South Korea's leading battery manufacturers, LG Energy Solution, Samsung SDI, and SK On, are accelerating efforts to secure domestic production capabilities ahead of the third energy storage system (ESS) central contract market, valued at around 1 trillion won. With the second market emphasizing non-price evaluations such as industrial competitiveness and supply chain reliability, competition for contracts in the upcoming third market is expected to intensify as all three companies establish production lines for lithium iron phosphate (LFP) batteries for ESS.
According to industry sources, the Korea Power Exchange is expected to announce the bidding for the third ESS central contract market as early as this month. The project size is anticipated to be similar to the previous second market, around 1 trillion won.
In the first market, price evaluations accounted for 60%, leading to concerns that products with higher price competitiveness had an advantage. Given that this is a public power grid project funded by taxpayer money, there have been calls for a more active assessment of contributions to domestic production capabilities, supply chains, and the industrial ecosystem.
In response, starting from the second market, the government adjusted the evaluation ratio of price to non-price factors from 60:40 to 50:50, incorporating feedback from industry and experts. The scoring for industrial competitiveness was also increased from 9.6 to 12.5 out of 100, and assessments of battery material origin were strengthened.
LG Energy Solution plans to produce LFP batteries for ESS at its energy plant in Ochang, North Chungcheong Province, starting in 2027. Initial production capacity is set to begin at 1 GWh annually, with plans to gradually expand based on market demand.
SK On is also ramping up its domestic production capabilities. The company plans to complete the conversion of its electric vehicle battery production line at its Seosan plant in South Chungcheong Province to an ESS LFP battery line by the fourth quarter of this year, with an expected annual production capacity of 3 GWh once the transition is complete.
Samsung SDI is establishing a mother line for LFP batteries for ESS at its Ulsan facility. Additionally, the company announced plans to invest approximately 16 trillion won in Ulsan starting this year for the production of LFP batteries for ESS. It continues to secure contracts for its existing nickel-cobalt-aluminum (NCA) batteries.
As a result, the domestic production capabilities and supply chain development of each company are emerging as key factors influencing contract awards in the third market. If the Korea Power Exchange maintains the existing evaluation framework for the third market, competition will likely intensify not only over price competitiveness but also regarding contributions to the industry and economy, as well as fire and equipment safety.
An industry insider noted, "Since the ESS central contract market evaluates contributions to the domestic industrial ecosystem, having a domestic production base is likely to be a significant factor in winning contracts. However, as overseas markets also demand local production, battery companies may face increased pressure to expand production capabilities both domestically and internationally."
* This article has been translated by AI.
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