The Future of Energy Storage and Batteries | Highlights from BlueRun Ventures' New Energy Series Salon

Recently, BlueRun Ventures hosted the "Energy Storage and Batteries" edition of its New Energy Salon Series, bringing together energy industry experts, frontier startups, and investors from the China Energy Storage Alliance, China Nonferrous Metals Industry Association, Beijing Taikang Investment, Bricycle, YunChu New Energy, E-Motion, Blue Carp Energy, and Yigen Technology for an online discussion on battery operations technology progress, applications, and investment opportunities.

This article compiles excerpts from the event. As an early-stage tech-focused fund, BlueRun Ventures has been tracking the new energy infrastructure赛道, continuously supporting innovation in batteries, hydrogen energy, charging and swapping, and energy storage; it is also actively exploring the convergence of energy and computing infrastructure, and laying out applications and frontier exploration of new energy across mobility, industry, logistics, and other sectors. Stay tuned for upcoming events in BlueRun Ventures' New Energy Salon Series!

• According to incomplete statistics from the Energy Storage Alliance's global energy storage project database, covering physical storage, chemical storage, molten salt thermal storage, and others, cumulative global project capacity exceeded 200 GW last year, with China accounting for 46.1 GW, roughly 20% of the global total.
• Under future high-penetration renewable energy scenarios, demand for storage durations beyond four hours will grow increasingly strong, becoming a primary source of future storage demand. Among long-duration storage technologies currently receiving the most attention, four categories stand out: new-type flow batteries, compressed air, high-temperature thermal storage, and hydrogen energy.
• For the new-type energy storage market, global newly commissioned capacity reached 10 GW last year, up 67% year-over-year. The grid connection points for storage vary considerably across global markets. Aggregated across regions, user-side, generation-side, and grid-side each account for roughly one-third, representing a relatively balanced development pattern.
• On energy storage policy: Last year, power rationing emerged domestically, and under rationing pressure certain provinces and cities introduced subsidies for new energy storage. To some extent, user-side storage gained additional revenue last year, and some shared models with more comprehensive returns also began emerging.
• Global trends in user-side energy storage: International markets have already entered a post-subsidy phase for user-side applications, driven by two factors. First, high electricity prices, rising renewable energy penetration, and constraints on oil and gas resources. Second, continuously declining costs for solar-plus-storage. Under this dual effect, the era of grid parity for solar-plus-storage may arrive ahead of schedule.
• To achieve its goal of 100% renewable energy grid integration by 2045, California has proposed a storage deployment plan before 2045 to address its future carbon neutrality targets. Europe has introduced regulations around opening capacity markets; taking the UK as an example, its capacity market applies discounts to storage capacity availability based on duration for different long-duration storage technologies. Storage at four hours or above receives the highest capacity availability, with availability discounted for every half-hour reduction in duration. The longer the duration, the better the returns; the shorter the duration, the lower the capacity availability and returns. We believe China is likely heading in this same direction, as the challenges posed by wind and solar are fundamentally the same.
• Spot markets represent a critically important policy trend for energy storage—how to make electricity markets operate both economically and reliably. From international market experience, rising wind and solar penetration will likely bring intense, frequent price volatility in spot markets. For storage, two aspects of spot markets merit attention: first, the price ceiling and floor; second, settlement mechanisms. We find that shorter settlement windows benefit batteries. In 2021, Australia's spot market changed its settlement window from 30 minutes to 5 minutes. After operating for some time, with dispatch strategies unchanged, this single change in settlement mechanism increased average returns by A$40,000 for the same storage system. Additionally, how to predict spot market prices is crucial for storage investors; improving price prediction capabilities and optimizing decision-making are important ways to enhance storage returns.
• How to pass through energy storage costs currently lacks a particularly clear model. Domestically, demonstration projects are being used to experiment and explore; ultimately, resolving economics through market-based mechanisms is a highly complex process requiring multi-party negotiation and resolution over time.
• Our current assessment is that by 2025, the energy storage market will reach 48–79 GW.

• This year, nickel, cobalt, and lithium prices will likely fluctuate at high levels, with overall prices significantly higher than in 2021. The main driver is strong supply and demand on both sides.
• What technologies will have the greatest impact on the metals world going forward? We believe two stand out: the energy transition and transportation electrification. The energy transition—from coal to clean energy—and transportation electrification, such as power batteries, are supported by a major cycle for nickel, cobalt, and lithium.
• Last year lithium supply increased by 50%, which is decent, but still fell short of demand. For nickel, supply will likely ramp up in the second half of the year, and prices should gradually decline. For cobalt, we're seeing considerable incremental supply at the mining level this year, but prices have risen again due to pandemic-related logistics disruptions and slightly better consumption in Europe and the US this year. Once the pandemic stabilizes, cobalt prices should come down.
• On whether electric vehicles should raise prices: Personally, I believe that if you want to promote new energy vehicles and energy storage over the long term, you must use a market-based system to reflect supply and demand. You can't have policy subsidies propping up the downstream while the upstream faces market-based environmental constraints and dual energy consumption controls—this still leads to supply shortages.
• China's external dependence on nickel, cobalt, and lithium resources is relatively high: roughly 80–90% for nickel, 98% for cobalt, and over 60% for lithium. I believe China's outbound investment in nickel and cobalt came relatively early, and these past few years should be when those investments bear fruit. Large-scale lithium investment last year will take some time, but once these projects come online, from a market-based and efficiency-first perspective, they should be prioritized for allocation to China, given how complete China's industrial chain is here.
• How foreign automakers are positioning themselves in upstream nickel, cobalt, and lithium resources is also worth considering. Foreign automakers tend to use more market-based approaches for positioning and hedging. Toyota and Tesla, for instance, conduct very deep research into upstream resources—not inferior to what we specialized nonferrous metals companies do.
• Nickel and cobalt recycling represents a new blue ocean赛道. Currently 15% of global cobalt production already comes from recycled materials, projected to reach 25% by 2025. Nickel was previously used extensively in stainless steel, so scrap stainless steel recycling is already quite mature. Previously lithium wasn't priced into spent battery recycling; in recent years it's been bundled with nickel and cobalt at price coefficients above 100%, showing how much attention this recycling is receiving.
• To ensure power battery raw material supply, we should first increase development of domestic resources under current circumstances. We hope to call on various parties to give upstream and downstream the same policies, encouraging their balanced development. Additionally, I believe we should encourage new energy vehicles, power batteries, and energy storage batteries to pursue diversified technology routes, reducing over-dependence on single technology routes and the resulting resource insecurity—such as sodium-ion battery R&D and so forth.

• From an entrepreneurship perspective in the dual-carbon space, I'd like to share three observations. First, during the pandemic, economic pressures have been considerable, and the叠加 of geopolitical cycles presents unprecedented challenges. Under external economic pressure, dual-carbon is a relatively promising area across industries. Even so, I believe entrepreneurship must always prioritize cash flow—whether in fundraising strategy or capital deployment strategy, leave yourself sufficient room.
• Second, most dual-carbon businesses are B2B. When evaluating startups, we must place particular emphasis on industrialization and commercialization capabilities. You must establish strong cooperation with the industrial chain and quickly determine a commercialization model rather than purely technical discussions— this must be prioritized during economic downturns.
• Third, dual-carbon also has a globalization trend. China's manufacturing and industrial advantages can be exported overseas, so from day one of entrepreneurship you should have global market considerations. We're already seeing many startups making advantageous moves in overseas markets, including in Southeast Asia, Middle Eastern Belt and Road countries, and even Europe and the US—I believe opportunities exist across all of these.

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Further Reading

BlueRun May Newsletter | Remember Why You Started

BlueRun Ventures Wins Multiple Awards Including Top 3 Early-Stage VC and Top 10 Returns at ChinaVenture Annual Awards

BlueRun Ventures Completes RMB 5.5 Billion New Dual-Currency Fund Raise

BlueRun Ventures was established in Silicon Valley in 1998. BlueRun Ventures China was founded in 2005 and is a venture capital firm focused on early-stage startups.

Currently, BlueRun Ventures manages multiple USD and RMB dual-currency funds in China, with assets under management exceeding RMB 15 billion. It focuses on Pre-A and Series A investments across hard tech and innovative interaction, enterprise technology, new consumer, and healthcare sectors, having cumulatively invested in over 150 startups including Li Auto, Waterdrop, QingCloud, Guazi Used Car, Qudian, Songguo Mobility, Ganji.com, Energy Monster, Yuntu Semiconductor, Machenike, CloudShen Intelligence, Anxin Netshield, and BioMap.

BlueRun Ventures has been ranked #1 among "China's Top 30 Early-Stage Investment Institutions" by Zero2IPO and "China's Top 30 Best Early-Stage Venture Capital Institutions" by ChinaVenture, and was named among Preqin's Top 10 VC fund managers globally for sustained high-return performance.

Additionally, BlueRun Ventures has been consecutively recognized by Forbes China, 36Kr, Cyzone, Caixin Media, CBNweekly, Jiemian, and other media organizations with honors including "China's Best Early-Stage Institution of the Year," "China's Top Venture Capital Firm," "Most Entrepreneur-Friendly Early-Stage Institution of the Year," and "Most Influential Early-Stage Institution of the Year."