Korean battery trios bolster efforts to recapture ESS market

LG Energy Solution’s energy storage system (ESS) products. [Courtesy of LGES]

South Korea’s three major battery makers are stepping up efforts to recapture energy storage system (ESS) market leadership lost to China by enhancing the cost-effectiveness of battery production and improving safety to secure orders for high-capacity ESS products in the global market, which is showing a rapid growth trajectory comparable to electric vehicles.

“While LG Energy Solution used to lead the ESS market, it slipped to fourth place due to competition from Chinese companies,” said an industry source. “To regain its position, LG Energy Solution is restructuring its business with a focus on lithium iron phosphate (LFP) batteries, considering the unique market characteristics of ESS different from EV batteries.”

LFP batteries are a strong suit for Chinese companies. They outperform NCM batteries, which had been the main business focus of Korean companies, in terms of cost-effectiveness and safety, leading to a shift in market share.

As of the end of 2022, LG Energy Solution and Samsung SDI held a market share of 7.5 percent and 7.3 percent, respectively, a sharp decline from their 55 percent dominance in the global ESS battery market just two years ago. Chinese companies now occupy the vacated top positions.

Leading global battery manufacturer, CATL from China, commands a 43.4 percent market share in the ESS market, followed by BYD (11.5 percent) and EVE Energy (7.8 percent). The 6th to 8th positions are also taken by Chinese companies: REPT, Great Power, and Guoxuan.

LFP batteries are heavier and experience reduced output at low temperatures compared to NCM batteries. However, their cost is lower because they do not contain cobalt, a critical element in NCM batteries.

While the weight disadvantage might lead to reduced driving range for EVs, this drawback does not have the same impact on stationary ESS applications.

Reflecting this market shift, LG Energy Solution is restructuring its supply chain, with LFP batteries at the center of production.

The company is producing ESS products from the LFP battery production line in Nanjing, China, and also plans to fill the void left by Chinese companies in the North American ESS market with LFP batteries.

Samsung SDI, on the other hand, is focusing on NCM batteries for ESS, leveraging its strengths. Despite the ESS battery market moving towards LFP batteries, Samsung SDI continues to prioritize NCM batteries due to its superior capacity per unit volume.

Samsung SDI, which produces cylindrical, prismatic, and pouch batteries, is reportedly focusing on prismatic batteries for ESS.

SK on is still focused mainly on a growth strategy centered on electric vehicles rather than ESS. The company also produces some ESS products, but they reportedly make up a small percentage of the company’s overall revenue.