The Changing Landscape of the ESS Market – Why Samsung SDI Surpassed LG Energy Solution to Take the Top Spot
Editor
An unexpected twist has occurred in the domestic Energy Storage System (ESS) market. In the first central contract market, where many industry experts anticipated LG Energy Solution, armed with LFP (Lithium Iron Phosphate) batteries, to have the upper hand, the actual winner was Samsung SDI. By supplying batteries to six out of the eight selected operators, Samsung SDI effectively dominated the market. Is this merely a coincidence, or is the competitive landscape of the ESS market fundamentally changing?
What personally intrigued me the most about this outcome is that market dominance can no longer be achieved through price competitiveness alone. Despite the Korea Power Exchange setting the price and non-price scores at a 6:4 ratio in the first bid, Samsung SDI won with its NCA (Nickel Cobalt Aluminum) batteries, which are relatively more expensive than LFP. This highlights how important non-price factors, particularly domestic production and material localization, have become as evaluation criteria.
Examining the factors behind Samsung SDI’s victory reveals a clear strategic difference. The decisive factors were the plan to produce ESS cells domestically through the Ulsan plant and the use of domestic company products for most cell components. In contrast, LG Energy Solution and SK On, with a high proportion of production in China, reportedly suffered significant disadvantages in non-price scores. LG Energy Solution, in particular, sourced LFP cathode materials from China’s Shanshan and anode materials from BTR and Shanshan, producing them in Nanjing and Holland, Michigan, USA. This global supply chain structure ended up being a hindrance.
The announcement of the second bid on November 27, 2025, suggests that these trends will be further strengthened. In this bid, totaling 540MW and approximately 1 trillion won, the Korea Power Exchange adjusted the price and non-price score ratio to 5:5, increasing the influence of non-price scores. Notably, the scoring for system integration, industrial economic contribution, and fire and equipment safety has been increased, while the scores for technical capability and community acceptance, which had relatively low differentiation, have been reduced.
Intensifying Localization Competition – Reducing Dependence on China is Crucial
LG Energy Solution’s actions in response to these changes indicate how urgent the situation is. They plan to establish an LFP ESS production line at the Ochang plant to secure a production capacity of 1GWh annually by 2027, clearly a strategic move to increase domestic production. Simultaneously, they are conducting domestic tests on key materials such as cathodes, anodes, and separators, showing a strong determination to reduce dependence on China.
SK On is taking similar steps. They are testing L&F cathodes at the Seosan plant instead of the Chinese cathode supplier used in the first bid. L&F is one of Korea’s leading cathode companies, with a market capitalization of about 15 trillion won as of 2025. This move seems to be part of a broader supply chain diversification strategy, beyond just responding to the ESS bid.
However, the dilemma of LFP batteries is interesting here. While LFP has advantages in price competitiveness and safety, it has a structural issue with its supply chain being concentrated in China. Chinese companies hold over 90% of the global LFP cathode market share, with BYD’s subsidiary FinDreams and CATL’s Shanshan leading the market. Pursuing localization in this context is bound to be a significant technical and economic challenge.
In contrast, Samsung SDI’s NCA battery strategy appears quite clever in this regard. The main materials for NCA batteries, such as nickel, cobalt, and aluminum, have relatively diversified supply chains, and there are competitive companies like POSCO Chemical and EcoPro BM in Korea. In fact, POSCO Chemical has an annual cathode production capacity of about 200,000 tons as of 2025, and EcoPro BM is recognized for its world-class technology in high-nickel cathode materials.
Safety Debate – The Battle Between Materials and Form Factors
The most noteworthy variable in the second bid is the change in safety evaluation criteria. The score for fire and equipment safety has increased from 22 to 25 points, which I believe is not just a mere 3-point increase but a significant change that can alter the overall competitive landscape. With frequent ESS fire incidents domestically and internationally in recent years, concerns about safety have grown. From 2019 to 2021, over 30 ESS fires occurred domestically, prompting the government and the Korea Power Exchange to significantly strengthen safety standards.
An interesting technical debate is unfolding here. In terms of materials, LFP is undoubtedly safer than ternary batteries. LFP has a thermal runaway temperature of about 270°C, much higher than NCA’s 150-200°C, and releases less oxygen, making it relatively less prone to fires. However, the story changes when it comes to form factors. Prismatic batteries have better heat and gas emission characteristics compared to pouch types and superior thermal propagation prevention (NP) features.
The key is how the Korea Power Exchange will evaluate safety. If more weight is given to the inherent safety of materials, LG Energy Solution and SK On’s LFP pouch batteries will have an advantage. If the focus is on the safety of form factors and system levels, Samsung SDI’s NCA prismatic batteries are likely to have the upper hand. Personally, considering that most recent fire incidents stemmed from BMS (Battery Management System) defects or system-level issues, I expect Samsung SDI to maintain its strength in comprehensive safety evaluations.
In fact, Samsung SDI has accumulated considerable technical know-how in the ESS field. Since starting its ESS business in 2012, it has supplied over 6GWh of ESS globally and is recognized for having industry-leading technology in fire prevention. On the other hand, LG Energy Solution, while demonstrating overwhelming technological prowess in electric vehicle batteries, is relatively inexperienced in the ESS field.
However, there’s an aspect that should not be overlooked: the competition in solid-state battery technology development. LG Energy Solution is reportedly building a solid-state pilot line at the Ochang Energy Plant, marking a significant step toward its 2028 mass production goal. Solid-state batteries are next-generation technology that can fundamentally solve the flammability issue of existing liquid electrolytes. If LG Energy Solution succeeds in mass-producing solid-state batteries by 2028 as planned, the entire safety debate in the ESS market could enter a completely new phase.
Samsung SDI is also operating a solid-state pilot line at the Suwon plant since 2023, making the competition in this area fierce. Both companies have set the commercialization timeline for solid-state batteries to 2028, which seems to be a realistic goal considering the technological maturity and market conditions. Solid-state batteries can improve energy density by 30-50% compared to existing ones and significantly enhance safety, potentially becoming a game-changer not only in the ESS market but also in the electric vehicle market.
The results of the second bid, expected in February next year, are highly anticipated. Will Samsung SDI continue its winning streak after defying expectations in the first round, or will LG Energy Solution and SK On, with their strengthened localization strategies, mount a counterattack? What is certain is that this competition will further advance the technological capabilities and supply chain stability of the domestic ESS industry. As material localization becomes more pronounced, new opportunities are expected to open up for material companies like L&F, POSCO Chemical, and EcoPro BM.
In the long term, these changes are not just an issue for the domestic market. With global interest in supply chain stability and energy security rising, Korea’s localization efforts could serve as an important benchmark for other countries. Especially as movements to reduce dependence on China are becoming more active in the US and Europe, the experiences of Korean companies are expected to aid future overseas market expansion.
This article was written after reading a news article and adding personal opinions and analysis.
Disclaimer: This blog is not a news medium, and the content written reflects the author’s personal views. Responsibility for investment decisions lies with the investor, and no responsibility is taken for investment losses based on the content of this article.
