Two major catalysts are driving the energy storage sector forward. According to foreign media reports, technology leader Alphabet has announced it will adopt innovative "iron-air battery" technology at its large data center campus in Minnesota. This move is seen as a technological milestone for the battery industry. Additionally, brokerages indicate that Europe and Australia are entering a new phase of high growth. Subsidies in Australia are continuously stimulating activity, making it a driver for residential storage. The UK previously introduced substantial subsidies, potentially becoming another growth engine. Demand in Ukraine is recovering, and Poland launched a new round of subsidies for residential solar and storage systems at the end of January. This afternoon (25th), the energy storage sector experienced a significant surge. Delong Huineng saw its shares hit the upward limit shortly after the afternoon session began. Xiongtao Co., Ltd. skyrocketed, approaching the daily limit, and closed up over 7%. The Battery ETF managed by China Universal surged more than 2% during the afternoon.
Significant Breakthrough Reports indicate that Alphabet is making a major bet on "iron-air batteries." These new devices can provide stable power for up to 100 hours, a substantial improvement over the current mainstream lithium-ion batteries, which typically last only 4 to 8 hours, significantly extending the service life of green energy facilities. Alphabet is partnering deeply with Minnesota power provider Xcel Energy on a plan to build a clean energy system with a total capacity of 1.9 gigawatts (GW), including financing for large-scale wind and solar power plants. A key highlight of this extensive green energy plan is a 300-megawatt (MW) battery system developed by Massachusetts-based startup Form Energy. Form Energy's "iron-air battery" operates on a unique principle, generating electricity through a chemical reaction involving oxygen, water, and iron powder, a process akin to metal rusting. More breakthrough is its ability to reverse this "rusting" process during recharging, storing energy for later use. Since traditional lithium batteries struggle to support 24/7 operation, iron-air batteries with their 100-hour storage potential can maintain stable renewable energy supply for several days even during cloudy or windless conditions, enabling true round-the-clock green power. Iron offers several advantages over lithium, including greater abundance and lower cost. Form Energy CEO Mateo Jaramillo stated that iron battery costs could be just one-tenth that of lithium batteries. However, a drawback is their relative unsuitability for rapidly delivering large amounts of power to the grid. Therefore, Jaramillo noted that Alphabet's facility will adopt a "hybrid strategy," deploying both lithium and iron batteries. The former will handle short-term peak power demands, while the latter will serve as a long-duration backbone, each fulfilling distinct roles. He indicated that "iron-air batteries" are particularly suitable when the grid is under stress from factors like extreme heat, leading to prolonged high demand. Grid operators are especially concerned about such peak periods, which can cause blackouts. Data center developers capable of deploying long-duration storage batteries to help utilities stabilize power supply are expected to gain grid connection approvals faster. Form Energy delivered a small-scale storage system to another Minnesota power company last year. The scale of the agreement with Alphabet is over 200 times larger than that initial delivery.
Is a New High-Growth Phase Starting? Domestically, Huafu Securities pointed out that production and sales of power/energy storage batteries saw rapid year-on-year growth in January. China's combined production of power and energy storage batteries reached 168.0 GWh, up 55.9% year-on-year. Sales reached 148.8 GWh, up 85.1% year-on-year. Specifically, power battery sales were 102.7 GWh, accounting for 69.0%, a 63.2% increase; energy storage battery sales were 46.1 GWh, accounting for 31.0%, surging 164% year-on-year. Exports of power and energy storage batteries combined reached 24.1 GWh, up 38.3% year-on-year, accounting for 16.2% of total sales. Simultaneously, positive news continues to emerge from overseas. Brokerages state that large-scale storage is essential infrastructure for both online and offline grid power consumption. The US and European power systems are experiencing a 60-year Kondratiev cycle, reflecting not only grid demand but also stronger, sustained demand for large-scale storage. Recent industry feedback indicates robust order books for overseas energy storage companies, particularly those with high exposure to residential and commercial/industrial storage, with many companies seeing production schedules fully booked for the first half of this year. Furthermore, leading Chinese companies across the lithium battery supply chain have revised their February-March production schedules upward to some extent, with March production intensity expected to reach new historical highs. The core uncertainty for current demand lies in the domestic electric vehicle market, which requires observation of March-April sales data. It is important to note that energy storage demand, both domestically and internationally, may exceed expectations again. Should demand expectations improve, the lithium battery materials sector could re-enter an optimal investment phase. Soochow Securities stated that the introduction of a national capacity compensation electricity price policy will be followed by detailed rules and lists from various provinces. Demand for large-scale storage is strong, with an expected growth rate exceeding 60% by 2026. Post the US Inflation Reduction Act, a surge in installations is anticipated before 2025, exceeding expectations. Coupled with the expected take-off of data center storage starting in Q4 2025, 2026 could see further upside surprises. Demand for large-scale storage is exploding in emerging markets like Europe and the Middle East, sustaining high growth. European residential storage inventory digestion is complete, shipments are recovering, commercial and industrial storage demand is beginning to surge, and emerging markets continue to grow. Global energy storage installations are projected to grow over 60% in 2026, with a compound annual growth rate of 30% to 50% from 2027 to 2029.
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