Navigating the Future of the Energy Storage Industry Amidst Waning Policy Incentives

With the recent release of the notice titled “Notice on Deepening Market-oriented Reforms of New Energy Grid Pricing to Promote High-quality Development of New Energy“, it has been declared that “the requirement for energy storage configuration will no longer be a prerequisite for the approval, grid connection, or pricing of new energy projects.” This marks the end of the era of mandatory energy storage and raises questions about how energy storage companies will confront the real market challenges in the absence of policy incentives.

At the recently held 13th International Energy Storage Conference and Exhibition (ESIE2025), nearly 800 exhibitors showcased over 500 new products, illustrating the industry’s development trajectory: new energy storage is shifting from a focus on “price competition” and “scale competition” to “technology empowerment” and “value cultivation.”

Market-driven Development

The notice stipulates that for existing new energy projects that are completed before June 1 of this year, a price difference settlement mechanism will be adopted to ensure their revenue does not fall below the original pricing mechanism, albeit with a gradual reduction of the guaranteed power ratio. For new energy projects that start after June 1, the pricing will be determined through market competition. As the policy’s implementation date approaches, new energy companies are accelerating project construction to ensure they are connected to the grid by the deadline to secure expected returns.

During ESIE2025, Lv Jian, General Manager of Shenzhen Pengcheng Infinite New Energy Co., Ltd., noted that to meet energy storage needs, leading battery and integration manufacturers are ramping up production to fulfill orders, resulting in a “rush to install.” Xu Dongyang, Head of Product Development at CRRC Zhuzhou Electric Locomotive Research Institute Co., Ltd., believes that the notice has a profound impact on the energy storage market. After the short-term “installation rush,” there will likely be a period of market observation while waiting for local governments to issue comprehensive guidelines for new energy market entry and for companies to rebuild their investment return calculation models. Although there are risks of postponed energy storage orders from last year’s tenders, the long-term outlook for the new energy storage industry remains positive as a key supporting technology for large-scale new energy development.

The Zhongguancun Energy Storage Industry Technology Alliance predicts that this year, China’s new energy storage installations are expected to exceed 30 gigawatts. Entering the 14th Five-Year Plan, the new energy storage industry in China will gradually transition from being policy-driven to market-driven. In a conservative scenario, by 2030, the cumulative capacity of new energy storage could reach 236.1 gigawatts; in an ideal scenario, it could reach 291.2 gigawatts.

According to Chen Haisheng, Chairman of the Zhongguancun Energy Storage Industry Technology Alliance, 2024 will see rapid development in China’s energy storage industry, but competition will also intensify. This year, energy storage is expected to continue its rapid growth amid challenges, transitioning from large-scale development to comprehensive commercialization.

To enhance the willingness of new energy project owners to voluntarily integrate energy storage, over 20 provinces nationwide have implemented time-of-use pricing and spot market price difference mechanisms to promote “new energy + storage” collaborative operations.

Technological Innovations Reshaping Advantages

A key adjustment in the notice is the removal of mandatory energy storage requirements for new energy projects, allowing operating entities to decide whether to integrate energy storage. This signifies that the previous reliance on policy subsidies and bundled projects is no longer sustainable, and companies must demonstrate their value in market-oriented scenarios such as auxiliary services.

How can companies stand out in the competitive market? Breakthroughs in technologies such as large capacity and high integration are reshaping the core competitiveness of energy storage products. At ESIE2025, various enterprises showcased large-capacity energy storage systems. The capacity of standard 20-foot containers has generally surpassed 6 megawatt-hours, with some high-end products reaching over 9 megawatt-hours, effectively doubling the capacity of mainstream systems from 3-5 megawatt-hours in 2023. This “large capacity transformation” is supported by underlying technological advancements.

Advancements in cell technology have led to system upgrades. With the large-scale application of battery cells exceeding 500 amp-hours, the integration efficiency of energy storage systems has significantly improved. For instance, Faraday Future‘s EN 8 Pro system, which features 700 amp-hour long-cycle cells, achieves a single cabin capacity of 8.3 megawatt-hours with a cycle life exceeding 15,000 cycles, representing a 50% improvement over the industry average.

This “cell-system” collaborative innovation leads to substantial reductions in land usage costs. Lishen Battery‘s 8.3 megawatt-hour system employs high-voltage blade battery technology, decreasing land occupancy by 40%, which is particularly advantageous in land-scarce eastern coastal regions. Xu Dongyang believes that the shift towards larger cells and systems not only reduces initial investment costs but also enhances integration and energy density, significantly lowering footprint and operational expenses, thus optimizing the cost structure over the lifecycle.

With the trend towards integrated energy storage systems, combined AC and DC designs have become mainstream. In traditional energy storage systems, the independent configuration of DC battery clusters and AC inverters results in high energy conversion losses and a large footprint. Reports from the exhibition indicate that over 60% of new products utilize integrated designs, embedding the inverter within the battery cabin to achieve seamless “DC input – AC output.” This significantly enhances energy conversion efficiency, reduces construction and operational costs, conserves land resources, and extends equipment lifespan.

AI Empowering Industry Upgrades

If 2024 marked the emergence of “AI + Energy Storage“, then 2025 is poised to be a turning point for deep integration of AI in energy storage. At ESIE2025, AI emerged as a central theme, with various companies showcasing intelligent management systems based on large models. Major players like CATL, Faraday Future, and Sungrow Power Supply have launched new energy storage products leveraging AI technology, while companies such as Keyuan Technology, Trina Storage, and Huaibo Technology have presented strategic plans for deep integration of AI throughout the entire lifecycle of energy storage.

CATL unveiled its first smart energy storage management platform, “Tianheng·Smart Storage“, which integrates a “big data platform + AI large model” with “advanced algorithm fusion + AI assistant tools” to create a comprehensive set of standardized capabilities for energy storage stations, including intelligent warning, operational analysis, station diagnostics, and smart maintenance. Sungrow Power Supply has incorporated AI large models into its battery management systems, resulting in a heat runaway warning accuracy exceeding 99%, and improvements in the estimation precision of SOH (State of Health) and SOC (State of Charge) by 2%-3% compared to industry standards.

These technological breakthroughs transform energy storage systems from “dumb devices” to “intelligent agents” capable of autonomous decision-making, allowing them to gain a competitive edge in the dynamic electricity market. Tian Qingjun, Senior Vice President of Faraday Future, asserts that integrating AI technology is essential for the development of the energy storage industry, which is evolving into an “intelligent agent” for new power systems and energy frameworks, helping to overcome the bottlenecks associated with high proportions of new energy integration and facilitating a transition to cleaner and smarter energy solutions.

Qian Hao, CTO of Beijing Huabo Technology Co., Ltd., points out that AI is driving technical innovations across all facets of energy storage systems: from project planning and equipment design to predictive maintenance, intelligent scheduling, and safety monitoring, AI is now a critical support for enhancing efficiency and lowering costs in energy storage systems.

However, the application of AI in the energy storage sector still faces several challenges. XU Zhonghua, General Manager of Energy Storage Product R&D at Faraday Future, openly states that insufficient data processing capabilities pose a significant bottleneck to industry development. The lack of data volume and quality hampers the effectiveness of large models. To achieve continuous iterative optimization of safety models in energy storage, a data closed-loop covering the entire industry chain must be established. Xu emphasizes that only by integrating cell design data, manufacturing data, process data, and operational data can effective safety traceability be established, ultimately building a robust safety protection system.