More Bidding, More Losses? K-Batteries Bruised by Bloodletting Competition

For domestic battery companies ramping up their energy storage system (ESS) business amid expected explosive demand growth, the government's centralized ESS bidding market is an opportunity they must secure. However, as price competition intensifies to secure volume, companies are being forced into bidding wars even at the cost of losses—contrary to the original intent of nurturing the battery industry ecosystem.

According to relevant industry sources on the 26th, average bidding prices in February's second ESS bidding round were lower than those in July's first round last year. While specific prices remain undisclosed, the market estimates that bidding prices dropped from the 30th-won range per kWh during the first round to the 20th-won range in the second round. Considering that estimated bidding prices during Jeju's 2024 pilot project were in the 50th-won range per kWh, the decline is even more striking. As competition for orders intensifies, bidding prices continue to fall—explaining why domestic battery companies' expressions are far from bright.

In fact, SamsungSDI secured more than half of the volume in the first round, and SK On did the same in the second round, earning them the title of "winners." However, the reality was different. An industry insider stated, "Although price weighting in the second round dropped by 10 percentage points to 50% from the first round's 60%, companies minimized margins yet prices still fell further," adding, "The structure makes it difficult to generate profits even when securing orders." At such price levels, some even suggested that selling batteries overseas would be more profitable than supplying them to the domestic ESS market.

In response, battery companies have proposed to the government that institutional measures be introduced in the bidding market to secure appropriate margins necessary for stable operations. There is also a desire to eliminate side effects caused by price-based mutual posturing continuing until just before the bidding deadline. The rationale is that bids should not focus solely on price but must comprehensively evaluate both battery performance and safety.

One proposed alternative is the adoption of a minimum-price system. If the government sets a price floor, overheated competition over battery prices could be somewhat alleviated. Conversely, similar to wind power bidding, a maximum price cap could be established, with all operators offering support below 85% of that cap receiving the maximum score for price evaluation. This would create safety mechanisms to prevent scores from rising indefinitely simply by lowering bids. Another option discussed involves first selecting participating companies based on non-price factors before allowing them to compete solely on price in the final bidding stage.

There is growing demand for such institutional support in the third bidding round, which the government is expected to announce as early as next month. This comes amid expectations that the scale of the third round will reach nearly 1GW (gigawatt), almost double the previous rounds. Critics argue that regulations must be reformed before economies of scale can be fully realized in ESS.

Some segments of the energy industry view establishing "protective measures" as an admission that domestic battery companies' competitiveness has declined. However, others argue that competing on price with Chinese firms backed by massive government subsidies inherently disadvantages K-batteries. Another industry insider stated, "We hope the government considers this from the perspective of nurturing new industries with significant future growth potential," adding, "As ESS is core infrastructure connected to the national power grid, long-term stable operation is essential."