Navigating the Shifting Landscape of the Energy Storage Industry: Who Will Lead in 2025?

As the new energy storage industry continues to evolve, the roller coaster of policy changes presents both challenges and opportunities. Driven by the dual carbon goals, the industry has seen explosive growth fueled by favorable policies, but it is also facing hurdles due to policy fluctuations, price wars, and technological bottlenecks. With the impending exit of the mandated energy storage policy by 2025, the sector is transitioning from being policy-driven to market-driven.

Amidst fierce price competition and increasing demand in overseas markets, Chinese companies are hastening their international expansion. However, this landscape is fraught with both opportunities and challenges. In this shifting environment, innovative thinking will be crucial for the energy storage sector to navigate the upcoming changes.

The transition towards market-driven models has already led major players into more complex competitive dynamics, with innovative strategies emerging as a key focus for many storage companies aiming to make their mark in this still chaotic landscape.

Policy Changes and New Market Dynamics

Since the introduction of the mandatory energy storage policy in Qinghai in 2017, China’s installed energy storage capacity has surged from under 1 million kilowatts to 73.76 million kilowatts by 2024, showcasing remarkable growth and the development of a robust domestic industry chain. However, this policy-driven growth has also led to structural contradictions, such as widespread underutilization of projects in regions like Shandong and Sichuan, where the effective utilization rates stand at just 6.1%. Additionally, the proliferation of low-quality, low-cost equipment has caused a sharp drop in production efficiency, with cell utilization rates plummeting from 87% to 50% in 2023, and system prices halving to 0.435 yuan/Wh.

The release of the “Document No. 136” in February 2025, which eliminates the mandatory energy storage requirement, signifies the end of the policy-driven phase. This shift prompts the industry to focus on proving economic viability through electricity spot markets and ancillary service markets rather than relying on administrative directives. On April 29, the National Development and Reform Commission and the National Energy Administration jointly issued a notice to expedite the establishment of the electricity spot market, aiming for nationwide coverage by the end of 2025.

In response to policy changes, various regions are experimenting with capacity compensation mechanisms, like Xinjiang’s compensation of 0.2 yuan per kilowatt-hour based on discharge volume and Hebei’s upper limit of 100 yuan per kilowatt-year for capacity pricing. The implementation of time-of-use pricing policies further differentiates the market. For instance, Jiangsu province’s recent adjustments to time-of-use pricing will reshape the revenue models for distributed photovoltaic and energy storage projects, making traditional peak-valley arbitrage less viable.

2025 could be termed as a “year of seismic policy shifts” for energy storage, bringing concerns about policy stability, especially given the frequent adjustments in some regions. Despite the clear trend towards marketization, energy storage projects need to enhance their dynamic adaptability. Additionally, safety regulations are being reinforced, with the National Energy Administration mandating improvements in battery safety and standards.

Technological Innovations and Challenges

As the installed capacity of new energy continues to rise, global energy storage technology is at a crucial juncture. Lithium-ion battery storage has remained dominant in the electrochemical storage sector, but the growing demand for safety and long-duration storage has made flow batteries, compressed air storage, and sodium-ion batteries attractive alternatives due to their superior safety and extended lifecycle.

To maintain its market appeal, lithium battery technology must evolve. For example, at the Munich Battery Storage Exhibition on May 7, CATL unveiled the TENER Stack, the world’s first mass-producible 9MWh large-capacity storage solution, drawing significant attention. This innovative design utilizes a “two-in-one” stacked solution that meets international transport weight regulations, allowing for reduced complexity and lower transportation costs.

Furthermore, grid-forming storage technology is gaining traction, particularly following large-scale power outages in Spain and Portugal, which highlighted its potential to provide voltage and frequency support during grid failures. Leading companies like Sungrow, Envision Energy, and Huawei have begun pilot applications in regions such as Shanxi and Guangdong.

Additionally, AI’s integration into energy storage systems is emerging as a powerful tool. Tesla’s use of AI for price forecasting and risk assessment in its Australian station exemplifies how AI can significantly enhance storage station profitability.

Ecological Shifts: Building Resilience

On May 7, the Shandong Provincial Development and Reform Commission issued a market reform implementation plan for renewable energy pricing, becoming the first province to enact policy changes following Document No. 136. This plan aims for full market entry for wind and solar energy by 2025 while emphasizing that energy storage is not a prerequisite for grid connection.

As the industry navigates these changes, differentiation and collaboration across the supply chain will be essential. Energy storage companies must strengthen their technological advantages across the entire chain from cells to systems and focus on developing customized solutions for specific applications. Furthermore, to overcome trade barriers, companies need to adopt multi-faceted strategies, including local production and technology licensing.

Ultimately, energy storage is shifting from being merely equipment suppliers to becoming “system service providers,” utilizing virtual power plants and carbon credit revenues. As CATL’s chairman remarked, the core of future competition will lie in creating high-value capabilities rather than competing on price alone.

In conclusion, while the policy roller coaster has presented challenges, it has also signaled a maturity phase for the energy storage industry. Short-term pains are inevitable, but market mechanisms will filter out companies that possess the necessary technological, financial, and operational capabilities. Future competition will focus on economic efficiency, flexibility, and safety. By leveraging technological innovations and strategic global positioning, Chinese companies can enhance their competitiveness in the global market, ultimately transitioning from policy dependency to value creation, solidifying their role as a key pillar in the new energy system.