Emergence of 2.0 Profit Models for Industrial and Commercial Energy Storage Amid Policy Changes in Jiangsu

Policy Withdrawal ≠ Market Retreat! The Era of Profit Model 2.0 for Commercial and Industrial Storage Investment in Jiangsu Has Arrived

As the policy landscape changes, commercial and industrial storage investments are entering a new phase of strategic adjustments. On May 26, 2025, the Jiangsu Provincial Development and Reform Commission implemented a new notice aimed at optimizing the time-of-use electricity pricing structure, which is designed to promote renewable energy consumption and reduce electricity costs for businesses (Document No. Su Fa Gai Jian Ce [2025] 426). This policy has led to a significant reduction in peak-valley arbitrage profits for storage stations, presenting unprecedented challenges for the Jiangsu storage industry.

Jiangsu’s new policy is not an isolated case; more provinces are beginning to adopt similar regulations and implement new pricing mechanisms. The notice includes two major changes:

• Change 1: The adjustment of time-of-use pricing segments now includes a new low-price segment from 11 AM to 1 PM, while the high-peak price from 8 AM to 11 AM has been eliminated. The operation strategy for commercial and industrial storage has shifted from “charging during low periods and discharging during peaks + charging during flat periods and discharging during peaks” to “charging during low periods and discharging during peaks + charging during low periods and discharging during flat periods.” This change clearly indicates that the revenue from discharging during flat periods is significantly lower than that from discharging during peak periods. Additionally, the reduction in the duration of low-price periods may increase demand, resulting in a 10% decrease in the annual equivalent operational days.
• Change 2: The floating ratio of time-of-use pricing has been adjusted, with peak and valley floating ratios changing from 71.96% and 58.15% to 80% and 65%, respectively. While this may seem like an increase in the floating ratio, it conceals critical changes. The key issue is that the benchmark for the floating price has shifted from the full-price floating to only the user’s purchase price, effectively dropping the price difference between peak and valley periods by about 25%.

This price adjustment has greatly impacted the development enthusiasm for commercial and industrial storage projects in Jiangsu. Existing projects and new investments are left in a state of uncertainty. Taking a typical project in Jiangsu as an example, a 0.5 MW/1 MWh system with an initial investment of 1.05 RMB/Wh and a revenue split of 20%/80% over a 15-year project cycle shows that the internal rate of return (IRR) has plummeted to just 5.05%, with a payback period approaching 11 years. This outcome suggests that the storage investment market in Jiangsu may soon be abandoned.

So, is there still potential for investment in Jiangsu projects? Are there clear solutions? One straightforward approach is to reduce EPC costs by 0.05 RMB, which would only marginally increase the IRR by less than 1 percentage point. In many cases, manufacturers may need to cut down on equipment quality to achieve this, potentially leading to larger project risks. It is clear that the logic behind a “single arbitrage” model is no longer sustainable. To uncover the multi-dimensional value of storage projects, a combination of “increasing efficiency and reducing costs” is the correct investment strategy for commercial and industrial storage projects.

Building Profit Model 2.0: Intelligent Operations as the Future

When one door closes, another one opens. The participation of storage projects in markets such as spot electricity, ancillary services, and demand response is continuously increasing. Xingji Yunneng, specializing in storage station operations, is driving the transition from “single arbitrage” to “value operation” with a “trinity” strategy for increasing efficiency:

• Operational Strategy Optimization: Enhancing system utilization through self-developed intelligent prediction and scheduling systems, moving from fixed time slots and power strategies to dynamic charging and discharging strategies based on user-side photovoltaic and load models. This practice can increase the annual equivalent charging and discharging days of storage systems by over 10%.
• Dynamic Demand Control: Reducing basic electricity fees through a “dynamic tracking and demand forecasting” algorithm, effectively lowering the monthly maximum demand and saving significant costs. For example, a project in Suzhou managed to reduce demand by 370 kW, saving nearly 200,000 RMB annually based on the basic fee of 51.2 RMB/kW for the 10 kV voltage level in Jiangsu.
• Multi-Market Collaboration: Peak shaving and valley filling through optimized trading strategies to participate in demand-side response, ensuring basic operational logic while generating excess profits. For instance, a 6.5 MWh system in a Jiangsu industrial park achieved annual peak shaving profits of 310,000 RMB.

Combining these strategies, the same Jiangsu 0.5 MW/1 MWh project can now generate a comprehensive monthly revenue of 23,300 RMB (before profit sharing), marking a 48% increase in comprehensive revenue compared to the post-policy arbitrage revenue, translating to an average annual revenue increase of 90,900 RMB and an IRR recovery to 14.23%. This underscores the fact that the fundamental value of storage is significantly greater than that of single arbitrage profits, indicating a future trend towards “value creation.” The true value of storage lies in achieving dynamic balance and maximizing system benefits through technological integration and operational innovation.

Exchanging Time for Space: Long-Life Storage Systems Ensure Revenue Certainty

The lifespan limitations of battery cells have long been a significant concern for storage investors. Mainstream battery cells typically last only 7,000 cycles, requiring replacement after the eighth year, with retrofitting costs reaching up to 0.6 RMB/Wh. Adverse electricity pricing conditions could severely impact the IRR. Xiamen New Energy offers long-life battery cells with 15,000 cycles tailored for commercial and industrial scenarios, providing annual SOH warranties based on various operating conditions to significantly reduce future uncertainties in power replenishment, achieving a firm commitment of “15 years without cell replacement.”

Incorporating New Energy battery cell solutions into the financial model can raise the IRR from 14.23% to 16.21%, not only compensating for losses due to policy adjustments but also exceeding initial revenue targets. This opens up new collaborative models for commercial and industrial storage: “Long-Life Storage Systems + Full Lifecycle Operations” may become the standard collaboration paradigm between platform integrators and investors.

Upon further reflection, the notion of battery replacement in the eighth year is somewhat misleading. With rapid advancements in battery technology, one can expect significant changes in specifications and parameters beyond the eighth year, making compatibility with current storage systems nearly impossible. Thus, rather than discussing retrofitting battery cells, it is more accurate to consider replacing the entire system, which is fraught with uncertainties. Long-cycle solutions can alleviate such future uncertainties without necessitating cell replacements.

Returning to the financial model of Jiangsu projects, incorporating the annual SOH decay values provided by New Energy for the Jiangsu region shows that without incurring additional retrofitting costs, the IRR can significantly improve. Overall, storage stations in Jiangsu have effectively restored revenue losses from the previous single peak-valley arbitrage model following the policy adjustments by integrating long-cycle systems, optimizing strategies, controlling demand, and responding to market dynamics.

Conclusion: From Land Grabs to Operational Competition, the Second Half of Commercial and Industrial Storage Has Just Begun

The new policy in Jiangsu is not an endpoint but rather a turning point. By compressing arbitrage profits and raising operational thresholds, the industry is being forced to return to the essence of storage: ensuring flexibility in the power system and redistributing electricity value. Not only Jiangsu but more provinces will follow suit in adjusting time-of-use pricing policies. As policies mature and the electricity market continues to open up, storage is transitioning from an arbitrage tool to an operational asset. Companies with specialized operational capabilities, reliable equipment systems, and a long-term investment perspective will emerge as key players in the next decade.

Xingji Yunneng is constructing a new paradigm for “platform-based power station operation,” while Xiamen New Energy is providing future-proof “equipment certainty support.” From Jiangsu, a new chapter in the reconstruction of investment logic in commercial and industrial storage has begun.