Can Energy Storage and Solar Integration Help the Industry Navigate Economic Cycles?

Thanks to its strategic investments in the solar energy storage sector, Sunshine Power reported a profit of 7.7 billion yuan in the first half of this year, defying market trends. Recently, the company’s market value surpassed 300 billion yuan, making it the third publicly listed company in the photovoltaic industry, after LONGi Green Energy and Tongwei Co., Ltd., to reach this milestone.

Currently, the integration of solar energy and storage is becoming a standard for companies in the photovoltaic industry. In addition to early movers like Canadian Solar and Trina Solar, reports have emerged that LONGi Green Energy is considering acquiring a storage company. Industry experts believe that the domestic market will soon ease restrictions on spot market pricing, enabling solar energy storage solutions to maximize their value as price differentials widen. Moreover, the increasing demand for self-consumption scenarios is driving the need for integrated solar and storage solutions.

Overall, while there are some improvements in the photovoltaic industry fundamentals, optimism remains cautious. Many industry insiders suggest that the development of integrated solar and storage solutions, particularly storage systems, is becoming crucial for solar companies aiming to overcome challenges and create new growth trajectories. However, without adequate preparation, companies entering the storage sector amidst fierce competition may struggle to achieve profitability in the short term.

Recently, it was reported that LONGi Green Energy has acquired a stake in SuZhou JingKong Energy Technology Co., Ltd. and is exploring the acquisition of another storage company. A representative from LONGi stated, “We are continuously assessing our strategy for the storage business, but specific results are still uncertain.” Industry experts view LONGi’s entry into the storage market as a move that could enhance the integration of solar generation and storage systems.

In November of last year, during a research activity, LONGi Green Energy indicated its steadfast support for hydrogen energy development, while clarifying that no definitive decisions had been made regarding storage. Although the company’s plans for solar-storage integration require further validation, many photovoltaic companies are already adopting this integrated approach. According to Canadian Solar, by the end of the first half of the year, the company had signed contracts worth 3 billion USD for its storage systems. It anticipates shipping between 2.1 to 2.3 GWh of storage in the third quarter, with a total annual shipment target of 7 to 9 GWh, maintaining a leading gross margin in its storage business.

JA Solar also aims to achieve a shipment target of 6 GWh for the entire year, while simultaneously advancing global deployment of integrated solar-storage solutions. According to Trina Solar’s semi-annual report, the company has a backlog of storage orders exceeding 10 GWh, with a significant portion of these orders coming from overseas markets. In mid-September, Trina Solar announced contracts for a total of 2.48 GWh of storage products with three clients from China, Latin America, and the Asia-Pacific region, including a 1 GWh overseas order set to use a grid-connected system.

Yue Fen, deputy secretary-general and researcher at the Zhongguancun Energy Storage Industry Technology Alliance, noted that photovoltaic companies have inherent advantages in entering the storage market due to three main factors: First, there is a high overlap in customer bases since both solar and storage primarily serve power generation companies and large industrial users, facilitating resource and market channel reuse. Second, storage is a rigid demand for renewable energy absorption, as one of its core applications is to stabilize the output fluctuations of solar and other renewable energies, thereby directly enhancing energy absorption efficiency. Third, there is a technological overlap, as both sectors rely on power conversion systems (PCS), allowing solar companies to create synergies in technical research, supply chain management, and other areas.

“Storage systems can effectively address issues related to solar energy absorption and grid stability, making their integration an inevitable choice for energy transition,” said Yang Bao, president of Trina Solar’s storage division and vice president of its photovoltaic product division. He emphasized that the full market entry of renewable energy generation is driving the shift from policy support to market transaction for storage solutions, making the collaboration between solar and storage increasingly unavoidable.

With advancements in photovoltaic and storage technologies and declining costs, conditions favorable for their integrated development are emerging. Yue Fen analyzed that on the generation side, as renewable energy progressively enters the market, solar power is likely to encounter zero or negative pricing during peak generation hours. Currently, some provincial photovoltaic projects maintain reasonable returns through mechanisms like regulated electricity pricing. However, if such policy supports are lifted, photovoltaic projects will either face curtailment or rely on storage systems to shift low-price midday generation to high-price evening consumption, with the economic viability hinging on the peak-to-valley price differential.

She predicted that the policy document “Notice on Further Deepening the Power Spot Market Construction” explicitly states that “future spot market price limits will be appropriately relaxed.” This policy direction is expected to widen the peak-to-valley price differential, maximizing the economic value of the solar-storage model. From the user side, national-level guidelines have recently been issued promoting green electricity connections and zero-carbon park developments, creating new scenarios for storage growth. For instance, the policy for green electricity connections mandates that the self-consumption of renewable energy must account for at least 60% of total available generation and 30% of total electricity consumption, with a target to raise self-consumption to 35% before 2030.

“The high standards for green electricity utilization will generate a demand for high-proportion storage systems, creating new growth opportunities for the storage industry. Additionally, the carbon compliance requirements for export-oriented enterprises will further drive their participation in green electricity connections and zero-carbon park projects,” Yue Fen added.

Yang Bao also pointed out that as the share of renewable energy increases, the grid’s stability requirements are becoming more stringent, making storage a crucial solution for addressing the intermittency and volatility of solar generation. He noted that diverse application scenarios, such as microgrids, zero-carbon parks, and solar-storage charging stations, have become widely recognized within the industry as effective means of collaborative development.

In response to the need for high self-consumption, a representative mentioned that Hubei Province has set a guideline requiring that the annual self-consumption of electricity from rooftop photovoltaics in industrial and commercial buildings should not be less than 50%, encouraging projects to enhance self-consumption through solar-storage collaboration.

Yang Bao emphasized that enhancing technological innovation and establishing a collaborative high-quality development system encompassing technology research, intellectual property, and industry standards are critical for photovoltaic companies venturing into the storage business. “The solar-storage system is not merely a product, but a comprehensive solution,” he stated. Companies need to leverage advanced technological innovations to meet regional-specific demands and diverse market needs. For example, Trina Solar has fully transitioned to a solution-oriented strategy this year, relying on its technological advantages and product leadership to provide comprehensive solutions for its customers.

It is worth noting that the policy-driven “strong storage requirement” is gradually yielding to economic-driven approaches, meaning companies need to pay closer attention to the actual economic benefits of their projects, creating real high value for customers.

Although the photovoltaic industry is still in a cyclical downturn, with main product prices remaining low and profitability for the industry as a whole still a distant goal, companies that have proactively integrated solar and storage solutions are already reaping the benefits. For instance, Sunshine Power reported a robust growth trajectory in its performance in the first half of the year, achieving an operating income of 43.5 billion yuan, a 40% year-on-year increase, and a net profit attributable to shareholders of 7.7 billion yuan, up 56% from the previous year. The company attributes its profitability mainly to its solar inverters and storage business.

Canadian Solar is one of the few photovoltaic companies that achieved profitability in the first half of the year, with its resilient performance stemming from strategic decisions in its solar business and breakthroughs in its second growth curve in storage. During this period, the company delivered storage systems totaling 3.1 GWh (including residential storage), with 2.2 GWh delivered in the second quarter alone, marking a more than 140% quarter-on-quarter increase. Regarding the differentiated advantages of solar-storage integration, Yang Bao noted that the company possesses full-stack technical capabilities and scenario-based solutions, along with a robust global localized service network. Furthermore, the company is taking proactive steps towards innovation and sustainable development, with its system integration and global delivery recognized by authoritative institutions.

As for business philosophy, the company focuses on enhancing overall project return rates through solar-storage integration to meet market demands. For example, its flagship project in Qinghai, “Wind-Solar-Storage Collaborative Desertification Control,” precisely meets customer needs. Yue Fen pointed out that both the photovoltaic and storage sectors are facing fierce competition, but leading storage companies maintain strong profitability due to their technological and scale advantages, while smaller firms are struggling with losses. “Currently, whether companies are focused on solar or storage, they are actively expanding into comprehensive energy services, virtual power plant operations, and electricity market trading to mitigate industry cyclicality,” she noted. However, she cautioned that companies entering the storage sector without sufficient technological reserves or deep understanding of market and policy dynamics may find it challenging to achieve short-term profitability amidst intense competition.

As the economic viability of solar-storage integration gradually becomes evident, it is seen as a strategic direction for photovoltaic companies to break free from low-price competition. Solar-storage integration is becoming a key pathway for the industry to navigate cycles and achieve sustainable development. “Through proactive positioning, companies are showcasing the positive contributions of storage to profits and operations,” Yang Bao concluded.

Currently, there are some encouraging signs in both domestic and international solar-storage markets. In China, accompanying policies for the “136 Document” are being rolled out, improving the profitability model for large-scale storage and shifting demand from policy-driven storage to economic-driven solutions. Notably, in August, the tendering and procurement volume for storage systems/EPC reached 69.4 GWh, setting a monthly record and validating the rigid demand and high growth. The overseas solar-storage market is also on an upward trajectory. Sunshine Power predicts that the global compound growth rate for storage over the next few years will conservatively be 20%, with an optimistic estimate reaching 30%. The European market shows strong demand for large-scale and industrial storage, while the U.S. market will see subsidies taper off only by 2033, maintaining favorable storage economics. Additionally, Australia is expected to have a storage demand of 10 GWh by 2026, indicating robust growth.