2025-09-25 05:58Summary of Key Points from the Conference Call Industry Overview - Industry: Energy Storage Systems (ESS) in China - Key Organization: China Energy Storage Alliance (CNESA) Core Insights 1. ESS Installation Trends: - Post-May 2025, China experienced a significant drop in ESS installations from 26 GWh to 7-9 GWh between June and August due to a rush in solar installations and the cancellation of mandatory ESS policies [6][9][39] - Despite this decline, ESS tender volumes remained strong, with August 2025 reaching a record of over 40 GWh, and total tender volume for the first eight months of 2025 increased by over 200% year-on-year to 144 GWh [6][11] 2. Government Support and Policy Changes: - The National Development and Reform Commission (NDRC) set a new ESS installation target of 180 GW by 2027, up from 75 GW in 2024, indicating a strong policy direction to support ESS development [6][22] - More than 10 provinces are expected to roll out incentive programs to support ESS installations, with Inner Mongolia already providing Rmb 0.35/kWh for power discharged by ESS projects [6][37] 3. V-Shaped Recovery Anticipated: - A V-shaped recovery in ESS installations is expected as early as Q4 2025, driven by project developers securing projects ahead of provincial incentive programs [6][39][40] - The expert predicts that China's ESS installations could reach 130 GWh in 2025, with a further increase to 150 GWh in 2026 [50][54] 4. Economic Viability of ESS Projects: - The removal of mandatory ESS attachment may negatively impact demand, but the falling costs of ESS systems (from Rmb 1.5/Wh in 2024 to Rmb 1.0/Wh in 2025) and reduced financing costs for state-owned developers are expected to support project economics [12][39] - ESS projects in Inner Mongolia are projected to achieve an internal rate of return (IRR) of 13% over the next 10 years due to capacity compensation and peak-trough price arbitrage [16][37] 5. Comparative Analysis with US Market: - The expert noted that China's mandatory push for ESS is lagging behind the US merchant power market, where installations are driven by economic factors rather than mandates [41] - If China were to adopt similar attachment rates and battery durations as the US, cumulative ESS capacity could exceed 300 GWh by the end of 2024 [41][42] Additional Important Insights - Investment Recommendations: - J.P. Morgan has an "Overweight" rating on CATL-A/H and LGES, while maintaining a "Neutral" rating on Sungrow due to its stretched valuation despite potential benefits from ESS installations [7][39] - Market Dynamics: - The expert emphasized that the pace of ESS installation recovery in China will be critical for the global outlook, as China contributes over half of all global ESS installations [7][50] - Provincial Policy Impacts: - Local governments may source funds for capacity compensation from power generators or users, potentially increasing power generation costs [37][38] This summary encapsulates the key points discussed in the conference call regarding the current state and future outlook of the ESS industry in China, highlighting the impact of government policies, market dynamics, and investment opportunities.