A potential battery supply shortage is emerging as a new variable in the third central contract market for energy storage systems (ESS), which is the largest ever held. With LG Energy Solution opting not to participate, the primary battery suppliers have been reduced to Samsung SDI and SK On. Even if both companies maximize their production capabilities, it is anticipated that they will struggle to meet the total demand.
According to industry sources, the total order size for the third ESS central contract market, which closed for bid proposals on November 4, is 1,180 MW. This exceeds the combined total of 1,128 MW from the first two rounds, which were 563 MW and 565 MW, respectively. The orders consist of 1,100 MW for the mainland and 80 MW for Jeju, translating to a battery storage capacity of approximately 7.08 GWh.
Considering equipment reserve rates, the actual required battery capacity is estimated to be around 9 GWh. However, Samsung SDI's supply capacity is estimated at about 4 to 5 GWh, while SK On's is around 3 GWh. Utilizing the available capacity from both companies will be crucial to meet the overall order demand.
As a result, in this third market, managing production capacity and supply schedules will be as important as the competition among battery manufacturers for orders. If power generation companies secure business rights through bidding but cannot receive batteries within the specified timeframe, it could disrupt the ESS construction schedule.
Industry insiders report that battery manufacturers have proposed supply prices that are 30 to 40 percent higher than in previous rounds. This increase in battery supply prices may also lead to higher bidding prices from power generation companies.
LG Energy Solution explained its decision to abstain from this bidding as a strategic move aimed at enhancing operational efficiency and long-term competitiveness within limited resources and personnel, rather than securing short-term volumes through price competition. The company plans to focus on ensuring stable supply of existing volumes secured in the first and second rounds and on developing next-generation batteries.
Ultimately, the third central contract market is expected to test the supply capabilities of battery manufacturers. With the surge in order volumes, how effectively Samsung SDI and SK On can allocate production capacity and adhere to supply schedules will be critical. There is also interest in whether they can secure additional supply capacity through production line adjustments or volume reallocations.
The Korea Power Exchange will close the submission of final documentation, including business plans, on November 11 and is expected to select preferred negotiation partners later this month. The government plans to establish ESS facilities by February 2029 through this initiative.
An industry official noted, "Given that this project was initiated by the government to support the industry during a challenging battery market, being selected as a participant holds significant symbolic meaning. However, considering the production capacities of Samsung SDI and SK On, supply volumes may be tight, necessitating efforts to expand production capacity to address this issue."
* This article has been translated by AI.
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