The decade-long continuous cost reduction has driven the promotion of  battery products, especially the widespread application of lithium iron  phosphate batteries, resulting in a surge in market demand for batteries. The  United States has become the world's largest battery energy storage market.  According to Bloomberg New Energy Finance, the annual demand for lithium-ion  batteries will exceed 2.7TWh by 2030.

　　The U.S. Energy Information Administration claims that the U.S. plans to  deploy 5.1GW of utility-scale energy storage in 2022. But the uncontrollability  of the battery supply chain is increasing, and this forecast is questioned.  That's because prices for almost all materials needed to make lithium-ion  batteries, including aluminum, copper and nickel, have risen across the  board.

　　As a professional customized lithium-ion battery manufacturer, SES Power  has been paying attention to the market of lithium-ion battery raw materials. In  the past 12 months, the price of lithium carbonate has increased by 500%. It is  estimated that for every 20% increase in the price of lithium carbonate, the  total cost of the battery will increase by 3%. The development speed of lithium  materials simply cannot keep up with the pace of market growth. We estimate that  the price of raw materials for lithium batteries will continue to increase for  two to three years.

　　Today, most of the world's lithium-ion batteries are produced in China, so  the cost of energy storage systems is also affected by the global shipping  crisis. Before the pandemic, the cost of shipping a standard container was only  $1,300, but in September 2021 it reached an all-time high of over $11,000. This  has brought huge troubles to many lithium-ion battery manufacturers. Take SES  Power's energy storage products as an example, such as 12V100Ah, 24V100Ah,  36V100Ah, 48V100Ah using EVE, CATL, BYD square aluminum-shell lithium iron  phosphate batteries, household energy storage systems of 3KW, 5KW, rack-mounted  energy storage systems, etc. Products, shipping + materials caused the price to  rise by nearly 20%.

　　In late October 2021, it took twice as long to unload containers at the  U.S. port of Long Beach, one of the world’s largest container ports, as it did  before the COVID-19 pandemic. The market generally does not expect container  shipping costs to normalize until 2023.

　　The solar power industry is also dealing with a similar supply chain  crisis, which has led the Solar Energy Industry Association (SEIA) to cut its  2022 market forecast by 25%. PV modules are more expensive than ever, and  research firm IHS Markit expects prices to remain high through 2023. Driven by  rising PV module prices, the price of solar power systems has increased by  nearly 50% from below US$0.20/W, rising to US$0.26/W to US$0.28/W from 2020 to  the second half of 2021.

　　Considering that 80% of the cost of solar + lithium battery energy storage  projects come from solar power generation facilities, and the remaining 20%  comes from energy storage systems, the price increase in the photovoltaic  industry has a greater impact on the promotion of clean energy. Since most of  the battery storage systems planned for the next three years in the United  States will be deployed in conjunction with solar power generation facilities,  developers also hope that photovoltaic modules will return to their original  prices.

　　Rising prices have delayed the deployment of many lithium-ion battery  energy storage projects, while energy storage systems using other batteries have  increased. Energy storage developers working on non-lithium and  non-electrochemical technologies raked in hundreds of millions of dollars in  revenue last year, and the prolonged turmoil in the lithium-ion battery market  presents them with more market opportunities.

　　As the demand for renewable energy continues to grow, it will also see  long-duration energy storage technologies become more critical, and the role of  energy storage system integrators becomes even more important. Due to the  explosive growth of market demand, many new players from different main  directions of upstream and downstream of the industry are trying to enter the  field of system integration.

　　In return, energy storage integrators will need to do their part by setting  transparent and reasonable expectations with off-takers on cost structures and  timelines. And Wärtsilä is working hard to find creative solutions to help its  customers meet this global challenge. This ranges from how to interact and  communicate with customers, to proposals and contract terms, to forecasting and  supply chain strategy.

　　While waiting for raw material and battery prices to recover, customers can  increase their revenue by integrating energy management software with existing  assets. For power producers, optimizing the long-term economics of their  portfolios has never been more important.

　　This intelligent control system can support a variety of applications to  maximize the value of the energy storage system. Using weather, use cases,  historical system performance and battery data, energy management software can  predict how much power an energy storage system will provide and leverage and  balance insights like price changes.

　　Finally, if the US Congress can pass the Build Back Better Act, which  includes the Investment Tax Credit (ITC) for independently deployed energy  storage systems, it would significantly ease the price increases of the past six  months. The Investment Tax Credit (ITC) will reduce costs and create much-needed  certainty in the energy storage market. Energy storage is now key to America’s  aggressive decarbonization and electrification goals, and the Investment Tax  Credit (ITC) will go a long way to help get the battery storage industry back on  track.