Emerging Energy Storage Industry: A Thriving Market Driven by Policies and Investments

As of 2025, China’s energy storage industry is poised at an unprecedented turning point. The release of the Special Action Plan for the Scaled Construction of New-Type Energy Storage has set a staggering target of 180 million kilowatts for installed capacity, akin to the starting gun in a race, with 250 billion RMB in direct investments ready to surge. The numbers reflect an astonishing pace of growth: by June 2025, cumulative new energy storage installations surpassed 100 GW, a figure that is 32 times greater than at the end of the 13th Five-Year Plan period. In the first half of 2025 alone, new installations reached 23.03 GW, a year-on-year increase of 68%.

However, it’s not just the numbers that are notable; a fundamental shift in the industry’s operational rules has occurred. In February 2025, the Document No. 136 officially marked the end of the “mandatory energy storage” era, allowing the energy storage sector to become self-sufficient. This shift has led to the rise of independent energy storage systems, which now account for over half of the installed capacity, transforming from mere “appendages” of new energy projects to “key players” in the electricity market. Energy storage, once a supporting role, is now taking center stage in the new energy power system.

Policy Breakthrough: Document No. 136 Redefines Growth Rules

The key to the revaluation of energy storage lies in the issuance of Document No. 136 in February 2025, which promotes market-driven reforms for renewable energy pricing. This policy introduces a dual approach of “short-term rush to install” and “long-term market drive,” fundamentally altering the logic of industry growth. The core breakthrough of Document No. 136 is its clear directive that energy storage cannot be a prerequisite for connecting renewable energy projects to the grid, effectively terminating the administrative model of mandatory storage.

In terms of implementation, the policy adopts a phased approach: existing projects connected to the grid before June 1, 2025, will benefit from a “price difference settlement” to secure returns, while new projects will operate under competitive market pricing, compelling companies to enhance their financial independence. Following the policy’s introduction, a rush for installations ensued, with 19.2 GWh of energy storage capacity tendered from March to May 2025, a remarkable 210% increase year-on-year. Major companies have already scheduled orders extending into May 2026.

In the long term, this policy transition encourages energy storage to shift from being merely a “policy task” to a “profitable choice,” where companies can cover costs through peak-valley arbitrage and ancillary services, thus refocusing competition from “price wars” to “value creation.”

Exploding Demand: Four Driving Forces with Data Centers as New Engines

From January to September 2025, global energy storage installations reached 86 GW, reflecting a 92% year-on-year growth, with 41 GW added domestically and 45 GW internationally. This growth is supported by four main drivers: the expansion of renewable energy storage, the drive from Document No. 136, market demand, and the rise of data centers.

New installations of wind and solar energy projects in China amounted to 102 GW during this period, with projects connected to the grid before June 1 accounting for 68%. Leading companies like Sunshine Power benefitted significantly, with energy storage shipments in the first half of 2025 nearing the total for the entire year of 2024 at 28 GWh.

User-side energy storage also displayed impressive performance, particularly in provinces like Guangdong and Jiangsu, where peak-valley price differences exceeded 1.2 RMB per kilowatt-hour. Companies deploying 1 MWh storage systems can achieve annual arbitrage profits exceeding 1.8 million RMB, with investment payback periods shortened to 3.5 years.

From January to September 2025, new user-side energy storage installations in China grew by 230% to reach 11.3 GW, with commercial and industrial users representing over 75% of this growth. Meanwhile, grid-side energy storage is evolving towards a “multi-revenue model,” reducing dependency on single peak-shaving services.

In July 2025, Guangdong launched a pilot program for a provincial virtual power plant, integrating 2 GW of user-side storage resources. The Xinjiang grid improved its wind energy utilization from 85% to 96% through a 5 GW storage system. By September 2025, domestic grid-side energy storage tenders reached 9.2 GW, marking a 105% increase year-on-year, with projects capable of providing ancillary services rising from 30% to 55%.

Notably, data centers have emerged as the fourth major demand pillar. Driven by the dual forces of the “East Data West Computing” initiative and the expansion of AI capabilities, new installations for data center energy storage reached 15.8 GW from January to September 2025, soaring 280% year-on-year, accounting for 38.5% of total new installations.

Technological Breakthroughs: Cost Reduction and Efficiency Enhancement

Between 2020 and 2025, the cost of domestic energy storage systems declined from 1.8 RMB/Wh to approximately 0.8 RMB/Wh, a reduction of 55%, while efficiency improved from 85% to 92%. These technological advancements are pivotal to the profitability of the market. Currently, lithium batteries dominate, comprising 82% of global energy storage installations, with the 280Ah large cell emerging as the market standard.

Sunshine Power’s PowerTitan 2.0 solution achieved a cost of 0.32 RMB/kWh in an Italian project, undercutting local coal prices. The price of lithium iron phosphate storage cells has dropped to 0.5 RMB/Wh, and when combined with intelligent BMS systems that extend battery life by 15%, the overall lifecycle cost is just 0.35 RMB/kWh, enabling profitable operations in regions with significant peak-valley price differentials.

However, lithium batteries have limitations in long-duration storage scenarios, prompting accelerated development of alternative technologies. The cost of vanadium flow batteries has fallen to 1.5 RMB/Wh with a cycle life of over 15,000 cycles. A 300 MW compressed air storage project in Hebei achieved a system efficiency of 70%, with costs reduced by 35%. Contemporary Amperex Technology Co. has introduced a sodium-ion battery with a density of 160 Wh/kg, which is 30% cheaper and is being piloted in low-temperature regions.

Market Dynamics: The Matthew Effect Intensifies

From January to September 2025, the “Matthew Effect” within the energy storage sector has become increasingly pronounced. Major enterprises achieved revenue growth rates exceeding 100%, while smaller firms lagged below 30%. The value central of the industry chain is rapidly consolidating towards technology-intensive segments. The upstream sector is characterized by “stable costs and scale advantages,” with the price of lithium iron phosphate cathode materials stabilizing at 45,000 RMB/ton, down 15% year-on-year. Meanwhile, the midstream, as the industry’s “value center,” showcases more pronounced competitive advantages.

In system integration, the domestic market concentration ratio (CR5) reached 65%, a 10 percentage point increase year-on-year, with Sunshine Power, CATL, and BYD capturing 22%, 18%, and 12% market shares, respectively. Sunshine Power’s energy storage business boasts a remarkable gross margin of 39.92%, significantly higher than the industry average. In the energy storage inverter segment, the global CR5 stands at 70%, with the combined market share of Sunshine Power, Huawei, Jinlang Technology, Goodwe, and DeYe Holdings reaching 65%, solidifying their leading positions.

The performance of leading companies is particularly striking: Sunshine Power’s energy storage revenue for the first half of 2025 reached 17.8 billion RMB, a 127.78% increase, surpassing photovoltaic inverters to become the largest revenue source. CATL’s energy storage business revenue exceeded 20 billion RMB, also growing by 110%, with order schedules extending into the third quarter of 2026, underscoring strong growth certainty.

Downstream operations are innovating business models to transform the “hard value” of energy storage into “long-term service value.” Mingyang Smart Energy provides comprehensive services for the Alibaba Zhangjiakou project, covering everything from wind energy and storage to dispatching, with a single contract valued at 1.4 billion RMB, opening new avenues for profitability.

Conclusion

The rise of the energy storage sector is not a fleeting “concept hype,” but rather the result of a resonance between “policy reconstruction” and “improved industry fundamentals.” This policy does not diminish demand but instead compels the industry to shift from “policy dependency” to “value creation,” and from “scale expansion” to “quality enhancement.” While short-term rushes sustain performance, long-term market dynamics reveal the ceiling for growth.

From a fundamental perspective, energy storage is not a “short-term trend” but an “inevitable choice” in global energy transition: 1) As wind and solar energy become mainstream, energy storage is a “required option”; 2) The opening of market pathways by Document No. 136 enables energy storage to develop its “self-sustaining” capabilities; 3) Continuous technological advancements lead to cost reductions, enhancing energy storage’s “long-term competitiveness”; 4) With the explosion of AI computing power, data centers are set to become the most reliable growth sector. This market trend is not the end but the beginning of a trillion-dollar industry dividend.

For investors, focusing on leading companies with technological barriers, scale advantages, and adaptability to market dynamics will yield long-term returns during the golden decade of the energy storage industry. The research institute continuously tracks the development trajectory of the energy storage sector, identifying key nodes in technological evolution, policy changes, and investment opportunities. We provide investors with decision-making references across various dimensions, including business models, industry chain dynamics, and optimal investment timing.

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