Industry Insight | The Chinese energy storage BMS industry is emerging with great momentum, and the future market will maintain a long-term high level of prosperity

Energy Storage Battery Management System

The energy storage system industry chain consists of three parts: upstream raw materials, midstream energy storage systems, and downstream end applications. Among them, BMS is one of the core components in electrochemical energy storage systems.

China's energy storage system industry chain

As a core link in the energy storage industry chain, energy storage system integration connects upstream equipment providers with downstream energy storage system owners (end-users), making it an area of competition for energy storage manufacturers. It mainly includes upstream raw materials and components; midstream core links such as energy storage system integration, which include four key parts: energy storage battery packs, energy storage converters (PCS), battery management systems (BMS), and energy management systems (EMS), as well as other equipment (such as battery control cabinets, local controllers, temperature control systems, and fire protection systems). It also provides these to downstream EPC manufacturers for project installation and operation and maintenance. The end-user scenarios are mainly found in three major areas: power generation, grid, and user.

Energy storage systems are typically comprehensive energy control systems that include energy storage batteries, battery management systems (BMS), power conversion systems (PCS), energy management systems (EMS), and other components. Among these, the BMS is an indispensable and important component of electrochemical energy storage systems, accounting for about 9% of the cost. Energy storage systems usually come into normal operation only after installation and operational maintenance, converting energy into different forms for storage and deploying it when needed. Compared with traditional lead-acid batteries, lithium batteries have significant competitive advantages in terms of energy density, energy-saving efficiency, environmental friendliness, and cycle life, which also determines the leading position of lithium batteries in the electrochemical energy storage system market.

Hierarchical Architecture of Energy Storage BMS System

The energy situation under China's 'dual carbon' background has promoted the development of new energy power generation + centralized energy storage. Distributed energy storage + charging piles have created a huge demand for energy storage systems, thus driving the rapid growth of the energy storage BMS market.

Energy storage BMS differs from power battery BMS. Energy storage systems have more batteries, a more complex system, and operate in harsher environments, requiring higher anti-interference capabilities from BMS. At the same time, energy storage BMS belongs to a technology field with poor interdisciplinary integration, high technical barriers, and software algorithm development and precise data measurement are the core competitiveness of companies deploying energy storage BMS.

Energy storage systems are more complex and voluminous, with deeper charge and discharge depths and longer life cycles. Energy storage BMSs need to cope with a more complex energy management system. A complete energy storage BMS system mostly has a three-tier architecture. The bottom layer is the individual battery management layer, consisting of battery monitoring chips and their associated circuits. It is responsible for collecting various information about individual batteries, calculating and analyzing the SOC (remaining capacity) and SOH (health status) of batteries, achieving active balancing of individual batteries, and uploading abnormal information from individual batteries to the main control. The middle layer is the battery pack management layer, which collects various information about individual batteries uploaded by BMUs (Battery Management Units) and battery pack information. It calculates and analyzes the SOC and SOH of the battery pack. The upper layer is the battery cluster management layer, which is responsible for overall coordination within the system and external information exchange with EMS (Energy Storage Energy Management System) and PCS (Power Conversion System). It controls the operation process of the entire BMS system according to external requests.

Development History of the Electrochemical Energy Storage Industry

The development process of the electrochemical energy storage industry in China can be divided into two stages: the budding stage (2005-2015) and the initial development stage (since 2016).

In 2005, the National Development and Reform Commission issued the 'Guiding Catalogue for the Development of Renewable Energy Industries', which included electrochemical energy storage, which was in the stage of technology research and development, as a key development industry for the first time. Electrochemical energy storage was first industrialized in the 'Zhangbei Wind-Solar-Power Storage Integration' project in 2011. As of 2015, China's cumulative installed capacity of electrochemical energy storage was 165.6 MW, indicating that the industry is still in its infancy. With the advancement of China's low-carbon green energy strategy and the implementation of supporting policies for a new round of power system reform, the application value of electrochemical energy storage has gradually been recognized by the market.

After 2016, the Chinese government introduced a number of policies to support the development of electrochemical energy storage, including the "Energy Technology Revolution and Innovation Action Plan (2016-2030)" and the "National Innovation-driven Development Strategy Outline." The application fields of electrochemical energy storage have become clearer, the planning volume of energy storage projects has increased significantly, and the commercial application of electrochemical energy storage has been rapidly promoted, marking the industry's entry into a preliminary development stage. However, due to the short history of industry development, unclear business models, and the complexity of the power market, China's electrochemical energy storage industry faces multiple challenges while rapidly developing. On July 23, 2021, the National Development and Reform Commission and the National Energy Administration officially jointly issued the "Guiding Opinions on Accelerating the Development of New Energy Storage," promoting rapid industry development. The report indicates that by 2025, new energy storage will transition from the initial commercialization phase to large-scale development; by 2030, it will achieve comprehensive market-oriented development.

Energy storage technology can mitigate the impact of renewable energy fluctuations and intermittency on power grid systems. Electrochemical energy storage, with its high specific energy, good cycle performance, and environmental friendliness, currently has broad development prospects. The widespread application of electrochemical energy storage in the future will continue to drive the development of the energy storage system market. Lithium battery energy storage systems have three main application scenarios: household energy storage, industrial and commercial energy storage, and grid energy storage. Thanks to the promotion of lithium battery energy storage systems in different application scenarios, the installed capacity of lithium battery energy storage systems in China will maintain high-speed growth.

Calculating the global energy storage industry market size based on new installations, with the promotion of lithium battery energy storage systems in application scenarios, the installed capacity of lithium battery energy storage systems in China has been continuously increasing. From 2018 to 2022, the annual compound growth rate of new installations of lithium battery energy storage systems in China was about 160%, and it is expected that by 2027, the annual compound growth rate will be about 60%.

Energy storage BMS is a key technology used for monitoring, controlling, and protecting battery packs. It can improve the performance and lifespan of battery packs and ensure safe and reliable operation. The development of the energy storage BMS market has been driven by the renewable energy power generation market. With the rapid development of renewable energy sources such as solar and wind energy, energy storage systems are widely used for energy storage and smooth energy supply.

Against the backdrop of 'dual carbon', the energy situation is constantly changing. New energy power generation + centralized energy storage, distributed energy storage + charging piles have become new focuses in China's energy construction. The installed capacity of energy storage has been increasing rapidly year by year, driving the high-speed development of the energy storage BMS market. It is expected that the installed capacity of energy storage systems in China will maintain a stable growth trend in the future, with the markets for lithium battery energy storage and household energy storage having an annualized compound growth rate of about 50% over the next five years. Driven by this trend, it is estimated that the energy storage BMS market will expand rapidly at an annualized compound growth rate of about 50% over the next five years, reaching a scale of hundreds of billions of RMB by 2027.

The generation of renewable energy highly depends on natural conditions, characterized by intermittency and volatility, which greatly affects the safety and stability of the power grid. The introduction of lithium battery energy storage systems can provide buffering for renewable energy integration into the grid, achieve flexible grid connection, and effectively improve the utilization rate of renewable energy.

The development of energy storage in Europe and America has been accompanied by the reform of electricity marketization. Since the late 1980s, driven by the UK, many countries have carried out reforms in the management system of the electricity industry, aiming to open up the electricity market, introduce competition mechanisms, and reduce generation costs, ultimately benefiting various end-users. In recent years, China has accelerated its pace of electricity marketization reform. In addition to sub-sectors such as transmission and distribution, competition mechanisms are urgently needed to further promote the development of the energy storage and energy storage BMS markets.

The energy storage industry has a clear policy orientation. In developed countries such as the UK and the US, governments have issued a series of policies to encourage the development of new energy and energy storage industries, including relaxing approval standards for energy storage projects, modifying charging models, and subsidizing household energy storage. In the future, China will continue to introduce policies to promote the orderly and healthy development of the energy storage market. At the same time, with the continuous growth of installed capacity of China's energy storage systems, the status of China's energy storage industry and BMS in the global market will continue to improve.

In recent years, with the rapid development of the economy, the peak-valley difference of power grid load has gradually increased, and users have put forward higher requirements for power quality. Peak shaving methods are usually inefficient and costly, which is not conducive to the safe and stable operation of generating units. Through large-scale investment in energy storage, energy storage systems can improve the regulation ability of output power, enhance the peak shaving capacity of thermal power units, improve the safety and stability of the power grid, and reduce the peak-valley difference of the power grid.