Chinese Battery Energy Storage Boom Drives A Lithium Recovery
High peak hour power prices in China have emerged as the driving force behind a revival in the price of lithium, a key battery metal, which has risen by 25% over the past four weeks, and 50% since mid-June.
Previous sharp moves in the lithium price have been linked to demand for electric vehicles (EVs) but the latest bounce is directly connected to demand for battery energy storage systems (BESS) such as the Tesla Powerwall.
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Most investment bank analysts missed the significance of a change in Chinese power pricing introduced in June which also removed a requirement for the compulsory inclusion of a battery energy storage system with all new wind and solar power installations.
The initial reaction was that the change would have a negative effect on lithium and other battery metals such as copper and cobalt because it reduced demand for back-up batteries.
But included in the changed regulations was a new electricity pricing mechanism which included increased variability to smooth overall demand with higher peak prices and lower off-peak prices, a perfect combination to encourage the installation of BESS systems.
UBS, an investment bank, noted the change in Chinese power pricing in a report published last week, written after a week-long tour of major Chinese cities by a team of its analysts.
The bank acknowledged an error an earlier report after a similar tour in May which resulted in a report which warned that removing the
battery installation requirement would result in falling BESS orders in the second half of the year.