Korean battery makers split strategies as LG expands ESS operations and Samsung leads supply

Two Korean battery makers are taking divergent approaches to the energy storage system (ESS) market — LG Energy Solution is pushing deeper into operations while Samsung SDI has focused on maintaining its dominance in battery cell supply.

The Ministry of Climate, Energy and Environment announced on Friday details of its project to support AI-powered ESS deployment in the Jeolla region this year, according to battery industry sources on Monday. The initiative aims to install ESS units along power distribution lines in the region and use AI to optimize their charging and discharging.

LG Energy Solution was selected as an operating company through a consortium with Shinhan Asset Management. The consortium was one of nine successful bidders in the project. It will oversee seven distribution lines with a combined storage capacity of 140 megawatt-hours.

While LG Energy Solution had previously participated as a battery cell supplier, it will now take charge of both the construction and operation of ESS facilities. The move marks its expansion into the virtual power plant (VPP) business.

A VPP integrates and controls distributed ESS units and renewable energy facilities as if they were a single power plant.

Charging and discharging data accumulated through ESS operations are considered key assets for AI-based energy management and future competitiveness in the VPP business.

"The strategy is to build operational capabilities beyond mere battery supplies," an LG Energy Solution official said.

Samsung SDI, meanwhile, demonstrated its strength in supplying battery cells, the core component of ESS.

Six of the nine selected operators opted for Samsung SDI batteries, giving the company a 66 percent share of the project's installed cell capacity.  LG Energy Solution accounted for 22 percent, while SK On accounted for 12 percent.

As suppliers prepare to compete again in the third round of the government ESS bidding in September, following a first round for 563 megawatts in May of last year and a second round for 540 megawatts in November, the share of battery cell capacity from this project is expected to signal who has the upper hand in future contract bids.

Competition is also intensifying overseas as companies race to secure production bases.

As demand for ESS in the United States surges alongside the expansion of AI data centers, Korean battery makers are responding by converting existing EV battery plants into ESS production lines.

Korean battery makers with local manufacturing bases are in a relatively stronger position as the United States excludes Chinese-made batteries from its supply chain, industry experts say.

On July 7, LG Energy Solution began mass production of lithium iron phosphate (LFP) batteries for ESS at Ultium Cells, its joint venture with General Motors in the United States.

Once its Lansing, Michigan, plant begins operations later this year, the company will have more than 50 gigawatt-hours of ESS production capacity in North America alone.

Samsung SDI is producing nickel-cobalt-aluminum ESS batteries at StarPlus Energy, its joint venture with Stellantis. It also plans to begin producing LFP ESS batteries there later this year.

SK On is also preparing to expand its ESS business.

Attention is increasingly turning to the timing of a profitability rebound as competition intensifies in the ESS market at home and abroad.

"ESS orders in the United States continue to increase, and much of the cost of converting production lines has already been absorbed," a battery industry source said. "There is a strong possibility that profitability will begin improving in earnest from the fourth quarter."

BY LEE SU-JEONG [[email protected]]