Battery maker LG eyes US market to lift energy storage sales

SEOUL: South Korean battery maker LG Energy Solution Ltd is considering an expansion of its production in the United States in a bid to triple sales from energy storage systems, according to a senior executive.

LG is reviewing further investment in the United States, after unveiling a US$2.3bil spending plan in March to produce grid-scale batteries for storage in Arizona, said Chang Seungse, who leads the company’s employee self-service (ESS) business.

North America will account for up to 70% of LG’s ESS sales by 2030, helping triple its total revenue from the sector in the next five years, he said.

Chang declined to give any details on the additional investment in the United States.

The South Korean manufacturer’s foray in the United States underscores its effort to fend off Chinese producers and regain clout in the energy storage sector.

The company will focus on supplying higher-end storage systems in North America, specialising in premium products and will benefit from the tax credits doled out by US President Joe Biden’s Inflation Reduction Act, Chang said.

“It would be hard for Chinese suppliers to compete directly with us in the United States,” he said in an interview before heading to Las Vegas for RE+ 2023, an industry trade fair. “It’s not in our plan to play a market-share game with China.”

The expansion plans come after a spate of fires between 2017 and 2019 at energy storage sites in South Korea sapped the sector’s growth in the country, and prompted stricter government regulations.

Safety is considered one of the key factors hampering South Korea’s efforts to decarbonise its power grid.

As South Korean ESS battery manufacturers grappled with safety concerns, their biggest rivals in China seized more of the global market.

Contemporary Amperex Technology Co and Eve Energy Co have both seen their shares rising to around 43% and 7.8%, respectively, while LG’s share plunged to 7.5% last year from almost 18% in 2021, according to a report from Seoul-based SNE Research.

Soaring domestic demand in China has also benefitted Chinese producers.

The global ESS market is forecast to record a 23% compound annual growth rate, with China overtaking the United States as the largest energy storage market by 2030, according to a report from BloombergNEF.

LG is looking to use its expertise in electric vehicle batteries, it’s a supplier to global automakers including Tesla Inc and General Motors Co, in the ESS market.

The company will accelerate its development and production of batteries based on lithium-iron-phosphate (LFP), that are relatively safer and cheaper than nickel-cobalt-manganese cells conventionally used in storage systems, Chang said.

“LFP will remain the dominant battery storage chemistry for the stationary storage market until 2030, making up 65% of the ESS battery storage chemistry mix in 2030,” said Helen Kou, a BloombergNEF analyst.

“It is essential for LG ESS to invest in LFP technology to compete with its battery provider peers.”

LG is also looking beyond the battery manufacturing segment, Chang said. The company will hire more software engineers to help operate massive energy storage systems. — Bloomberg