Economic Observer reporter Wang Yajie

In mid July, Manager Li, the head of an energy storage system integrator in Changzhou, Jiangsu, specially met with the owner of an independent energy storage project.

Manager Li's company won the bid for the energy storage system equipment supply of the project at the end of April, signed a contract with the owner in June, and paid a performance bond of 5% of the contract amount. The system quotation for this hundred megawatt hour (MWh) project is less than 0.5 yuan per watt hour (Wh).

When the energy storage system quotation was still at a historical low in April this year, this was still a low profit order that could be included in the performance report.

But in July, Manager Li calculated that if the original contract price was still delivered, the project could cost millions of yuan.

The problem lies in the assumption of the original account changing.

A project leader of a state-owned energy storage system integrator explained that in the past, companies dared to quote low prices because they were betting that the prices of key equipment such as battery cells and PCS (energy storage inverters) could be further reduced between winning the bid and delivery.

Since July this year, due to factors such as upstream cost rebound, concentrated demand release, and structural adjustment of production lines by battery cell factories, the long-term and spot prices of some battery cells have risen. Battery cell factories have simultaneously increased their prepayment ratio and shortened their payment terms. The original path of "taking projects at a low price first, and then purchasing battery cells may be cheaper" is no longer feasible. The contract price is locked in, but the price of battery cells has increased.

Delivery of low-priced orders has changed

When winning the bid, the above-mentioned projects were considered as "must win" orders within Manager Li's company.

Manager Li said that at that time, the price of energy storage systems was still low, and peers were quoting lower prices one by one. "If we don't quote lower prices, we won't even have a chance to be shortlisted.

He analyzed that the practical basis of this pricing strategy is that in the past year and a half, the long-term contract price of 314Ah battery cells has remained stable in the range of 0.30 yuan/Wh to 0.33 yuan/Wh, with monthly fluctuations usually not exceeding two or three cents.

Most small and medium-sized integrators base their bids on this long-term stable downward price curve, leading to an inertial expectation that the battery cells will be cheaper between winning the bid and delivery. Based on this, his company did not reserve a significant price increase space for key equipment such as battery cells when bidding.

Manager Li admitted, "There wasn't much profit when bidding for this project, and the gross profit was less than 3 points." At that time, the company's judgment was to first complete the project, achieve performance, streamline processes, and ensure team operation.

After Director Li's review, on the one hand, the owners hope to complete the grid connection before the year-end assessment of new energy installation indicators and the adjustment of capacity and electricity policies. On the other hand, battery cell factories are facing tight production schedules and extended delivery cycles. Leading battery cell factories are actively adjusting their production line structures and shifting more production capacity towards new specifications above 500Ah. Conventional specifications such as 314Ah are saturated and the production pace is correspondingly tightened. integrators must stock up and schedule production in advance.

The price of upstream lithium carbonate has rebounded since the end of April. Manager Li said, "From the second half of 2023 to the first half of 2025, the price of battery cells is almost a stable downward sloping line. People have become accustomed to scheduling cost budgets according to this curve. In the quotations a few months ago, no one expected this line to suddenly rise

According to the contract, the project is required to complete full capacity grid connection by the end of December 2026, and equipment will be installed in batches starting from October. The operational window left for integrators is actually only three to four months.

During the bidding process, Manager Li had a framework agreement with a second tier battery cell factory, but the framework price was only locked in until the end of June. When the negotiations resumed in June, the long-term contract price for 314Ah battery cells offered by the other party had increased to 0.365 yuan/Wh, and they requested a 20% advance payment and production scheduling after September. In July, Manager Li inquired about the spot market again and found that the price of 314Ah battery cells was close to 0.39 yuan/Wh to 0.40 yuan/Wh, and many suppliers requested spot payment.

After recalculating, he found that if the battery cells were purchased at a price of 0.365 yuan/Wh or even higher, the total project cost would be significantly higher than the original contract price. He said, "For small and medium-sized companies like ours, losing millions of yuan on a project is a huge blow

Manager Li stated that PCS suppliers have already issued price increase notices in July, and the company's original PCS cost estimate of approximately 0.06 yuan/Wh now needs to be reconfirmed at a higher price. He said, "This project is not going to suffer a big loss, but it's basically a case of flat inflows and outflows, with no effort

Pressure from top enterprises

Facing low-priced projects, the pressure from top integrators comes later.

The project leader of a leading energy storage system integrator told reporters that about 75% of the battery cells they won in the first half of the year were guaranteed through annual long-term agreements, mainly signed framework agreements with leading battery cell companies, with quantity locked in first and prices negotiated quarterly. The long-term contract price of the company was around 0.33 yuan/Wh in the first quarter, and was raised to 0.35 yuan/Wh to 0.36 yuan/Wh in the second quarter. It is expected to continue to adjust in the third quarter, but the magnitude is smaller than in the spot market.

The person in charge revealed that based on the current long-term contract cost calculation, the gross profit of several energy storage system projects with prices around 0.48 yuan/Wh and 0.49 yuan/Wh that the company won in the first half of the year is already very thin, about 3% to 5%, lower than the level of 8% to 10% of some projects in the second half of last year.

He said, "We have the advantage of large-scale procurement. Battery cells are two or three cents cheaper than small factories. PCS and BMS are partially self-developed, and structural components are centrally purchased. The total system cost may be four to five cents lower per watt hour than small and medium-sized integrators. For the same low-priced order, small factories may lose money, but we can still make a small profit. ”

But even for top companies, the bidding bottom line is changing.

The above-mentioned person in charge stated that after July, the company will redraw the line for low-priced projects internally: in principle, it will not invest in projects with 4-hour energy storage systems below 0.48 yuan/Wh, and will also be very cautious about projects with 2-hour systems below 0.55 yuan/Wh, unless it is for strategic customers or for subsequent projects. The owner has made a clear commitment outside the main contract to renew a subsequent energy storage project order of the same region and type at the same or better price, otherwise it will not be easily followed up.

His explanation is that it's not impossible to do it at all, it's a cost-benefit ratio that's not cost-effective. If the price is too low, any problems in the delivery process may consume the profit.

The reason why the person in charge sensed this round of price changes earlier than Manager Li is that since the first signal of an upward adjustment in the long-term contract price of battery cells in May this year, the leading enterprise has already begun to re-examine the low-priced projects won in the first half of the second quarter. In other words, 'pressure comes later' does not mean that changes occur later, but rather that top companies have long-term contract prices, scale procurement advantages, and longer buffer periods.

Cell Variable

One of the key variables that puts pressure on the low-priced orders after they enter the delivery period is the battery cells. In the past, after winning the bid at a low price, companies could still wait for the battery cells to continue lowering their prices to make up for profits; But this time, when some orders actually enter the procurement process, the prices of battery cells, production scheduling, and payment terms have all changed.

Li Ming, the head of research and development at a leading energy storage battery company, told the Economic Observer that the price of 314Ah batteries has gradually increased since the second quarter.

For the integrators who won the bid at a low price, a change of a few cents is enough to rewrite the project ledger.

Li Ming gave an example that an integrator signed a framework agreement with them in the first quarter, but did not lock in the specific purchase quantity at that time. In June, this company came to purchase a batch of 314Ah battery cells, hoping to implement the first quarter price. The battery cell factory did not accept it, and after re quoting, the other party spent two weeks grinding. In the end, the integrator accepted a higher price, but the delivery date was scheduled for September.

Li Ming said, "The framework agreement locks in the intention to cooperate and the annual scale, not the current contract price. If the purchasing enterprise did not lock in the quantity and price at that time, they would have to renegotiate according to the current price and production schedule if they came to purchase now

Besides the price, production scheduling is also becoming tighter.

Li Ming said that the operating rate of his company's 314Ah production line has exceeded 95%, and the new production line with a capacity of over 500Ah started to increase in June and is still in the climbing stage. The current order has been scheduled until October. Under normal circumstances, the delivery cycle for regular specification battery cells is two to three weeks, but now it has been extended to four to five weeks.

The payment terms have also begun to be adjusted.

Li Ming said that for some integrator clients who clearly won the bid at a low price, they have tightened their payment terms internally. In the past, some customers could receive payment terms of three or even six months. Now, similar orders will be required to increase the prepayment ratio or change to payment upon delivery or within 30 days of delivery.

Li Ming further stated that the order "no longer smells good" does not mean that the company can skip it, as there are contracts, performance bonds, and credit records in between. He said, "Some integrators are not unaware of the thin profits, but if they don't take the goods now, they may be more expensive in the future, or they may not be able to catch up with the grid connection node

Answer

After the low-priced order entered the delivery period, the owner also began to adjust their actions.

A person from a state-owned enterprise's power investment platform energy storage project told Economic Observer that in the past two months, there have been more discussions among suppliers regarding prices, payments, and delivery schedules. But in state-owned enterprise projects, it is difficult to directly change the recorded winning bid price. The project leader is more concerned about whether the supplier will compress the configuration in the delivery process in order to maintain profits.

His company has started to refine the equipment acceptance process upon arrival. The battery cells need to be sampled and traced, and the brand and model of PCS and BMS should be checked item by item with the bidding documents. Fire protection, temperature control and other equipment should also be checked for consistency with the technical agreement. For quotations that are significantly lower than the market level, the project team will require suppliers to supplement the source of battery cells, production schedule, equipment delivery milestones, and quality assurance arrangements.

The person in charge of the project admitted, "What we are most afraid of now is not the supplier coming to negotiate payment, but him saying he will deliver according to the contract, but actually changing the configuration privately when he delivers

Industrial storage owners are also re evaluating low-priced orders.

Zhao Mingyuan, the person in charge of a photovoltaic energy storage project supporting an electrolytic aluminum enterprise in Yunnan, told Economic Observer reporters that his company's second phase 50MW/200MWh energy storage project is currently bidding, and most of the system equipment quotations received are concentrated between 0.52 yuan/Wh and 0.58 yuan/Wh, but there are also two quotations that are significantly lower.

Zhao Mingyuan's first reaction after seeing the quotation was not 'cheap', but 'can we make it happen'. He asked the technical team to review the bid again and found that the bidder's battery cell brand was written as "domestic first tier brand", but did not specify the specific manufacturer; BMS states' independent research and development ', while the company's previous largest project was only a few megawatt hours; The warranty period is also shorter than other bidders.

Zhao Mingyuan said, "We are an electrolytic aluminum enterprise, and we are most afraid of power outages. If the energy storage cannot be released when it should be discharged, or if there is a malfunction during operation, the saved equipment money is not enough to compensate for the loss of one shutdown

In this bidding, Zhao Mingyuan's company controlled the price distribution at around 40%, with higher weight given to technical solutions and business qualifications. Suppliers who offer significantly lower prices than others need to explain their cost structure, equipment brand, and warranty arrangements in person.

The evaluation rules for relevant state-owned enterprise projects are also changing, and abnormally low price evaluations are starting to be initiated more frequently.

The above-mentioned personnel from the energy storage project of the state-owned enterprise power investment platform mentioned that in a project last month, a bidder quoted about 0.45 yuan/Wh, which was about 15% lower than the second lowest bid. The evaluation committee requested an explanation of the cost composition. The other party was unable to clarify the source of the battery cells, purchase price, and system configuration, and ultimately failed to proceed.

In this energy storage industry chain, from integrators to battery cell factories to owners, every party is recalibrating their judgment on low-priced orders.

(At the request of the interviewee, Li Ming used a pseudonym in the article)

(Author Wang Yajie)