Pressure on Energy Storage Companies in Q1: Factors Behind the Performance Turnaround of Some Enterprises

In the first quarter, energy storage companies faced significant pressure; however, some firms managed to achieve remarkable performance despite the challenging circumstances.

According to the latest financial reports, many energy storage companies are gradually adapting to the industry’s environment and are accelerating their international expansion to overcome the difficulties of increasing revenue without profit. For numerous storage manufacturers, the pressure in the first quarter was quite substantial. The bidding prices in the system continued to decline, and the acceleration of market liberalization released short-term demand for mandatory storage integration in projects.

During a collective performance briefing held by the Shanghai Stock Exchange on May 13, many companies expressed optimism about their energy storage businesses. Previously, several cross-industry firms had claimed they would develop energy storage as a “second growth engine,” and this expectation has gradually materialized in last year’s and this year’s financial reports. Zhuan Yan, the General Manager of Canadian Solar, noted during the performance meeting that the company’s energy storage sales grew over 500% year-on-year last year, making it a leading energy system integrator in major overseas markets such as North America, Europe, Australia, and Latin America. This year, the company plans to fully leverage the advantages of its secondary energy storage business to ensure high-quality delivery of large energy storage projects.

According to Zhang Jinhui, a senior analyst at Xinluo Information, the domestic energy storage market is highly competitive, with low gross margins. The increase in net profit primarily relies on international markets. In the first quarter of this year, several companies reported significant growth in net profits from their energy storage businesses, closely related to their focus on overseas markets and export strategies. Looking ahead, following a wave of tariffs from the United States, tariffs on products exported from China, including energy storage, have now fallen to acceptable levels. “China’s lithium iron phosphate battery products are highly competitive; they are 2 to 3 times more expensive than Tesla’s energy storage products, making the tariff impact minimal,” Zhang stated.

Recently, the Zhongguancun Energy Storage Industry Technology Alliance released data indicating that the newly installed capacity of new energy storage in China for the first quarter was 5.03 GW/11.79 GWh, marking year-on-year decreases of 1.5% and 5.5%, respectively. This is the first negative growth reported by the Alliance since it began public statistics in 2022. The newly installed capacity on the power generation side was 1.83 GW, a 31% decrease compared to the same period last year. On the user side, the newly installed capacity was 575 MW, down 11% year-on-year.

New energy storage refers to energy storage technologies primarily outputting electricity, excluding pumped storage. GW is a unit of power, indicating the maximum instantaneous power of the storage system, while GWh is a unit of energy, representing the capacity of the storage battery.

Yue Fen, deputy secretary-general of the Zhongguancun Energy Storage Industry Technology Alliance, explained that the decline in installed capacity is mainly due to the typical project construction cycle coinciding with policy adjustments. “The first quarter is usually the period when most companies have the least installed capacity for the year, and it is not the delivery period for orders,” she noted. Additionally, although the national level has clarified the plan for electricity market reform, specific implementation rules have yet to be issued, leading to a cautious market outlook and a slowdown in project development.

Regarding the user side, the slowdown in the growth of energy storage capacity is attributed not only to investors’ unclear expectations of electricity market revenue but also to some provinces strengthening management of user-side energy storage for safety reasons, which has extended project development timelines.

In line with the installed capacity, the bidding prices for energy storage have also been under pressure. According to data from Gaogong Industry Research, the average bidding price for energy storage EPC projects in March was 1.027 yuan/Wh, and procurement prices for energy storage systems have entered the “0.3 yuan era,” with bidding prices ranging from 0.368 yuan/Wh to 1.05 yuan/Wh, reflecting a 21% decrease compared to the previous month.

Comparing the financial reports of different companies in the energy storage sector, the ability to stabilize revenue from overseas markets has increasingly become a key determinant of profitability. The financial report of Haibo Science and Technology, known as the “first stock of energy storage integration” that went public at the beginning of the year, indicated continued weakness in performance during its first quarter post-listing, with revenue growth but a decline in profits, resulting in a net profit drop of nearly 50% after excluding non-recurring items. Although the 2024 annual report showed revenue and net profit growth, the growth rate fell sharply from triple digits to less than 20% compared to previous years.

The “heavy domestic, light overseas” market structure has significantly impacted the company’s performance. Haibo Science and Technology entered the overseas market late, with less than 7% of its revenue coming from international sources. This has led to a considerably lower gross margin for its energy storage products compared to peers, which has continued to decline. From 2020 to 2023, gross margins for Haibo’s energy storage products were 37%, 25%, 23%, and 20%, respectively, and are projected to drop to just 18% in 2024, reflecting the pressure from the domestic red ocean market.

In contrast, several companies that are deeply engaged in overseas markets are faring much better. The financial report from Sungrow Power Supply indicated that the company’s revenue for the first quarter reached 19.036 billion yuan, a 50.92% year-on-year increase; the net profit attributable to shareholders was 3.826 billion yuan, up 82.52%. Notably, the company’s energy storage system business experienced a revenue growth rate of 40%, significantly surpassing the 5.3% growth of its primary photovoltaic inverter business. Additionally, energy storage system products achieved a gross margin of 37%, making it the company’s most profitable product, while other businesses, such as photovoltaic inverters and other power electronic conversion devices, had gross margins of 31% and 20%, respectively.

The high gross margins in international markets serve as a profit engine for the company. The financial report showed that overseas revenue accounted for 46.62% of Sungrow’s 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%. This implies that the overseas market contributed approximately 60% to Sungrow’s profits last year.

Similarly, CATL, which has been expanding globally, reported revenue of 27.75 billion yuan last year, reflecting a 2.8% year-on-year growth. Although revenue from its power battery segment declined, the income from energy storage system products and other businesses saw substantial growth, rising from 4.757 billion yuan to 8.2 billion yuan, marking a remarkable increase of 72.4%. Wang Xiaoqiang, a senior vice president and head of the energy storage division at CATL, noted in a prior interview that energy storage battery shipments are expected to reach 20 GWh in the first quarter, with a year-on-year growth of nearly 150%. This surge in orders is a result of the synergy between technological innovation and market strategy. Besides significant growth in international markets, the performance boost is also attributed to stable base orders from leading clients, the concentrated delivery of large energy storage projects, and sustained advantages in 314Ah cell technology.

However, not all companies that have aggressively pursued international markets have delivered satisfactory results. The first stock of household storage, Pylon Technologies, reported revenue of 392 million yuan in its first quarter, a year-on-year increase of 1.72%, but its net profit attributable to shareholders was -38.1732 million yuan, marking a situation of revenue growth without profit. This represents the company’s first quarterly loss since its IPO. The announcement stated that while short-term profits have been affected by price competition and investments in new businesses, the company is expected to achieve “dual recovery in volume and profit” with the anticipated rebound in household storage market demand, the rollout of commercial energy storage projects, and the scale reduction of lightweight power batteries and sodium-ion batteries.

After the “tariff tsunami,” the overseas market may present greater opportunities. A mid-level official from a domestic energy storage company stated on May 14, “The reduction in tariffs is certainly a positive development. Previously, we were concerned that shipment delays would impact orders, but now it seems we can maintain our performance expectations.” On May 12, the Chinese and US governments released a joint statement from the Geneva trade talks, promising to substantially reduce tariffs by May 14. Following the latest measures, tariffs on non-vehicle lithium batteries, including energy storage batteries exported from China to the US, have dropped to 40.9%.

Several leading companies had previously expressed cautious attitudes towards the increasing tariffs. Yiwei Lithium Energy responded that its direct exports to the US account for less than 4% of its total revenue. In the short term, the company primarily conducts transactions with US clients on an FOB (Free on Board) basis, meaning Yiwei does not bear tariff costs, which will not impact the delivery of existing contracts. CATL also mentioned during its first-quarter performance briefing that its US business represents a small portion of its overall shipments, and since last year, it has developed contingency plans in response to changing conditions, resulting in minimal impacts from the tariff policies.

Zhang Jinhui analyzed that, although there are still risks regarding potential fluctuations in US market tariffs, Chinese energy storage products remain highly competitive globally. On one hand, energy storage orders that were previously frozen or postponed due to tariff issues are expected to resume normal trade. On the other hand, the recent power outages in Europe have exposed weaknesses in the power grid system, which may enhance consumption capacity in other regional markets.

Signs of this recovery are already emerging. The largest energy event in Europe, the European Smart Energy Expo, closed on May 9 in Munich, Germany, with over 2,000 exhibitors from 57 countries, approximately 850 of which were from China. Chinese energy storage companies showcased energy solutions, including energy storage cells and systems, and secured over 12 GWh in storage orders.

The rising popularity 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 blackout in nearly 20 years, caused by aging grids and the exit of traditional power sources, which weakened the grid’s peak-shaving capability. Coupled with a high proportion of renewable energy and extreme temperatures, the weaknesses in the electricity system were starkly exposed.

For users facing frequent outages due to an unstable grid and high energy costs, commercial enterprises are turning to distributed generation equipment for energy storage to ensure normal production operations and reduce electricity costs. Regular households are installing home energy storage systems to maintain essential power and basic living conditions during extreme weather or outages.

According to Shi Jiayan, an energy storage analyst at Bloomberg New Energy Finance, global energy storage installations are expected to reach 247.2 GWh this year, a 37% increase compared to last year. Due to pre-stockpiling, installations in international markets, especially the US, are projected to continue growing. However, market expectations for 2026 remain low due to uncertainties surrounding tariffs. Nevertheless, the long-term growth potential for energy storage remains substantial; by 2035, global energy storage installations are projected to be four times higher than in 2025, with the Chinese market expected to exceed five times that amount.