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The enclosure movement of battery operators

Of all the opportunities created by China’s vehicle electrification movement, electric vehicle battery operators have the most to gain. It is a tempting scenario: all the fat profits currently going to China’s top three oil corporations will be swallowed up by battery operators once gasoline vehicles are completely electrified.

Though the market is still emerging, China’s two leading power grid companies have already gotten their feet wet in the battery business. And the country’s three oil giants have incorporated the new battery business into their company strategies. Aside from these mammoth corporations, small private companies are also competing for a stake in this new market.

Statistics show that at the end of 2011, China had more EV charging stations and poles than any other country, with 243 charging and battery swapping stations and 13,283 charging poles. On average, each of China’s 30 major cities has eight charging stations and 440 charging poles.

The two power giants State Grid and China Southern Power Grid (Southern Grid) have made 2012 a signature year for developing their EV charging station networks. State Grid president Liu Zhenya said the company will continue to push the build-out of EV charging stations, optimize charging and battery swapping operation modes, and highlight charging networks in the Yangtze River Delta, Bohai rim area and other key cities.

In Beijing, State Grid has built 12 charging stations and 274 poles which can serve 1,140 electric vehicles. By the end of the 12th Five-Year Plan period, there will form a Bohai-rim charging and battery swapping network that is centered in Beijing.

Southern Grid plans to further equip the five provinces with more charging facilities, including highway service stations. It has found a professional partner, Better Place, to develop advanced battery swapping technology. In December 2011, Southern Grid and Better Place opened their Switchable Electric Car Experience Center in Guangzhou, Guangdong Province.

Industry observers said the two power grids have geographically divided their territories. Southern Grid controls services in five provinces including Guangdong, Guangxi, Yunan, Guizhou and Hainan. The remaining 26 provinces and municipalities are managed by State Grid.

Noticeably, State Grid and Southern Grid have made up their minds to promote battery swapping mode, supplemented by regular charging.

Opportunity for oil companies

Though the two power grid giants enjoy obvious advantages in power supply, they face one big challenge: it is too costly to build new charging stations that are land-consuming. And therein lies the opportunity for oil companies to jump in.

As early as in 2010, a senior manager from Sinopec Group Jin Zehui disclosed that the company was preparing to enter the EV battery operation business. He said Sinopec Group had organized groups of experts to study EV charging stations.

Sinopec Group set out to tap the vehicle charging station market in February 2010 by adding charging facilities in its large gas stations in some regions, such as Beijing and Chongqing. A Beijing subsidiary of Sinopec teamed up with Beijing Capital Science and Technology Group Corp. to set up a clean-energy joint venture to build charging stations for electric vehicles. Its first refueling and charging station in Beijing went into trial operation in late 2011.

Of the country’s three major oil giants, China National Offshore Oil Corp. (CNOOC) became the most active force to be involved in the new battery market. In July 2009, CNOOC invested ¥5 billion ($152 million) in the Tianjin Lishen Battery Co., Ltd., a vehicle-use lithium battery producer, to support the construction of 20 battery production lines in the company’s new plant in Tianjin. Potevio-CNOOC New Energy Power Co., Ltd., a joint venture built by CNOOC and the Potevio Group in 2009, launched a pilot operation of charging and battery swap stations in Hangzhou through a partnership with Zotye Auto.

China National Petroleum Corp. (CNPC), which has not made any big moves in tapping the EV charging business, is one of the founding members of China’s largest electric vehicle industry alliance which was established by 16 state-owned enterprises in August 2010.

Oil companies have been calling for a more open power grid market for more industry players to enter. “The electric vehicle market is so enormous that no single company can control it. We hope the government can usher in policies that will nurture healthy competition,” said Sinopec Group Beijing company deputy general manager Wang Wenlian at an EV forum in Beijing in October 2011.

Sinopec Group has joined the bandwagon of EV charging station buildouts but has seen difficulties along the way with complicated approval processes and other bureaucratic red tape. Wang called for favorable policies that can incentivize charging service providers to maintain normal operations by charging customers benchmark electricity prices and service fees.

Battery makers themselves also want a stake in the charging business. The Henan-based EV power battery maker Henan Huanyu Electrical Source Products Co. has appealed to the local government for accelerating EV battery operation. Huanyu has also teamed up with a local enterprise to run an electric taxi company.

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