Pressure Mounts on Energy Storage Companies in Q1, Yet Several Firms Achieve Remarkable Turnarounds

Many energy storage manufacturers are feeling significant pressure in the first quarter of this year. Initially, system bidding prices have consistently dropped, and the acceleration of market-oriented electricity has led to a short-term demand for mandatory project storage. However, according to the latest financial reports, numerous companies have gradually adapted to the industry environment and are expanding their overseas operations to improve their revenue without increasing profits.

On May 13, at a performance briefing hosted by the Shanghai Stock Exchange for companies listed on the Sci-Tech Innovation Board, several companies expressed optimism about their energy storage businesses. Previously, many cross-industry firms claimed they would develop energy storage as a “second growth driver,” and this expectation is beginning to materialize based on last year’s and the first quarter’s financial reports. Zhuang Yan, the general manager of Canadian Solar, stated at the performance meeting that the company’s energy storage sales saw a year-on-year increase of over 500% last year. Currently, they are a leading energy storage system integrator in major overseas markets such as North America, Europe, Australia, and Latin America. This year, they plan to leverage the advantages of their second primary business in energy storage to ensure high-quality delivery of large-scale energy storage projects.

According to Zhang Jinhui, a senior analyst at Xinhua Information, the competition in the domestic energy storage market is quite fierce, with profit margins remaining low. The increase in net profits primarily depends on overseas markets. In the first quarter of this year, many companies reported significant growth in net profits in their energy storage divisions, closely linked to their efforts in overseas markets and “export expansion.” Looking ahead, after experiencing a “tariff tsunami” in the U.S., the tariffs on related products exported from China have now dropped to acceptable levels. “The advantages of China’s lithium iron phosphate battery products are very prominent. Compared to Tesla’s energy storage products, which are priced 2-3 times higher than domestic counterparts, the impact of these tariff rates is minimal,” Zhang added.

The domestic energy storage installation capacity is currently under price pressure. Recently, the Zhongguancun Energy Storage Industry Technology Alliance revealed that in the first quarter, the newly operational installed capacity of new energy storage in China was 5.03 GW/11.79 GWh, representing a year-on-year decline of 1.5%/5.5%. This marks the first negative growth since the alliance began public statistics in 2022. Among these, the newly added installed capacity on the power supply side was 1.83 GW, a 31% decrease compared to the same period last year. On the user side, the newly added installed capacity was 575 MW, representing an 11% decrease from the previous year.

New energy storage refers to storage technologies other than pumped hydro storage, focused on power output. GW is a unit of power, indicating the maximum instantaneous power of an energy storage system; GWh is a unit of energy, representing the capacity of energy storage batteries.

Yue Fen, deputy secretary-general of the Zhongguancun Energy Storage Industry Technology Alliance, analyzed that the decline in installed capacity is primarily due to the combined effects of project construction cycles and policy adjustments. She explained that, according to industry characteristics, the first quarter is typically the quarter with the least installed capacity for most companies, as it is not a period for delivering orders. Although the national level has clarified the reform plan for the electricity market, the specific implementation rules have yet to be released, creating a period of market observation that slows down project development.

“By category, the decline in installed capacity on the power supply side is mainly due to the end of mandatory storage policies, which has reduced demand. The slowdown in user-side energy storage growth is not only due to unclear revenue expectations from investors regarding the electricity market but also because some provinces have strengthened user-side energy storage registration management for safety reasons, extending the project development process,” Yue Fen stated.

In line with the operational volume, the bidding prices for energy storage projects are also under pressure. According to data from Gaogong Industry Research Institute, the average bidding price for energy storage EPC projects in March was 1.027 yuan/Wh, and the procurement of energy storage systems has entered the “0.3 yuan era,” with bidding prices ranging from 0.368 yuan/Wh to 1.05 yuan/Wh, showing a 21% decrease from the previous month.

Observing the financial reports of different companies in the energy storage sector, the ability to stabilize revenue from overseas markets has increasingly become a key factor in determining profitability.

Haibos Creative, known as the “first stock of energy storage integration” that entered the capital market at the beginning of the year, reported continued weakness in its financial performance during its first quarter post-listing, with revenue growth but declining profits, as net profit halved year-on-year after excluding non-recurring items. The previously released 2024 annual report indicated that although both revenue and net profit had increased, the growth rate had plummeted from triple digits in previous years to less than 20%.

The “heavy domestic, light overseas” market structure is a significant factor in its underwhelming performance. Haibos Creative has entered the overseas market relatively late, with less than 7% of revenue coming from abroad. This has resulted in its energy storage product gross margins being noticeably lower than peers and continuing to decline. From 2020 to 2023, the gross margins for Haibos Creative’s energy storage products were 37%, 25%, 23%, and 20%, respectively, with the 2024 gross margin dropping to just 18%. This reflects the performance pressure from the competitive domestic market.

In contrast, many energy storage companies that have focused on overseas markets are faring much better. Sungrow Power Supply Co. reported a first-quarter operating revenue of 19.036 billion yuan, a year-on-year increase of 50.92%, while net profit attributable to shareholders jumped by 82.52% to 3.826 billion yuan. Notably, according to the previously released annual report, the company’s energy storage system business grew by 40%, far exceeding the 5.3% growth of its largest business segment, solar inverters. Furthermore, energy storage system products achieved a gross margin of 37%, making them the company’s “most profitable” products, in comparison to the margins of 31% and 20% for its other two business segments—solar inverters and renewable energy investment and development.

The high gross margins in overseas markets are a significant profit engine. The financial report indicates that Sungrow’s overseas revenue accounted for 46.62% of total revenue last year, reaching 36.294 billion yuan, with a gross margin of 40.29%, significantly higher than the domestic market’s 20.91%. Based on this, it is estimated that the overseas market contributed approximately 60% of Sungrow’s profits last year.

Similarly, CATL has also supported high growth through its widespread international presence. Last year, CATL’s revenue was 27.75 billion yuan, marking a 2.8% year-on-year increase. Although revenue from the power battery segment declined, income from energy storage system products and other businesses saw substantial growth, rising from 4.757 billion yuan to 8.2 billion yuan, an increase of 72.4%. Wang Xiaoqiang, Senior Vice President and General Manager of the Energy Storage Division at CATL, stated in a previous interview that in the first quarter, the shipment volume of power storage batteries is expected to reach 20 GWh, representing a nearly 150% year-on-year increase. The surge in orders is the result of coordinated technological innovation and market strategy. In addition to significant growth in overseas markets, performance gains are also related to stable orders from major customers, concentrated delivery of large energy storage projects, and the continued advantage of their 314Ah cell technology.

However, not all companies that have increased their overseas investments are achieving satisfactory results. The first stock of household energy storage, Pylon Tech, reported a first-quarter revenue of 392 million yuan, a year-on-year increase of 1.72%, but the net profit attributable to shareholders was -38.1732 million yuan, indicating a scenario of increased revenue but decreased profits. This marked the first quarterly loss for Pylon Tech since its public listing. The announcement stated that although short-term profits were affected by price competition and investments in new businesses, the company is expected to achieve a “dual recovery of volume and profit” with the subsequent recovery of demand in the household storage market, the rollout of commercial energy storage projects, and the large-scale cost reduction of lightweight power batteries and sodium-ion batteries.

After the “tariff tsunami,” the overseas market may have larger opportunities. “The drop in tariffs is certainly a good thing. We were worried that delays in shipments would affect orders, but it seems we should be able to maintain stability and performance expectations,” said a mid-level executive at a domestic energy storage company on May 14.

On May 12, the Chinese and U.S. governments issued a joint statement following trade talks in Geneva, committing to significantly reduce tariffs by May 14. Following the implementation of these measures, the tariffs on non-automotive lithium batteries, including energy storage batteries exported from China to the U.S., have been reduced to 40.9%.

Previously, several leading companies expressed cautious views regarding the increase in tariffs. Yiwei Lithium Energy responded that its current direct exports to the U.S. account for less than 4%. In the short term, the company mainly settles with U.S. customers using FOB (free on board) pricing, under which Yiwei Lithium Energy does not bear the tariff costs, and this does not impact the delivery of existing contracts. Contemporary Amperex Technology Co., Ltd. stated at its first-quarter earnings briefing that its business in the U.S. accounts for a small proportion of the company’s shipments, and they had already made prior plans based on changing circumstances, meaning the impact of tariff policies on the company’s performance is minimal, and they are actively negotiating solutions with customers.

Zhang Jinhui analyzed that although there is still some risk regarding whether U.S. market tariffs will continue to fluctuate, from a global perspective, China’s energy storage products remain highly competitive. On one hand, energy storage orders that were previously frozen or delayed in the U.S. due to tariff issues are expected to accelerate the recovery of normal trade; on the other hand, recent power outages in Europe have highlighted weaknesses in grid systems, potentially enhancing consumer capabilities in other regional markets.

These signs have already begun to appear. The largest energy event in Europe, the European Smart Energy Exhibition, concluded on May 9 in Munich, Germany, featuring over 2,000 exhibitors from 57 countries, with approximately 850 exhibitors from China. Chinese energy storage companies not only showcased energy storage cells and systems but also secured over 12 GWh in energy storage orders.

The rise of energy storage in Europe is related to local electricity supply and demand conflicts. In late April, Spain and Portugal experienced the most severe nationwide power outage in Europe in nearly 20 years. Aging grids and the exit of traditional power sources weakened the grid’s peak-shaving capacity, combined with a high proportion of renewable energy and extreme heat, exposing the fragility of power systems.

For users facing frequent outages due to grid instability, coupled with high energy costs, commercial and industrial enterprises are turning to distributed generation equipment paired with energy storage to ensure normal production and save on electricity costs. Ordinary households are installing home energy storage systems to ensure basic power supply during extreme weather or outages.

According to Shijia Yan, an energy storage analyst at Bloomberg New Energy Finance, globally, the new energy storage installed capacity is expected to reach 247.2 GWh this year, an increase of 37% compared to last year. Due to advance stocking, installations, particularly in the U.S., are expected to continue growing this year. However, market expectations for 2026 remain low, primarily due to uncertainties surrounding tariffs. Nevertheless, in the long term, the potential for energy storage growth remains substantial. By 2035, the global new energy storage installed capacity is expected to be four times higher than in 2025, with the Chinese market expected to exceed five times.