightly lower than the forecast data in the second quarter because the commercial commissioning date (COD) of 600MW projects has been postponed from 2024 to 2025.

Although the US energy storage market has broad prospects, it still faces some challenges. First, the initial investment in energy storage systems is still high, which is a considerable burden for some consumers and companies. Second, as the use of batteries increases, how to deal with waste batteries and their recycling has become an increasingly severe environmental challenge. In addition, the grid infrastructure in some parts of the United States is relatively old and cannot fully adapt to the access and dispatch of distributed energy, which also limits the widespread deployment of energy storage systems.

In summary, in 2025, the European and American energy storage markets are expected to continue to maintain strong growth momentum, and their policy support, technological progress and market demand will continue to drive the rapid development of the market. However, while enjoying overseas development opportunities, Chinese energy storage companies also need to pay attention to and solve the above potential challenges to achieve their own long-term sustainable development.

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