Intensive Policy Releases Transform China’s Energy Storage Sector: Analyzing the Impact of Documents 136 and 394

Intensive Release of Energy Storage Policies! A Deep Dive into the Industry Reshuffle from Document 136 to Document 394

Published on: May 14, 2025

When one door closes, another opens. In just four months into 2025, the energy storage sector has experienced a series of significant policy updates. The combined effects of Document 136 and Document 394 essentially aim to eliminate excesses in the energy storage industry, marking a critical transition from policy-driven growth to market-driven dynamics in China’s energy storage sector. As the tides recede, only companies that can iterate technology, innovate models, and establish a global presence will survive this monumental reshuffle.

Top-Level Design: Initiating a New Market-Oriented Landscape

In February 2025, the National Development and Reform Commission (NDRC) and the Energy Administration jointly issued Document 136, which acted like a powerful bomb, creating ripples throughout the energy storage industry. The document explicitly states that energy storage configuration cannot be a prerequisite for the approval of new energy projects, effectively ending the era of administrative mandates that began in 2017 with Qinghai’s introduction of the “mandatory storage” policy. Document 136 represents a pivotal turning point in the development of the energy storage sector, as its significance extends beyond merely abolishing mandatory storage requirements. At a deeper level, this reflects the nation’s innovative implementation of laws such as the Renewable Energy Law and the Energy Law in the new context.

The document emphasizes the need to enhance market trading and pricing mechanisms, facilitating the full integration of new energy into the electricity market for fair and equitable trading. Additionally, it proposes the establishment of a “sustainable development pricing settlement mechanism” for renewable energy sources, ensuring long-term support for the development of wind and solar energy while steering the industry toward sustainable growth.

Just two months later, on April 29, the NDRC and the National Energy Administration issued another notification regarding the acceleration of electricity spot market construction (Document 394). This document sets a clear goal of achieving comprehensive coverage of the electricity spot market by the end of 2025. While Document 136 focused on overhauling existing regulations, Document 394 shifts its focus to the top-level design of the incremental market, outlining specific plans for timelines, trading varieties, and price transmission mechanisms.

According to the established timeline, by December 2025, six major regional markets including North China, East China, Central China, Northwest, Southwest, and Northeast, along with 20 provincial markets, are expected to achieve continuous settlement operations. This goal aims to further improve and efficiently operate the national electricity market system. Eight pilot provinces, including Guangdong and Shanxi, are tasked with leading this initiative, required to complete independent settlement trials by June 2025.

In terms of trading varieties, Document 394 effectively expands options. In addition to maintaining day-ahead and intraday markets, it proposes for the first time to explore mechanisms for integrating capacity markets, ancillary services markets, and spot markets. For instance, in frequency regulation services, key indicators such as the response speed of energy storage (<2 seconds) and regulation accuracy (>95%) will be included in the revenue assessment system. This means that companies with strong technological capabilities will gain a significant competitive edge in the market, contributing to the overall uplift in industry technology levels.

Another highlight of Document 394 is the price transmission mechanism. The spot market will realize a linkage model of “new energy reporting and pricing + dynamic energy storage response.” According to forecasts, revenues from energy storage’s peak shaving participation could rise from the current 0.5 yuan/kWh to 1-1.5 yuan/kWh, significantly motivating energy storage companies to engage in market transactions. However, this potential increase in revenue comes with risks. Energy storage companies must contend with uncertainties caused by real-time price fluctuations, which could exceed 300% during extreme weather events, raising the bar for their risk management and market response capabilities.

With Document 136 abolishing mandatory energy storage requirements and Document 394 pushing for comprehensive electricity spot market coverage, this policy combo directly addresses two critical aspects of the energy storage industry: revenue logic and safety baseline. The impending nationwide electricity market examination will profoundly alter the commercial logic and development pathways for industrial and commercial energy storage, heralding disruptive changes for the sector.

Jiangsu’s Practice: Time-of-Use Pricing Reform Breaks Traditional Dependence

On April 30, Jiangsu’s Development and Reform Commission issued a notice titled “Optimizing the Structure of Time-of-Use Pricing for Industry and Commerce to Promote Renewable Energy Consumption, Reduce Electricity Costs for Enterprises, and Support Economic and Social Development,” which has garnered significant attention in the energy storage industry. This policy adjustment aims to encourage industrial and commercial users to adjust their electricity usage periods and lower costs by widening the fluctuation ratio between peak and valley prices and adding a midday low-valley period, effective from June 1.

As the leading province for industrial and commercial energy storage installations, boasting over 3GW of capacity by the end of 2024, Jiangsu’s new pricing policy signifies three major changes. Firstly, the policy adopts a more refined time division, extending the midday low-valley period from 12:00-14:00 to 11:00-15:00, increasing the low-valley duration by 50%. However, this adjustment compresses the daily arbitrage period from four hours to three hours.

Secondly, in terms of price difference calculation, the policy changes the base for calculations from “end-user electricity price (including transmission and distribution fees)” to “proxy purchase electricity price.” For instance, for a specific industrial and commercial user, the peak-valley price difference dramatically decreases from 0.85 yuan/kWh to 0.62 yuan/kWh, nearly halving the arbitrage space. Lastly, the policy imposes higher demands on user responsiveness, mandating that enterprises with an annual electricity consumption of over 5 million kWh must install load management systems. This will push energy storage functionalities towards a “peak supply assurance + demand-side response” hybrid model, compelling companies to shift strategies from merely purchasing energy storage equipment to developing an integrated “solar-storage-charging” system.

In the future, energy storage companies will increasingly rely on market mechanisms and technological innovations. The differentiated demands for energy storage technologies across various application scenarios will continue to drive the industry toward greater refinement. In the context of industrial and commercial energy storage, high-quality owners will become scarce resources, and excellent operators will play a key role. The diverse operational revenues that emerge from this foundation will be crucial for the industry to achieve breakthroughs.

Future Trends: Fire Safety Becoming a Major Hurdle in Energy Storage Elimination

Policies regarding energy storage safety have become increasingly stringent. On April 21, the East China Energy Regulatory Bureau released the draft for the “Essential Safety Enhancement Project for Electric and Electrochemical Energy Storage Stations,” which is considered the industry’s “strictest safety order.” This document delineates the safety red lines for energy storage and serves as a lifeline for many storage enterprises and stations. It explicitly prohibits units that have experienced safety production accidents within a year from participating in the construction of electrochemical energy storage stations. By the end of 2025, those that do not comply with national mandatory standards for energy storage batteries and related systems, or fail to meet fire safety requirements, will be ordered to cease operations immediately. From January 2026, new electrochemical energy storage stations must pass battery quality inspections and fire safety system evaluations before commencing operations. Additionally, the document bans the deployment of energy storage stations in crowded areas, high-rise buildings, underground facilities, and flammable or explosive locations.

On May 7, the National Energy Administration and four other departments jointly released a notification aimed at strengthening safety management in electrochemical energy storage. It includes clear requirements for enhancing the inherent safety level of battery systems, conducting safety assessments for electrochemical storage projects, improving related standards and regulations, enforcing safety supervision responsibilities, facilitating inter-departmental coordination and information sharing, and ensuring enterprises fulfill their primary safety production responsibilities.

Industry Trends: The Strong Will Thrive as the Global Competition Intensifies

The direction of the energy storage industry’s elimination race has shifted. Only those who actively seek change can remain unscathed amid transformation. Previously, industry forecasts indicated that 80% of enterprises might be eliminated. Currently, storage manufacturers are engaged in fierce “price wars,” causing prices across the storage supply chain to plummet, with energy storage cells and systems nearing or even falling below cost, a scenario where “bad money drives out good.” However, the significant policies introduced this year are shifting the industry elimination race from “bad money driving out good” to “survival of the fittest.”

While domestic policy environments are undergoing drastic changes, the demand for energy storage in overseas markets, including Europe, America, and the Middle East, is experiencing explosive growth. Some agencies predict that by 2025, the installation of large-scale energy storage overseas will double. In this context, leading domestic energy storage companies are accelerating their international expansion. BYD’s energy storage market share in Europe has surpassed 25%, EVE Energy’s orders in North America have surged by 300%, Envision Energy has secured a £240 million energy storage contract in the UK, and CATL has further solidified its advantageous position in the global storage market through deep collaboration with Tesla.

Meanwhile, many small and medium-sized storage enterprises are also looking towards emerging markets in Asia, Africa, and Latin America, seeking opportunities for breakthroughs in this blue ocean. By 2025, the overseas energy storage market is expected to become a fiercely competitive red ocean. Under the continued influence of major policies, the clearing process in the energy storage industry will accelerate. Situations such as project shutdowns, delays, and even order cancellations may become common occurrences in the sector’s development. However, once inefficient and outdated capacities are eliminated, the energy storage industry will truly enter a new phase of high-quality development.