With the ABB/BYD alliance, energy storage reaches maturity

by / Friday, 05 September 2014 / Published in Smartgrid-CI Blog

The alliance between ABB and BYD just signed can be a success on the condition the Chinese EV market really takes off.

The European energy giant ABB and BYD, the Chinese leader in the electric bus industry that is partly owned by Warren Buffett’s Berkshire Hathaway just signed a global partnership on the development of energy storage.

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What makes the event particularly important is that both are very significant global actors in the respective markets, which gives the alliance a true global flair. The other important dimension of this agreement is its scope that covers mobility storage as well as energy and marine storage. Founded in 1995 only, BYD is one of the world leaders in the battery industry with a global footprint and a world leader in the electric bus and electric car industry. What makes BYD important in this alliance is its position on the Chinese market at a time when the Chinese government is ready to strongly push electric vehicles as a way to fight air pollution. The Chinese government recently passed a charging station mandate that includes the installation of 1000 fast charging stations by the end of this year. More importantly, it is considering a $16B subsidy policy in the next few years in order to boost the implementation of an EV charging network across the country. Some of BYD competitors, such as Tesla, have already understood the tremendous potential of the Chinese EV market. The California firm just signed an agreement with China Unicom (the country’s second biggest telecommunications carrier) for the roll out of a network of 400 charging stations in 120 cities.

This agreement comes at a time when BYD ‘s electric car sales in China are improving and when at the same time, the Chinese company is developing its electric vehicle strategy with a new partnership with Daimler taking off.

But what makes this alliance even more interesting is the technical synergy that will emerge from both giant working together and the possibility to absorb R&D and manufacturing investment beyond the electric vehicle business. This is where ABB’s global reach becomes very important to the alliance. ABB has been working on energy storage for more than ten years now and has implemented energy storage for a diversity of applications within a grid; load leveling, peak shaving, frequency regulation and so on. This represents very significant knowledge when it comes to identify a market and quickly get into it with the right combination of products and services. However, the significant synergy of this partnership comes with one caveat. Its success depends a lot on China’s EV market to really take off rapidly and the least that can be said is that China has been quite disappointing in this area so far. Last Year, China absorbed 17,000 EV’s only, out of a global market of more than 200,000 vehicles and China’s EV market growth rate was 38% only when most other nations experienced much higher growth rates and more maturity. In 2013 the global EV market grew 63%.

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