Surge in Energy Storage Demand Sparks Industry Excitement, Experts Warn Against Overzealous Optimism

The “Chip Shortage” in Energy Storage Sparks Industry Excitement: Experts Urge Caution

In the first half of this year, China’s energy storage battery shipments reached 232.03 GWh, marking a 118.4% year-on-year increase.

According to a delivery management department head from a leading domestic energy storage battery company, “Currently, there are four to five gigawatt-hour battery orders on the market. The prices, payment terms, and business conditions are excellent, with some customers even offering to pay in full. However, I simply cannot take on any more orders.” The reason for this predicament is the company’s current backlog of orders, which has exceeded the capacity of their production lines.

This situation is reflective of many top energy storage battery manufacturers. In September alone, several publicly listed companies, including Yiwei Lithium Energy, Sunwoda, and Ganfeng Lithium, indicated on investor interaction platforms that their energy storage batteries are operating at full capacity with saturated order demands. Ruipu Lanjun previously revealed in an interview that their orders are booked until the end of the year, and they have begun accepting orders for the first quarter of next year. Chuneng New Energy has reported over 80 GWh in new orders this year, fully utilizing their effective capacity of 110 GWh.

Liu Yong, Secretary-General of the Energy Storage Application Branch of the China Chemical and Physical Power Industry Association, noted that leading energy storage battery companies are operating their production lines at high levels, with CATL and Yiwei Lithium achieving nearly 90% capacity utilization. Some high-quality production lines are running at full load. To manage the rapidly growing orders, some companies have even resorted to outsourcing production.

According to Zhang Jinhui, a senior analyst at Xinluo Information, energy storage cell prices have recently seen a modest increase of 0.01-0.03 yuan/Wh due to capacity constraints.

Statistics from the China Chemical and Physical Power Industry Association’s Energy Storage Application Branch indicate that global energy storage battery shipments reached 246.4 GWh in the first half of the year, reflecting a 115.2% increase year-on-year. In this, China’s energy storage battery shipments totaled 232.03 GWh, up 118.4% year-on-year.

The surge in production and sales of energy cells can be attributed to a concentrated explosion in demand from downstream applications. Tian Qingjun, Senior Vice President of Envision and President of Envision Storage, remarked, “This year’s demand in the energy storage industry has exceeded expectations, showing a ‘leading role by major players with multiple points of growth’.” He also noted that Envision’s energy storage cell production capacity is operating at full load, having delivered over 50 GWh of energy storage cell products in the first half of the year, with over 50% of exports.

Data from Gaogong Storage indicates that in the first eight months of this year, Chinese energy storage companies secured over 250 new overseas energy storage orders, totaling 188 GWh, which is a 183% increase year-on-year. Among these, orders from the Middle East reached 38.75 GWh, leading the overseas market, followed by Australia at 37.88 GWh and Europe contributing 32.49 GWh.

Currently, regions such as Asia-Pacific, the Middle East, and Africa are emerging as growth hotspots in the global energy storage market. These areas either rely on government support to boost energy storage projects or experience surging demand due to weak power infrastructure.

In traditional overseas energy storage markets like Europe, the US, and Australia, demand is also on the rise. The European market continues to see high and volatile electricity prices, with a significant increase in the share of renewable energy generation, further driving the demand for energy storage. Additionally, special funding support from various countries and dynamic pricing mechanisms implemented in regions such as Germany have substantially improved the investment returns for commercial and residential energy storage.

In the US market, uncertainties in US-China trade relations have prompted some energy storage demands to be brought forward. Moreover, the growth of data centers and the return of manufacturing have led to increased electricity loads, which face challenges from an aging power grid, making reliance on energy storage critical for ensuring power supply safety.

In Australia, frequent extreme weather events have posed challenges to grid stability. At the same time, a national battery storage subsidy program has stimulated the residential energy storage market.

Domestically, on February 9 of this year, the National Development and Reform Commission and the Energy Administration jointly issued Document No. 136, which explicitly stated for the first time that, after May 31, mandatory energy storage installations are prohibited. This document led to a rush in domestic energy storage installations, with many projects rapidly advancing in the first half of this year, causing a swift increase in energy storage battery demand.

According to statistics from the CNESA DataLink global energy storage database, spurred by the “531” policy, the newly installed capacity of new energy storage projects in China reached 15.85 GWh in May, a 228% year-on-year increase. However, in June, this number dropped to 5.63 GWh, representing a 66% year-on-year decline and a 72% month-on-month decline.

However, a report from CITIC Construction Investment pointed out that despite the decline in new installations, a resurgence in bidding during June compared to April and May was observed. This is likely due to local enterprises having more advantages in resource acquisition, with lower funding costs among local city investment and trading entities that prefer stable-return assets like energy storage.

One sales representative from Ruipu Lanjun indicated to the media, “We were initially concerned that the market would enter a weak phase after the ‘531’ policy, but this situation has not occurred.” They believe that the marketization of energy storage stations has improved the profit model, resulting in an increase in buyers.

They anticipate that the energy storage market will gradually normalize, shifting from a focus on price competition to a focus on technological advancements, which may lead to the exit of companies that rely solely on price competition.

Besides Document No. 136, on September 12, the National Development and Reform Commission and the National Energy Administration issued the Special Action Plan for Large-Scale Construction of New Energy Storage (2025-2027), which clearly states that the new installed capacity of energy storage nationwide will exceed 100 million kilowatts from 2025 to 2027. By 2027, the newly installed capacity of new energy storage in the country is expected to reach over 180 million kilowatts, driving direct project investments of around 250 billion yuan. This implies that in the second half of this year and in the next two years, at least 85.09 million kilowatts of new energy storage capacity will need to be added nationwide.

The Gaogong Industry Research Institute (GGII) pointed out that the Action Plan directly addresses the short-term economic issues of energy storage following the cancellation of mandatory installations by Document No. 136, aiming to enhance storage economic viability and demand scale through planning, business models, and scheduling.

“While current demand is indeed strong, its sustainability is still questionable,” provided Mo Ke, founder of Zhenli Research. “It remains uncertain whether there is a true shortage.” He cited data from the National Energy Administration indicating that by the end of 2024, the cumulative installed capacity of newly constructed energy storage projects nationwide will reach 73.76 million kilowatts. In this context, according to the Action Plan, the newly installed energy storage capacity during the 2025-2027 period is projected to be 106 million kilowatts, averaging about 35.33 million kilowatts per year, which is lower than the 42.37 million kilowatts installed in 2024.

“If the energy storage market were truly booming, the energy bureau would not issue a document at this time suggesting that I allow for a lesser new energy storage installation this year compared to last year,” Mo commented.

He believes that the reduction in the annual new installation target proposed in the Action Plan is primarily based on the transition from a “planned” model to a “market” model for the energy storage industry as indicated in Document No. 136. He noted that this policy shift has radically altered the development logic of the energy storage market.

Mo pointed out that the current market demand is shifting from the traditional 280 Ah energy storage cells to 314 Ah cells, leading to a gradual exit of the more commonly produced 280 Ah cells from the market. The release of new industry capacity will take some time, resulting in tight supply for energy storage cells.

Additionally, leading battery manufacturers are currently in a critical transition period, upgrading from 300+ Ah to 500+ Ah and larger capacity cells, with most mainstream manufacturers focusing their resources on developing next-generation products and building capacity, further tightening the supply of mainstream products represented by 314 Ah cells.

Mo also noted that, in light of technological iterations, some battery manufacturers lacking the capability to produce 314 Ah energy storage cells may be eliminated, leaving the remaining companies to capture a larger share of orders.

Supporting Mo’s perspective, Liu Yong provided data indicating that second- and third-tier energy storage battery companies currently exhibit uneven performance, with overall capacity utilization rates ranging from 30% to 60%, and some firms dropping below 30% due to technological and order deficiencies.

Haicheng Storage pointed out that leading manufacturers have advantages in quality, research and development, technology, and cost, particularly large-scale producers, while mid-tier and smaller companies struggle to secure consistent orders and a sufficient shipping history, making it challenging to gain market trust.

Ruipu Lanjun also mentioned that customers tend to consider brand and quality when selecting cells, often preferring established companies with reliable products. This has resulted in the current phenomenon of “drought for some and flooding for others,” where some companies face full orders and capacity shortages, while others have no orders and cannot operate.

A business leader from a top energy storage company expressed to the media that the storage market is cyclical, and after the current concentrated demand is satisfied, a decline will naturally occur. The company remains cautious about capacity investments.

“We should not be overly excited; we need to remain calm,” Mo advised.

Dai Deming, Chairman of Chuneng New Energy, believes that any industry’s development is characterized by waves, and it is crucial to pay attention to the broader direction of the industry. He stated to the media that the lithium battery industry is currently in a healthy development phase, “It is neither oversupply nor undersupply, but rather a need for quality capacity. Whether products, production lines, and R&D capabilities can keep pace will determine the future development of enterprises.”

Dai predicts that by 2025, global production of energy storage and power batteries is expected to exceed 2000 GWh, and this number may double by 2030.

Haicheng Storage indicated that under the long-term marketization of electricity, the profitability model for domestic energy storage is expected to become clearer, and the demand for large-scale storage in the country will continue to grow. The company remains optimistic about overseas markets, especially in regions with power shortages outside of the US and emerging markets.

In light of the industry’s fluctuations and potential, Tian Qingjun proposed three suggestions for the future development of the energy storage sector: First, adhere to a quality baseline to build a positive ecosystem. He emphasized that during periods of market explosion, product safety and reliability should take precedence, necessitating the establishment of a comprehensive quality management system throughout the product lifecycle to resist low-price competition at the expense of quality. Second, accelerate technological iterations to enhance cost-effectiveness, particularly as the industry transitions from 300+ Ah to 500+ Ah and larger capacity cells. The new generation of cells is expected to reduce system costs by about 40%, and the large-scale application of high-capacity cells is key to achieving parity in energy storage. Lastly, refine the industry mechanism to guide orderly development, including establishing a capacity warning system to prevent chaotic expansion, and accelerating the improvement of electricity market rules through diversified revenue channels such as spot trading and ancillary services to create a “quality for price” market environment.