LG Energy Solution skips third round of South Korea's central contract market for ESS, opting for selective focus over cutthroat competition

LG Energy Solution has decided not to participate in the third round of the central contract market bidding for energy storage systems (ESS), opting for a strategy of "selection and concentration" instead of engaging in a price war.

The company stated that it will prioritize the fulfillment of its obligations related to the ESS projects secured in the first and second rounds, as well as its involvement in AI-based power distribution network ESS projects. The average bid price has dropped from the 30-won range to the 20-won range per kWh, a level that makes it difficult to ensure profitability. "Whether to participate in the third round or beyond will be determined by considering market conditions," the company said, while drawing a clear line against concerns that it would scale back its domestic investments.

In Ochang, the company is preparing for the mass production of tab-less lithium iron phosphate (LFP) 2170 cells and is developing sodium-ion technology.

[Financial News] LG Energy Solution did not participate in the third competitive bidding for the central contract market of energy storage systems (ESS). The decision is attributed to the assessment that the unit price had fallen to a level that could not guarantee profitability due to excessive price competition during the first and second bidding rounds.

In a statement on the 5th, LG Energy Solution announced, "We are informing you that we will not participate in the third central contract market competitive bidding announcement." The company explained that this was a strategic decision aimed at enhancing operational efficiency and medium- to long-term competitiveness within limited resources and personnel, based on a strategy of "selection and concentration," rather than securing short-term volume through price competition.

■ Unit Price Drops from 30 Won to 20 Won Range... Distancing from Bleeding Competition

Industry observers cite the price competition in the first and second bidding rounds as the primary background for this decision. It was judged that the unit prices from the first and second bids not only made it difficult to secure immediate profitability but could also burden stable long-term business operations.

According to industry sources, the average bidding price in the central contract market fell from the 30-won range per kWh in the first round to the 20-won range per kWh in the second round. It is assessed that both the first and second round bidding prices are at a level with very low business viability, especially when compared to the ESS prices sold by the three major domestic battery makers—LG Energy Solution, Samsung SDI, and SK On—in the United States.

Consequently, discussions have emerged, centered around the three battery companies and industry associations, regarding the need for mechanisms to prevent excessive bleeding competition after the second bidding round. A source in the battery industry stated, "It is true that the industry's common view is that if we continue with the current price competition simply to secure volume, it will be difficult to ensure profitability and could burden long-term stable business operations."

The source added, "LG Energy Solution's recent decision is a case that illustrates the issues of excessive price competition and declining profitability that have been raised as problems in the central contract market." The source pointed out, "For the domestic ESS industry to grow sustainably, it is necessary to focus on creating an environment that enhances corporate business competitiveness and investment efficiency, rather than getting bogged down in short-term price competition."

■ "Domestic investments will continue"… Expanding scope with next-generation products and VPP in Ochang

LG Energy Solution drew a clear line against interpretations that its decision to forgo bidding in the third round or beyond signals a reduction in domestic investments. The company explained, "For competitive bidding announcements from the third round onward, we will determine our participation by comprehensively considering market conditions and management circumstances." It further emphasized, "We plan to consistently continue our efforts to invigorate the domestic battery industry ecosystem, including investments in the development and production of next-generation products centered on the Ochang Energy Plant."

LG Energy Solution has set a policy to prioritize the flawless execution of the volumes secured in the first and second rounds of the central contract market, as well as projects already secured, such as the government's "AI-Utilizing Distribution Network ESS Construction Support Project." At the Ochang Energy Plant, its domestic production hub, the company is advancing research and development (R&D) and the establishment of production lines for next-generation products, including sodium-ion batteries for ESS. It is also preparing for the mass production of tab-less LFP 2170 cylindrical batteries in the first half of next year.

The company is also broadening its ESS business structure from a focus on battery supply to energy solution businesses, including system integration (SI), AI-based operations, and virtual power plants (VPP). Since 2024, LG Energy Solution has operated distribution-network-linked ESS and VPP in Jeju. In July of this year, it was selected as the operating entity for the "AI-Utilizing Distribution Network ESS Construction Support Project" and is scheduled to operate a 140-megawatt-hour (MWh) scale ESS in the Honam region for 20 years starting in 2027. In North America, it provides integrated solutions covering design through operation and maintenance via its SI subsidiary, Vertech.

LG Energy Solution stated, "Going forward, we will grow into an energy platform company that provides differentiated solutions enabling customers to operate ESS more safely and efficiently by combining our battery cell competitiveness with battery management system (BMS) and AI-based operation technologies."