NEC has made a major play for a global energy storage system (ESS) business, specifically targeting the Chinese market and information technology (IT) and telecom sectors by acquiring A123 Energy Solutions to create a new company, NEC Energy Solutions.
NEC is no stranger to the grid storage market. The company is using batteries from Automotive Energy Supply Corp. (AESC), similar to those installed in the Nissan LEAF, for both utility-scale storage (2 MW will be commissioned in Italy by Enel Distribuzione shortly) and the residential storage market. It has also developed a residential system targeting the Japanese market with a 5.5 kWh home ESS.
There are three pieces to this transaction that will change the storage market going forward. First, NEC is slated to establish a partnership with A123 Systems’ parent company Wanxiang to target the Chinese storage market. Having a local partner will set NEC apart from other lithium ion (Li-ion) cell and system vendors targeting China. Second, the acquisition includes A123 Energy Solutions’ ALM product line, a 12V Li-ion uninterruptible power supply (UPS) product housed in the same form factor as a traditional lead-acid battery. This, coupled with NEC’s success and relationships in telecom and IT, will put the new company in a strong position to target the UPS market.
Finally, although A123 Energy Solutions has focused on the utility side of the meter using A123 Systems cells, NEC has experience on the customer side and also has its own Li-ion chemistry that’s manufactured in volume by AESC.
Navigant Research’s Advanced Batteries for Utility-Scale Energy Storage report forecasts that the market will reach $17 billion in 2023, with Li-ion taking a $7.8 billion share. This estimate is strictly for the sale of ESSs to customers on the utility side of the meter, not on the customer side. By definition, it excludes telcos, data centers, and other forms of commercial, industrial, and residential storage. Navigant Research believes that the telecom market for Li-ion hit an inflection point last year, reaching $100 million in annual revenue, and is poised to grow quickly. Regardless, NEC Energy Storage will have stiff competition in nearly all of these markets from major Li-ion cell manufacturers such as LG Chem and Samsung SDI.
What can we look forward to from NEC Energy Solutions? A123 Energy Solutions will bring software, controls, and integration expertise, three facilities in the United States and China, a portfolio of existing installed storage assets, and any new orders to the table, whereas NEC’s strength lies with data, analytics, IT, and the cloud. In fact, NEC’s original concept for the storage market revolved around the energy cloud. It makes sense that NEC Energy Solutions would combine the two areas of expertise to deliver new product lines and cultivate new business models.
As a 114-year old company with 270 subsidiaries in its corporate umbrella and total annual sales in the last fiscal year of $30 billion, NEC has the resources and business relationships to use the A123 Energy Solutions acquisition as the platform for building a global business.
Tags: Advanced Batteries, Energy Storage, Mergers & Acquisitions, NEC, Smart Energy Program
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