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ESS fire investigation to conclude next month

May 03,2019
Results of an investigation into a rash of power system fires will be released next month.

The Ministry of Trade, Industry and Energy said Thursday that it would announce in early June the cause of 21 Energy Storage System (ESS) fires that occurred over the past two years.

The most recent fire broke out on Jan. 22 this year.

An ESS, largely composed of batteries, is used in factories or eco-friendly power plants, such as wind farms, to store power and act as a stable power source.

The government convened a joint investigation team with civilian experts in January this year. While promising a swift investigation, the government has so far stayed mum on the progress.

“ESS burns down completely whenever there is a fire, and since there are many companies involved, a significant amount of time is needed for a scientific, transparent and fair explanation of the cause,” explained the Trade Ministry.

It added that previous fire-related investigations, into the Samsung Galaxy Note 7 in 2016 and in BMW vehicles, took around five months.

The months-long investigation has weighed on battery makers, affecting first-quarter earnings this year.

Major ESS producer Samsung SDI reported a 52.2-percent on-quarter decline in operating profit for the first quarter, pointing to ESS sales.

Sales from its battery business, which also includes batteries for electric vehicles, fell 7.9 percent over the same period.

“Related sales from ESS, which is highly profitable, fell greatly,” explained Cho Chul-hee, an analyst at Korea Investment & Securities, estimating an on-quarter fall of 43 percent for Samsung SDI’s ESS sales. “As the government is currently investigating the cause of the ESS fires, new project orders are halted and deliveries are being delayed.”

“ESS-related earnings will gradually improve after the government announcement on investigation results,” added Cho.

LG Chem, another battery maker, recorded a 57.7-percent on-year decline in operating profit in the first quarter. Its battery business fell 20.5 percent on quarter with the company citing the costs from the ESS fires.

Quarterly operating profit from LG Chem’s battery business had been growing throughout last year before the decline this year.

Meanwhile, businesses with ESS equipment installed in areas of potential risk, such as multi-purpose facilities, have been shut down at the government’s request.

As of April, 522 businesses with ESS equipment - around 35 percent of the total 1,490 - were shut down.

The government added in its announcement Thursday that it would announce measures to support the local ESS industry along with the investigation results next month.


BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]