'One to watch on': LG Energy Solution's relocation downstream with NEC ES procurement

• Industry-watchers will carefully follow just how the lately finished acquisition of energy storage space system integrator NEC ES by LG Energy Solution turns out.

Oliver Forsyth, research expert with the Climate and also Sustainability team of details provider IHS Markit, claimed it is a little very early to anticipate what type of larger sector influence the takeover of one of the battery energy storage industry's very early leaders by one of its biggest battery OEMs will certainly have.

However, the instructions taken for the system integration business, now relabelled LG Energy Solution Vertech Inc by its new owner, "will definitely be an intriguing one to keep an eye on going forwards," Forsyth stated.

NEC ES had been among the leading players in the industry till its mid-2020 exit, with reports citing an absence of success as a significant element. Closing know a gigawatt of setups, including a foothold in the United States market, parent firm NEC Firm in Japan stated it would no more be pursuing brand-new projects, although it maintained NEC ES' lasting O&M commitments.

IHS Markit research study suggests that NEC ES still holds a 4% market share for installed and also planned battery energy storage space system (BESS) projects, almost two years after dissolving nearly all of its operations.

" It simply goes to show simply how affordable this room is. It is a challenging market to make profit in," Forsyth informed Energy-Storage. news.

" I believe NEC, the parent business, chose that it wasn't worth attempting to play the lengthy game, to attempt to find out just how this could end up being lucrative and also because of that, they exited, which is definitely a pity for the industry in its entirety."

Much Of NEC ES' key personnel have actually moved on, with the similarity chief executive officer Steve Fludder currently heading up LS Energy Solutions-- the similarly-named energy storage space subsidiary of another Oriental corporation-- which means that a "lot of capability potentially didn't included this purchase," the sector could see a revitalisation of what the integrator had actually been contributing, the expert stated.

Up until last week, when the deal closed, LG Energy Solution (LGES) had not truly indicated what its post-takeover strategy may be. The business has actually currently stated the takeover reinforces its capacities as a system integrator which it will certainly seek vertical combination from its battery OEM company all the way downstream to deployment.

New direction for battery OEMs

Oliver Forsyth stated IHS Markit has actually observed a trend for battery suppliers to relocate downstream right into the project company as well as systems modern technology provision: the similarity BYD providing a fully containerised BESS system with incorporated power conversion systems (PCS), CATL as well as Samsung SDI in addition to LGES have actually introduced their own plug and play solutions.

The analyst noted that with the exception of BYD, the above instances leave out the PCS so these items are concentrated on DC-connected projects only. That means they are aimed at the solar-plus-storage market, specifically in the United States, where that segment is growing rapidly.

Nevertheless, that only allows them to chase after a portion of the total demand-- albeit a considerable portion, Forsyth claimed-- yet does limit their capability to obtain market share in projects that require "that even more facility assimilation from the AC degree up," entailing aspects like software and arrangement procedure that battery OEMs "have not actually completely spent or developed enough capacity in yet to provide".

" The procurement by LGES of NEC ES is a step in that direction, we could see in the future, a solution where a battery OEM can do everything. There's a few things they need to arrive. The software program, the O&M capability, the ability to use those longer term warranties, as well as taking care of that asset, along with that in-house combination capability of the PCS."

It deserves noting that LGES was a battery cell supplier to NEC ES for a number of its projects worldwide, so there might also be an aspect that LGES intends to ensure assets built with its cell remain to operate to consumer expectations, Forsyth additionally stated.

Other points to think about will be how LGES tackles the NEC ES software application and also controls platform, AEROS, which had actually had a lot of time as well as resources invested into it.

In terms of profitability, Forsyth stated NEC ES was one-of-a-kind in the feeling that it was "trying to develop extremely special projects each time, trying to tailor its design to every project, which suggested they were certainly really top quality, but at the same time, the success was very low".

Even in the short time given that its market exit was revealed, NEC ES' major rivals consisting of Fluence, Wärtsilä and also Powin Energy have actually all brought out item and solution lines with a much higher degree of standardisation.

" We're seeing these lost weight solutions: really attempting to optimise area, take care of how much equilibrium of plant you require per battery module, making certain that your fire suppression systems is maximised throughout as numerous solutions as you can, attempting to reduce the containerisation, truly trying to lose weight on the amount of metal you're making use of there, to really attempt to optimise costs. I assume that we'll remain to see that taking place."

It will be fascinating without a doubt to see what instructions LGES takes on these aspects of business. Yesterday (20 February), the supplier announced the consultation of Dr Peter Kyungsuk Pyun, in the newly-created function of chief electronic police officer, tasked with "electronically transforming" the company's global centers right into "data-centric operations".

"Based upon his accumulated experience in world-renowned companies, we anticipate LGES to take a further advance in battery manufacturing procedures by utilising AI and also big-data technology," the company said in a declaration as well as once again it will certainly be interesting to see if this new capability is leveraged right into its more downstream BESS activities through LG Energy Solution Vertech.