The largest-ever energy storage system (ESS) central contract market, totaling 1,180 megawatts (MW), has opened, intensifying the bidding competition among South Korea's top three battery companies: LG Energy Solution, Samsung SDI, and SK On. The volume released in this round matches the cumulative size of previous central contract markets, meaning the results could significantly alter the domestic ESS market share landscape.
According to industry sources, the government announced on September 22 that it has initiated the selection process for operators in the 2026 ESS central contract market, which includes 1,100 MW on the mainland and 80 MW in Jeju. The mainland projects are expected to be established by February 2029. Bidding will continue until November 11, with winners announced later that month. This volume is the largest since the introduction of the central contract market, which has selected a total of 1,196 MW through three rounds from 2023 to the first half of this year.
The rapid expansion of the market presents an opportunity for the K-battery trio to increase their domestic ESS market share. In previous central contract markets, the fortunes of companies varied with each bidding round. Cumulatively, Samsung SDI holds about 56% of the market, SK On has 25%, and LG Energy Solution has 19%.
However, the record volume does not automatically translate to increased profitability. The final evaluation for the mainland bids will weigh price and non-price factors equally, each accounting for 50 points. The price evaluation is based on the lowest bid, with higher bids receiving lower scores. Additionally, the contract prices proposed by the winning bidders will be fixed for a 15-year trading period, meaning initial price competition could impact long-term profitability. If companies engage in aggressive price competition to secure large volumes, the cost burden may shift to battery suppliers.
Simply lowering prices will not guarantee a win. The non-price evaluation, which also accounts for 50 points, includes criteria such as grid connection (25 points), industrial and economic contribution (25 points), fire and equipment safety (25 points), technical capability (14 points), community acceptance and project readiness (8 points), and project reliability (3 points). The industrial and economic contribution category evaluates the ability to supply key components and materials, as well as contributions to domestic industry, economy, and supply chain stability.
Technical capability assessments also pose challenges for companies. In this bidding round, to receive full points for warranty life, bidders must guarantee that at least 90% of the initial design capacity is maintained at the end of the 15-year contract period. Some industry observers view the requirement to maintain a 90% residual capacity over such a long term as excessive, suggesting it may necessitate increasing initial battery installation capacity or enhancing specifications such as cooling systems and battery management systems (BMS).
With the inclusion of industrial and economic contribution as a key evaluation criterion, there is speculation that the effects of this large-scale order may extend to the domestic materials and components industry. The three battery companies have recently been expanding their collaboration with domestic material suppliers alongside increasing production of lithium iron phosphate (LFP) for ESS, raising the possibility that rising cell demand could lead to new demand for materials such as cathodes.
An industry insider stated, "In this market, domestic production, industrial contribution, and warranty life will be key variables. While securing a large volume does not necessarily lead to significantly improved profitability, this market is symbolically important, so we have no choice but to participate actively." The insider added, "Particularly, the third round is significant due to the sheer volume involved, making it a critical focus for the industry."
* This article has been translated by AI.
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