Energy Storage Battery Demand Peaks Mid-Year Amid Technological Evolution and Market Restructuring

The current surge in demand for energy storage batteries may soon subside. Recent interviews with industry insiders reveal that, amidst structural contradictions in lithium battery production capacity, a “rush for orders” was reported in early April for energy storage cells. However, industry forecasts suggest that this surge is likely to peak between the end of May and June, followed by a gradual decline.

Simultaneously, a significant “anti-involution” movement is emerging, with some companies adjusting their strategies. Rather than solely pursuing scale to reduce costs, they are now focusing more on profitability and technological differentiation.

According to a representative from Penghui Energy, “There is indeed a rush for orders in the industry. Following the release of Document No. 136, many energy developers are accelerating the construction and grid connection of storage projects before June 1 to mitigate risks from price fluctuations.” Document No. 136, issued by the National Development and Reform Commission and the National Energy Administration earlier this year, outlines that existing projects connected to the grid before June 1, 2025, will adopt a “price difference settlement mechanism” to ensure their revenues meet or exceed those under the original pricing mechanism. In contrast, projects connected after this date will have their prices determined entirely through market competition.

Feng Siyao, Chief Analyst of the Energy Storage Application Branch of the China Chemical and Physical Power Industry Association, stated, “The issuance of Document No. 136 has prompted power generation groups to expedite the construction and grid connection of storage projects to secure existing revenues, resulting in a concentrated rush for deliveries in the first half of the year.” Under this rush, Penghui Energy is experiencing tight production scheduling for its key storage batteries. The company’s new generation of large cylindrical batteries for small storage has seen continuous orders since last year, maintaining full-capacity production even after the addition of two new production lines.

Wang Zigang, head of the energy storage product solutions at Envision Power, revealed, “Thanks to the company’s proactive layout in the energy storage battery sector and driven by market demand, Envision Power is still operating at full capacity.” While energy storage batteries are currently enjoying a policy-driven “small spring,” the “rush for orders” may not be sustainable in the long run. Feng Siyao analyzed that, based on policy timelines, this surge is expected to peak between late May and June, gradually tapering off afterwards. June 1 marks a critical deadline for many projects to be operational and connected to the grid, leading to significant delivery pressures by the end of the second quarter.

Looking ahead to the second half of the year, as the benefits of mandatory storage policies begin to diminish, industry demand may see a short-term decline. Feng Siyao believes that with the exit of mandatory storage policies, the market will shift towards being driven by autonomous and market-based demand. Starting in 2026, mechanisms like the electricity spot market and capacity compensation will gradually improve, allowing new energy storage to showcase its independent value in load balancing and frequency regulation, potentially leading to a rebalancing of supply and demand.

In addition to improving mechanisms, the energy storage industry is recognizing the need to combat “inefficient internal competition.” Recently, the China Photovoltaic Industry Association held a symposium with executives from over 20 leading companies to address the issue of “malicious competition” in photovoltaic inverters and energy storage. Since 2024, energy storage system prices have plummeted, and integrated system quotes in the Chinese market have repeatedly reached new lows. A surge of manufacturers entering the energy storage market has led to price wars, compressing industry profits. Furthermore, many energy storage projects are facing unprofitability or even losses, with equipment suppliers experiencing significantly extended payment cycles.

The “bloodletting” competition among energy storage manufacturers is clearly unsustainable, making it urgent to find solutions. Feng Siyao noted that in response to these challenges, a wave of “anti-involution” is brewing within the energy storage industry. Leading companies are adjusting their strategies to focus more on profitability and technological differentiation rather than merely scaling up to dilute costs. Major enterprises with significant scale advantages are leveraging cost control and brand strength to expand their market share against the trend.

Feng Siyao explained that “anti-involution” is fundamentally about pursuing high-quality development. First, industry concentration will increase, with market shares gradually consolidating among dominant firms; second, profit models will transition from subsidy-driven to market-driven; third, capital investment decisions will become more rational, favoring companies with core competitiveness; and fourth, the policy environment will shift from enforced stimulation to creating a fair, orderly market conducive to innovation.

From a technological perspective, end users are increasingly sensitive to the economic efficiency of energy storage systems. In response, manufacturers are focusing on high-capacity solutions. This year, the penetration rate of batteries over 300+Ah has continued to rise, replacing 280Ah batteries as the market mainstream. Specifically, battery costs represent a significant portion of energy storage systems. High-capacity batteries can reduce the number of individual cells needed, simplifying battery management systems and associated component requirements. Thus, high-efficiency energy storage batteries can significantly lower operational costs and greatly enhance return on investment for owners.

“The next generation of batteries in the industry will largely depend on who can first achieve implementation, mass production, and large-scale delivery,” Wang Zigang stated. A representative from Penghui Energy disclosed that the company’s new Wind Phoenix 600+Ah battery is expected to achieve mass production by the fourth quarter of this year, while the 530Ah battery from Envision Power is anticipated to enter mass production in 2025, and the 700+Ah battery by 2026.

New demand is emerging as China, the United States, and Europe remain the primary markets for energy storage. Feng Siyao has noted that emerging markets in Southeast Asia, the Middle East, Latin America, and Africa are becoming new growth points for global energy storage demand. In Southeast Asia, the simultaneous existence of electricity shortages and renewable energy development has sparked initial storage demand. The Middle East, characterized by large-scale renewable energy expansion and the need for stable electricity in desert environments, is becoming a new hotspot for energy storage. For example, Saudi Arabia stands out among Gulf countries, advancing its renewable energy installations under the “Vision 2030” initiative and planning for large-scale energy storage to complement its renewable energy output.

Recent disclosures from CATL indicate that the energy storage market in emerging regions like the Middle East and Australia is rapidly developing, driven by strong demand for renewable energy and AI data centers. The company has secured significant energy storage projects in these markets. In recent years, domestic energy storage manufacturers have made substantial inroads in overseas markets. For instance, CATL became the preferred battery storage system supplier for the world’s largest solar and battery joint storage project in the UAE, with total investments exceeding $6 billion, encompassing a battery storage project with a total capacity of 19GWh and a 5.2GW solar project. Additionally, companies like BYD, Sungrow, Canadian Solar, and Guoxuan High-Tech have also secured energy storage orders in the Middle East this year.

Moreover, the market demand spurred by AI data centers is also fueling the energy storage battery market. AI is increasingly viewed as a new growth point in the energy storage sector. Training large AI models typically requires high-performance GPU clusters, necessitating immense computational power and resulting in high energy consumption. Thus, ensuring a sufficient and stable electricity supply for data centers has become a critical issue in the AI era. Industry experts widely believe that integrating storage with data centers will be key to alleviating the electricity bottlenecks faced by AI.

Feng Siyao emphasized that with the global boom in renewable energy and the digital economy, the influx of energy storage orders from overseas markets is driving battery demand. Meanwhile, domestic initiatives like “East Data, West Computing” are steadily advancing, leading to a rising need for backup power and peak-shaving storage in high-energy-consuming facilities like data centers. A representative from Penghui Energy stated that given the rapid development of AI technology, the company is optimistic about the future potential of energy storage in data centers and is actively positioning itself in this sector.