中国储能行业：上游材料成本上涨对储能需求影响温和-China Energy Storage Industry _ Upstream material cost rise to have mild impact on BESS demand

Summary of the Conference Call Transcript Industry Overview - Industry: China Energy Storage Industry - Focus: Battery Energy Storage Systems (BESS) Key Points and Arguments Impact of Raw Material Costs - Recent increases in battery material costs have raised concerns about their impact on BESS demand and margins for manufacturers - Suzhou Deegares announced a 15% increase in battery prices to offset higher material costs - Core raw materials (LiCO3, LiPF6, VC) constitute only 26% of battery costs and 8% of total EPC costs, suggesting a mild impact on demand despite rising costs [2][3][4] Project IRR Analysis - Typical BESS project IRR is estimated at around 8% considering capacity compensation pricing - A 10% increase in battery costs could lead to a 3% increase in EPC costs, reducing project IRR by 0.66 percentage points to 7.4%, which remains attractive [3][4] - A Rmb0.1/kWh increase in battery costs would likely result in an IRR of 6%, still meeting the investment hurdle rate for most operators [3][4] Revenue Diversification - More diversified revenue streams for standalone BESS projects (e.g., spot market arbitrage, capacity compensation) could help offset cost inflation - An expansion of the peak-trough pricing spread by Rmb0.1/kWh could increase BESS project IRR by 3.6 percentage points [4][5] Demand Forecast - Positive outlook on BESS demand, with unchanged installation forecasts for 2026/27 at 231GWh (54% YoY growth) for China and 324GWh (40% YoY growth) globally [5][20] - Global forecasts for 2026/27 are 412GWh (49% YoY growth) and 544GWh (32% YoY growth) [5][20] Manufacturer Positioning - Companies with higher overseas exposure, such as Sungrow, may be better positioned to raise prices in response to cost increases [5] Risks to the Industry - Major downside risks include slower-than-expected growth in domestic renewable energy capacity, smaller peak-trough electricity price spreads, limited market accessibility for energy storage systems, and potential tariffs on Chinese products [22] Additional Important Information - The ability of BESS manufacturers to pass through cost inflation varies, with leading suppliers likely having an easier time compared to others [4] - The ramp-up of larger-capacity battery cells (587Ah) could also contribute to cost reductions [4] This summary encapsulates the essential insights from the conference call regarding the China Energy Storage Industry, focusing on BESS, its financial implications, demand forecasts, and associated risks.