Entrenched Incumbents and Seedling Start-ups in Battery Storage Markets – Innovation Finds a Way
In the February edition of CTG Insights, our bi-monthly publication highlighting trends we feel should be at the forefront of the minds of cleantech-focused corporates and investors alike, we wrote an article addressing the opportunities in battery storage markets. The lithium-ion battery energy storage market is composed of a few sub-sectors, including the decades-established consumer electronics market, a $20 billion market that has incumbent advantages in both scale and mature supply chains. However, the electric vehicles market has arrived in recent years to much fanfare, prompting a current scramble for market share. Looking to the future, the potential for energy storage in grid and utilities use cases is also promising rich, notwithstanding regulated, rewards. Competitive advantage in the consumer electronics market has so far predicted success in emerging storage sectors like EVs, giving Tier 1 suppliers a head-start in the race for market share. However, there are nuances in applications of battery storage technology (consumer electronics, EV, and grid), and the constantly changing landscape will continue to translate into opportunities for creating value and growth for innovative start-ups both in the present and in the future.
One area of analysis that we couldn’t explore as deeply warranted in our original article is the role of Chinese players in driving the market forces that we see in these battery-powered sectors. Large, state-owned enterprises such as BAIC Group, SAIC Motor and JAC Motors could well be the biggest electric car manufacturers you’ve never heard of, with a combined revenue in 2014 alone of around $150 billion (BAIC: $43 billion; SAIC: 101 billion; JAC: $5 billion). These three companies are supplied by another Chinese company, Guoxuan (anglicized to Gotion) High-Tech, a battery maker focused specifically on the EV market. In an already crowded market, it is the huge economies of scale enjoyed by these Chinese manufacturers that play a significant role (as it did in the PV solar market) in driving the lower Li-ion battery costs that we see today. This race to the bottom is well established in the consumer battery market, but the door appears to be fast closing on the possibility of another Tesla breaking into the Tier 1 OEMs in the EV sector.*
So it appears that between the long-established battery manufacturers such as Panasonic, Samsung and LG Chem, and Chinese players like Gotion, the large-scale battery manufacturing market appears pretty well cornered. Yet innovation continues to thrive around the edges, with a variety of software and supply-chain innovators finding niches and nuanced value propositions, enabling them to prosper around these well entrenched behemoths. For example, Li-ion batteries have a high operating voltage that makes them susceptible to over-heating, short-circuiting, and fires. LithFire-X is an example of a company developing proprietary technology for lithium-ion battery fire suppression and management to address these issues.
Another issue that OEMs face (and thus, an opportunity for innovation) is a lack of expertise in battery management systems to assess battery performance in EVs. Aberdeen-based start-up Dukosi has addressed this issue, innovating on the traditional slave/master architecture (a common industry term, not our own) of large battery packs, and embedding sensors into every battery cell at the start of the manufacturing process. This enables constant data feedback on the performance of cells within a battery, as well as significant weight savings in electric vehicles by reducing cumbersome wiring connectors.
It is clear from the analysis above that there are huge challenges facing start-ups that want a piece of the growing EV and grid market pies.
Between decades-old market incumbents, the growing power of Chinese players, and large-scale manufacturing OEMs, it seems that there is little room to maneuver for new start-ups hoping to seize upon new opportunities. But the market is rapidly changing, and with change comes opportunity. We are not saying that it’s easy; we would simply say that innovation, uh, finds a way.
* Although the door is not fully closed – NIO, for instance, has received huge amounts of investor funding, most recently from Baidu with a $600 million equity round closing in March, bringing its capital raised to over $1 billion.
Source:cleantech
