Vertical integration in battery storage isn’t the safety blanket it used to be. Here’s how integrators are catching up and what that means for ESS bankability.
Why vertical integration in energy storage suddenly matters
Utility-scale battery storage shipments are exploding, but the money isn’t evenly distributed. In 2024, the top 10 suppliers are on track to control more than half of global shipments, while dozens of smaller players fight for the rest.
This matters because battery energy storage systems (BESS) are now core infrastructure for the clean energy transition. If you’re a developer, IPP, utility, or climate-focused investor, choosing the wrong technology partner doesn’t just hurt returns — it can stall projects and undermine decarbonisation plans.
The big strategic question behind a lot of procurement decisions right now is simple: are vertically integrated cell-to-ESS players safer and stronger than independent system integrators — or is the opposite becoming true?
Here’s the thing about vertical integration: it gives you control, but it also locks you in. In a fast-moving green technology market where prices have dropped and oversupply has hit battery cells, that’s not always an advantage.
This article breaks down what the latest market data is signaling, what it means for project risk and bankability, and how to make smarter choices in the next 12–24 months.
Vertical integration vs integrators: what’s actually different?
Vertical integration in ESS means one company controls the chain from cell manufacturing through pack, rack, and full system delivery. Think of large battery cell makers that also sell containerised storage systems.
System integrators, by contrast, don’t make cells. They:
- Procure cells and modules from multiple battery manufacturers
- Design the full ESS (racks, containers, power conversion system, controls)
- Provide software, warranties, and long-term service
In the StorageTech Bankability Rating framework, both types of companies are assessed on:
- Financial strength (e.g. Altman-Z measures of default risk)
- Manufacturing and delivery capability (cells, assembly, and shipments)
What’s changed in the last couple of years is the balance of power between these two models.
Most developers used to assume: “Vertical integration = safer.” That’s getting less true each quarter.
Market concentration and the “standout player” effect
The data shows two things at once:
- Cell manufacturers still ship higher volumes on average than integrators.
- Three of the top five ESS suppliers by shipments are integrators.
That sounds contradictory until you look at the spread. Among integrators, shipment volumes are highly uneven — a handful of leaders ship a lot, while many smaller players remain niche. Standard deviation is much higher on the integrator side, which means you can’t generalise. A top-tier integrator can absolutely go head-to-head with a vertically integrated giant. A mid-tier integrator? Much riskier.
For anyone procuring storage projects, the message is pretty clear:
- Don’t write off integrators just because they don’t make cells.
- Don’t assume all integrators belong in the same risk bucket.
Why integrators are growing faster than cell makers
Integrators are gaining market share because flexibility scales faster than factories.
Vertically integrated suppliers are constrained by their own cell manufacturing capacity and capex cycles. Integrators aren’t. They can:
- Source cells from multiple manufacturers
- Shift volume between chemistries (LFP, NMC, sodium-ion, etc.) as prices and performance change
- React faster when one supplier faces quality or logistics issues
For new entrants, becoming a full cell manufacturer is a huge capital gamble. Setting up as an integrator — with strong engineering, software, and project delivery capabilities — is far more achievable. So the pipeline of future competition is skewed towards the integrator model.
Capex trends: cell makers hit the brakes
Recent data shows a clear divergence:
- Cell manufacturers are cutting capex as a share of revenue, reacting to oversupply and falling battery prices.
- Some, like CALB, spent more than 100% of revenue on capex between 2020–2023 to chase market share. That’s not sustainable in a price-crunch environment.
- Integrators run much lighter on capex, since they don’t need to finance gigafactories.
The result:
In a period of oversupply and aggressive price declines, integrators are structurally better positioned to grow shipments without overextending balance sheets.
For a green technology investor or buyer, that translates to:
- Lower risk that your ESS supplier will be forced into sudden strategic pivots
- More room for them to focus on software, performance guarantees, and long-term O&M — where most of your value actually sits
Revenue, margins, and the price squeeze
Cell manufacturers live and die by cell pricing. Since 2022, we’ve seen:
- Lithium raw material prices fall dramatically
- Cell prices pushed down further by global oversupply
- Operating margins at cell makers moving in lockstep with these trends
Meanwhile:
- Integrators benefit from lower input costs on cells
- Their value-add sits in system design, integration, safety engineering, and software
- ESS is often only a portion of their total revenue, which cushions shocks
The net effect is that some integrators can sustain healthy margins and reinvest in product improvements at a time when cell makers are defending profitability.
For an energy storage project, that generally means:
- Better pricing options
- More room for customised configurations
- Stronger incentives for the supplier to stay engaged post-commissioning
Bankability: how should buyers think about risk now?
The StorageTech Bankability Rating framework has quietly adapted to these realities. Historically, being a cell manufacturer carried heavy weight in the manufacturing score. That bias is being reduced.
That shift reflects a simple conclusion: in the current market, cell production alone isn’t a reliable proxy for long-term ESS bankability.
What actually drives bankability in ESS suppliers?
From a project finance and risk perspective, I’d rank the drivers like this:
-
Financial resilience of the parent company
Healthy balance sheet, decent Altman-Z, diversified revenue. If ESS is only 10–30% of their business, a storage downturn is survivable. -
Track record of ESS delivery
Not just MWh shipped, but:- Multi-year performance data
- Safety incident history
- Service and uptime metrics
-
Supply chain diversity
Ability to source cells from multiple qualified vendors; clear second-source plans; capability to qualify new chemistries. -
Technical roadmap and software capability
Strong BMS and EMS platforms, AI-driven optimisation, clear roadmap for warranty-backed performance improvements. -
Cell control and quality
Either via in-house manufacturing or tight, proven partnerships with top-tier cell makers and robust incoming quality checks.
Vertical integration helps with item 5, but it doesn’t automatically solve 1–4.
Why the weighting of cell production is going down
The report’s authors now give less weight to cell production in the overall manufacturing score. That makes sense for a few reasons:
- ESS is increasingly its own ecosystem, not just an offshoot of EV cell production.
- System-level engineering, safety, and software often define whether a storage project succeeds.
- Integrators that don’t make cells can still run very robust, bankable businesses if they excel elsewhere.
For developers and financiers, a more nuanced framework avoids two common mistakes:
- Overvaluing a vertically integrated supplier that’s weak on software or project execution
- Undervaluing an integrator with excellent partnerships, strong financials, and a clean delivery record
Practical implications for green technology projects in 2025–2027
The reality? The choice isn’t “vertical integration good, integrator bad” (or vice versa). It’s about matching supplier type to project risk, portfolio strategy, and speed.
When a vertically integrated supplier makes sense
You’re likely better off prioritising a vertically integrated cell-to-ESS player if:
- Your project is in a region with tight or fragile supply chains and you value guaranteed access to cells.
- You need large, repeat volumes of a single standardised product across many sites.
- Your investors are conservative and strongly favour a single-throat-to-choke model.
In those cases, tighter cell control and deep manufacturing experience can outweigh the loss of sourcing flexibility.
When an integrator is the smarter choice
A strong, bankable integrator often wins when:
- You want chemistry or vendor flexibility across your portfolio (e.g. some projects with LFP, others trialing sodium-ion).
- You’re rolling out AI-enhanced, software-led optimisation and need a partner whose core strength is controls and analytics.
- You’re deploying storage in diverse applications — grid-scale, C&I, co-located with solar and wind — and need tailored system designs.
A good integrator acts as your technology scout and risk buffer between rapidly changing battery tech and 20-year project lifetimes.
Questions to ask any ESS supplier today
Whether you’re dealing with a cell-to-ESS giant or a pure integrator, I’d push on these specific points:
-
Cell strategy and partnerships
- Who supplies your cells today, and what % of your volume do they represent?
- What’s your backup plan if one of them exits the stationary market or has a recall?
-
Technology roadmap
- How will your product cost and performance roadmap look over five years?
- How do you plan to integrate new chemistries or form factors without disrupting installed fleets?
-
Software and AI capabilities
- How does your EMS/BMS optimise revenue across multiple markets?
- Do you use AI for degradation forecasting, fault detection, or dispatch optimisation?
-
Service model and guarantees
- Who’s contractually responsible for availability and performance?
- How are penalties, liquidated damages, and warranty claims handled and funded?
-
Financial resilience
- What share of your revenue comes from ESS?
- How exposed are you to EV demand cycles or commodity price swings?
The answers will tell you more about real-world risk than a logo or a marketing slide about vertical integration.
How this fits into the broader green technology shift
Battery storage is where the digital and physical sides of green technology collide. Cells, racks, and containers are the hardware backbone. AI-driven controls, market optimisation, and predictive maintenance are the brains.
Vertical integration mainly affects the backbone. Integrator flexibility mainly affects the brains. For net-zero pathways, we need both:
- Robust, low-cost, low-carbon battery manufacturing at scale
- Smart, adaptive, software-defined energy systems that can respond to weather, prices, and grid stress in real time
As grid storage scales through 2030, expect the strongest players — whether they’re currently “cell makers” or “integrators” — to start looking more alike:
- More strategic partnerships between cell giants and software-led integrators
- Tighter integration of AI, forecasting, and asset management into standard ESS offerings
- Less obsession with who makes the cells, more focus on delivered performance, safety, and lifecycle emissions
If you’re planning significant investment in storage over the next few years, the best move is to build an internal playbook for assessing ESS partners that goes far beyond the vertical integration label.
Because the companies that will quietly win the energy transition aren’t the ones shouting about how integrated they are. They’re the ones that keep your projects on time, on budget, and online — even as the technology underneath keeps evolving.