The current surge in energy storage batteries may soon reach a turning point. According to recent interviews conducted by the Shanghai Securities Journal, this “rush for orders” in energy storage cells, which began in early April, is likely to peak between late May and June before gradually subsiding. This surge can be attributed to structural contradictions in lithium battery production capacity. As the industry adjusts, some companies are beginning to refine their strategies, focusing more on profitability and technological differentiation rather than simply scaling up to reduce costs.
There is indeed a “rush for orders” within the industry. Following the release of Document No. 136 by the National Development and Reform Commission and the National Energy Administration at the beginning of this year, many energy storage projects have been expedited during April and May to avoid risks associated with fluctuations in electricity prices. Additionally, due to U.S. tariff policies, clients in the European and American markets, as well as those involved in re-export trade, have been placing orders in advance. This document establishes that existing projects connected to the grid before June 1, 2025, will use a “price difference settlement mechanism” to ensure that their revenue does not fall below the original pricing mechanism, while new projects after that date will determine pricing entirely through market competition.
According to Feng Siyao, chief analyst at the Energy Storage Application Branch of the China Chemical and Physical Power Industry Association, the issuance of Document No. 136 has prompted energy generation groups to accelerate the construction and grid connection of storage projects before the June 1 deadline to secure their previous revenue. This has led to a concentrated “order rush” in the first half of the year.
During this order rush, Penghui Energy has reported a tight schedule for producing their key energy storage batteries. The company’s new generation of large cylindrical batteries for small storage applications has faced continuous high demand since last year. Despite adding two production lines last year, the company is operating at full capacity.
Wang Zigang, head of energy storage product solutions at Envision Energy, noted that thanks to the company’s foresight and market demand, Envision is still maintaining full production status. While energy storage batteries are experiencing a brief resurgence driven by policy, experts suggest that the “rush for orders” may not continue for long. Feng predicts that based on the timeline of policy changes, this surge will likely peak by the end of May or early June and then gradually taper off. June 1 marks a critical transition point for the new and old grid connection policies, creating significant pressure to complete many projects before May 31.
Looking ahead to the second half of the year, as the benefits from mandatory storage policies begin to fade, demand in the industry may see a short-term decline. Feng believes that as these policies are phased out, the market will shift towards self-driven, market-oriented demand. Starting in 2026, improvements in the electricity spot market and capacity compensation mechanisms are expected to gradually materialize, allowing the independent value of new energy storage in peak shaving and frequency regulation to be recognized, thus helping to restore balance between supply and demand.
The energy storage industry is also starting to recognize the need to combat “inefficient competition.” Recently, the China Photovoltaic Industry Association convened a meeting with executives from over 20 leading companies to discuss preventing “vicious competition” in photovoltaic inverters and energy storage. Since 2024, prices for energy storage systems have sharply declined, leading to record low integration quotes in the Chinese market. An influx of manufacturers into the energy storage sector has resulted in aggressive price competition, significantly squeezing industry profits.
Moreover, many energy storage projects are now facing profitability challenges, with extended payment cycles for equipment suppliers. This unsustainable “bloodletting” competition among manufacturers has underscored the urgent need for a strategic shift. Feng notes that in response to these challenges, the energy storage industry is on the verge of a “de-involution” trend. Leading companies are adjusting their strategies to focus less on scaling for cost reduction and more on profitability and technological differentiation.
In essence, this de-involution movement is aimed at pursuing high-quality development. Industry concentration is expected to increase, with market shares gravitating towards stronger companies. Profit models will gradually shift from subsidy-driven to market-driven approaches, and investment capital will become more rational, favoring companies with core competitiveness. The policy environment will also transition from mandatory stimulation to creating a fair, orderly market conducive to innovation.
From a technological standpoint, users are becoming increasingly sensitive to the economic aspects of energy storage systems. As a result, many manufacturers are focusing on “large capacity” solutions. This year, the penetration rate of batteries with capacities exceeding 300Ah has been steadily rising, overtaking the previously dominant 280Ah batteries. Specifically, batteries constitute a significant portion of the overall cost in energy storage systems. Larger capacity batteries can reduce the number of individual cells required, simplifying battery management systems and the need for supporting components. Consequently, high-efficiency energy storage batteries can significantly lower operational costs and enhance return on investment for owners.
According to Wang Zigang, “The next generation of batteries in the industry will largely depend on who can achieve successful implementation, mass production, and large-scale delivery first.” A representative from Penghui Energy indicated that their new Wind Phoenix 600+Ah battery is expected to enter mass production in the fourth quarter of this year, while their 530Ah battery is set for mass production delivery in 2025, and the 700+Ah battery is anticipated for 2026.
New demands are emerging in the energy storage market, particularly in regions such as China, the United States, and Europe, while Southeast Asia, the Middle East, Latin America, and Africa are becoming new growth points for global energy storage demand. The Southeast Asian region, facing both power shortages and renewable energy development, is witnessing the beginning of energy storage demand. In the Middle East, the large-scale expansion of renewable energy and the unique demand for stable power in desert environments are making it a hotbed for energy storage innovation. For instance, Saudi Arabia is advancing its renewable energy installations under its Vision 2030 plan and is planning extensive energy storage projects to support its solar and wind power outputs.
Recent disclosures from CATL indicate that the energy storage market in emerging regions like the Middle East and Australia is developing rapidly, with strong demand driven by renewable energy and AI data centers. Domestic energy storage manufacturers have successfully captured significant orders in overseas markets. For example, in January of this year, CATL became the preferred battery storage system supplier for the world’s largest solar and battery joint storage project in the UAE, involving over $6 billion in total investment, with a total capacity of 19GWh for battery storage and 5.2GW for solar projects. Other domestic manufacturers, such as BYD, Sungrow, Canadian Solar, and Guoxuan High-Tech, have also secured storage orders in the Middle East this year.
Additionally, market demand driven by artificial intelligence data centers is further fueling the energy storage battery market. AI is seen as a new growth point within the storage sector. Training large AI models typically requires high-performance GPU clusters, leading to significant power consumption and making reliable and stable power supply for data centers an essential issue in the AI era. The industry generally agrees that integrating energy storage into data centers will be a critical strategy for alleviating power bottlenecks in AI applications.
Feng highlights that as the global renewable energy and digital economy continue to grow, the surge in overseas energy storage orders is driving battery demand. Simultaneously, domestic infrastructure projects like “East Data West Computing” are progressing, leading to increasing needs for backup power and peak shaving energy storage in high-energy-consuming facilities like data centers. A representative from Penghui Energy stated that given the rapid development of AI technology, the company is optimistic about the future potential of energy storage for data centers and is actively making strides in this area.
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