Exhibit 4 The battery energy storage system value chain includes manufacturing, system integration, and customer acquisition.
Value chain breakdown of battery energy storage systems (hardware only)
Battery pack
Balance of system
Estimated profit pools
xx
Customer acquisition
Commissioning
Battery system manufacturing 50–55%
System integration
10–20%
25–30%
System design and integration
Cell
Pack
Inverter
Containerization
Grid optimization software
Project development
Interconnection
SCADA 1 /controller and control
EMS 2
Marketing and sales
Power electronic system design
1 Supervisory control and data acquisition. 2 Energy management system. Source: GTM Research; McKinsey Energy Storage Insights BESS market model
McKinsey & Company
What’s going on in the area of battery technology that we need to know about? From a technology perspective, the main battery metrics that customers care about are cycle life and affordability. Lithium-ion batteries are currently dominant because they meet customers’ needs. Nickel manganese cobalt cathode used to be the primary battery chemistry, but lithium iron phosphate (LFP) has overtaken it as a cheaper option. (Lithium iron phosphate customers appear willing to accept the fact that LFP isn’t as strong as a nickel battery in certain areas, such as energy density.) However, lithium is scarce, which has opened the door to a number of other interesting and promising battery technologies, especially cell-based options such as sodium-ion (Na-ion), sodium-sulfur (Na-S), metal-air, and flow batteries.
batteries in some important respects. Sodium- ion batteries have lower cycle life (2,000–4,000 versus 4,000–8,000 for lithium) and lower energy density (120–160 watt-hours per kilogram versus 170–190 watt-hours per kilogram for LFP). However, sodium-ion has the potential to be less costly—up to 20 percent cheaper than LFP, according to our analysis—and the technology continues to improve, especially as manufacturing reaches scale. Another advantage is safety: sodium batteries are less prone to thermal runaway. There’s also a sustainability case for sodium-ion batteries, because the environmental impact of mining lithium is high. All of this makes it likely that sodium-ion batteries will capture an increasing share of the BESS market. Indeed, at least 6 manufacturers are expected to launch production of sodium-ion batteries in 2023. Clearly, providers will have to make decisions about which technology to bet on. Integrators may want to set up their systems so
Sodium-ion is one technology to watch. To be sure, sodium-ion batteries are still behind lithium-ion
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