Transformations in China’s Energy Storage Market Ahead of the 531 Policy Deadline

As the “531” deadline approaches, the energy storage market is undergoing significant changes. In early 2025, the release of Document No. 136 marked a pivotal moment for China’s new energy sector, initiating a phase of intensive policy adjustments aimed at accelerating the construction of a new power system and promoting the marketization of new energy. The energy storage industry is transitioning from a “policy-dependent” phase to one focused on “value creation,” undergoing a transformative rebirth. This shift not only redefines the underlying logic of the energy storage sector but also spurs technological iterations, model innovations, and a comprehensive ecological restructuring.

Is a rush for installations underway? On February 9, 2025, the National Development and Reform Commission and the National Energy Administration jointly issued a notice titled “On Deepening the Market-Oriented Reform of New Energy Grid Connection Prices to Promote High-Quality Development of New Energy” (commonly referred to as Document No. 136). This document clearly states that energy storage configurations should not be prerequisites for the approval, grid connection, or market access of new energy projects, signaling the end of the era of over-reliance on mandatory energy storage installations that had plagued the rapid growth of China’s energy storage industry. Furthermore, the document emphasizes that the electricity generated from new energy sources will fully enter the power market, indicating the onset of a fully market-oriented pricing era for new energy. The transition from “policy-driven” to “market-driven” for the energy storage industry is now underway.

The document establishes June 1, 2025, as a critical milestone, implementing a “new and old segmentation” policy for new energy projects. Existing projects that commence operation before June 1 will continue to benefit from a degree of guaranteed purchase mechanisms, with electricity pricing based on current policies (not exceeding local coal-fired benchmark prices). However, they will need to enhance their competitiveness through equipment upgrades and actively participate in the market. In contrast, projects that start operations on or after June 1 will generally have their entire electricity output enter market trading, with prices determined through competitive bidding.

As a result, public opinion suggests that the policy will have two significant impacts on the energy storage market. First, the loss of policy support may lead to short-term fluctuations in energy storage installations. Second, to benefit from more favorable electricity pricing policies and achieve relatively stable returns, new energy companies are accelerating project construction to connect to the grid before the “531” deadline, which is driving a rush in the construction and installation of energy storage projects.

Current data from various organizations indicate that, despite a seasonal decline in newly installed energy storage capacity in the first quarter, the energy storage bidding market and new energy storage installations are still experiencing rapid growth. According to the CESA Energy Storage Application Committee’s industry database, from January to April 2025, the bidding scale for domestic energy storage EPC/PC (including DC-side equipment), energy storage systems, and energy storage battery procurement reached 34.52 GW/125.6 GWh, a year-on-year growth of 156%. As of May 20, 2025, there were 487 new energy storage projects connected to the grid in China, with a total installed capacity of 11.9 GW/32.32 GWh, representing a year-on-year increase of 70.98% in power capacity and 76.9% in energy capacity. Among them, 62 grid-side energy storage projects had a total scale of 6.34 GW/14.63 GWh, with power and capacity scales increasing by 74.18% and 52.4%, respectively; while 76 generation-side grid-connected projects had a total scale of 4.15 GW/13.73 GWh, with power and capacity scales increasing by 59% and 102.2%, respectively. These trends indicate that project owners are placing a large volume of orders before the “531” deadline to secure returns under the price difference settlement mechanism and mitigate risks associated with market fluctuations. The energy storage projects typically have longer construction cycles, making the first quarter not usually a peak delivery period. Hence, the observed decline in installations by some agencies is a normal phenomenon. Generally, the second quarter and the latter half of the year are expected to be peak delivery periods for energy storage projects, suggesting that the rapid growth of new energy storage installations will remain a dominant trend in the market this year.

Local Implementation of Document No. 136 Since May, various regions have started issuing specific guidelines based on Document No. 136, which is recognized as a fundamental restructuring of the energy storage industry’s development logic and a key turning point for the advancement of the electricity market. Therefore, local supporting measures are critical. As a forerunner in China’s power reform and new energy storage development, Shandong and Guangdong have successively released specific documents, while Guangxi has also circulated online drafts. This indicates that the market-oriented reform of new energy has entered a new phase of accelerated local implementation, providing a reference for subsequent policies in other provinces.

Shandong was the first province to publicly release the implementation guidelines for Document No. 136, highlighting its commitment to enhancing energy storage profitability through improved electricity market mechanisms. Shandong aims to achieve full participation of wind and solar energy in electricity market transactions by the end of 2025, with bidding processes for 2025 planned to commence in June. To promote the sustained and healthy development of new energy storage, Shandong has adopted several favorable measures while meeting the requirements of Document No. 136. On one hand, it plans to slightly relax the price limits in the spot market, thereby widening the price gap between charging and discharging. All energy from existing projects (those operational before May 31, 2025) will continue to enter the market under the regulated mechanism price set at a maximum of 0.3949 yuan/kWh, which is approximately 12.8% higher than the average spot price of 0.35 yuan/kWh in 2024. For new projects (those commencing operations on or after June 1, 2025), the mechanism price will be determined through competitive bidding, with a submission requirement for capacity not lower than 125%, and the final price will be based on the highest bid among the selected projects. These measures are expected to directly enhance the income of energy storage in the electricity market.

On the other hand, the policy specifies that when independent energy storage sends electricity to the grid, the corresponding charging electricity will not bear transmission and distribution prices or government fees, significantly enhancing the profitability of energy storage stations. This increases the competitive edge of independent energy storage stations, which hold high expectations in the market, while creating favorable conditions for attracting more investments into energy storage projects.

The policies in Guangdong focus on promoting the full market entry of new energy, providing potential space for energy storage development. The guidelines released in Guangdong clarify that starting June 1, 2025, all new energy projects, including wind and solar, will fully enter the market, with prices determined by market trading. Users can choose from three methods to participate: self-reporting, aggregating bids, or acting as price takers. Although there are not many direct regulations regarding energy storage in Guangdong’s guidelines, the overall participation of new energy in the power market creates potential opportunities for energy storage development. With all new energy electricity entering the market, the volatility and intermittency issues associated with new energy generation will become more pronounced, and energy storage is expected to see increased market demand as an effective solution to these challenges. For instance, energy storage can store electricity during periods of excess generation and release it during shortages, ensuring a stable power supply and better meeting the market’s demands for reliability.

According to the Southern Power Grid’s draft “Work Plan for New Energy Participation in the Electricity Spot Market (2025 Edition),” starting June 2025, the five southern provinces (Guangdong, Guangxi, Yunnan, Guizhou, and Hainan) will implement a trial run of long-cycle settlement in the spot market, promoting both centralized and distributed new energy generation to fully participate in the spot market. The operation of the spot market will make electricity price signals more responsive, allowing energy storage to participate in trading and capitalize on price fluctuations for profitability, thereby creating favorable market conditions for energy storage development in Guangdong.

Additionally, a recently circulated draft of Guangxi’s implementation guidelines for Document No. 136 has garnered significant attention within the industry. According to the information shared online, Guangxi’s implementation plan clearly distinguishes between existing and new projects. The mechanism price for existing distributed renewable energy projects is set at Guangxi’s coal-fired benchmark price of 0.4207 yuan/kWh, encompassing all mechanism electricity volume. The price for centralized renewable energy projects is set at 0.324 yuan/kWh, with the electricity for 2025 secured through long-term contracts, without additional mechanism electricity volume. The proportion of new individual projects applying for mechanism electricity cannot exceed 80%. New projects will need to establish mechanism prices through competitive bidding each year, with the first bidding transaction scheduled for 2025, targeting projects promising to commence operations between June and December of the same year. Bids will be ranked from low to high, and the final mechanism price will generally be based on the highest bid selected but cannot exceed the upper limit of 0.4207 yuan/kWh. This plan is notable for its establishment of a sustainable pricing settlement mechanism for new energy, regulating the pricing and electricity volume for projects. While there are no direct price support measures for energy storage in the document, the more regulated market environment for new energy projects will benefit the collaborative development of energy storage and new energy.

However, on May 21, Guangxi’s Development and Reform Commission refuted rumors regarding the formal submission of the “136 Document” implementation guidelines for approval. Despite the differing focuses of the three regions’ Document No. 136, all are expected to significantly impact the development of the energy storage industry. As these policies continue to advance and be implemented, other provinces are likely to follow suit, enabling the energy storage industry to grow and thrive in the path toward marketization, playing an increasingly vital role in building a new power system.

Further Policy Developments in Marketization Against the backdrop of energy transition, the value of energy storage is becoming increasingly prominent. Only in a mature power spot market can the full depth of energy storage’s value be realized. Shortly after the release of Document No. 136, another policy combination emerged for energy storage marketization, known as “Document No. 394.” This document mandates the nationwide coverage of the electricity spot market by the end of 2025, including the comprehensive implementation of continuous settlement operations. This policy aims to leverage market price mechanisms to guide the optimal allocation of energy storage resources and accelerate the phasing out of outdated production capacity. While Documents No. 136 and No. 394 may appear independently focused, they are in fact complementary and cooperative, both striving to promote the marketization of electricity, facilitate the high-quality development of new energy, aid in constructing a new power system, and advance the establishment of a unified national electricity market.

Document No. 136 emphasizes the reform of the pricing mechanism for new energy grid connections, clarifying policies for existing and new projects, and heralding the end of government-set pricing for new energy generation. Document No. 394, on the other hand, focuses on the development of the electricity spot market, clarifying the timeline for market operations and promoting the participation of user-side entities, establishing guidelines for transaction types and price transmission mechanisms, and providing a concrete trading framework and market environment for new energy.

Together, these documents form a policy framework for the marketization reform of new energy, where Document No. 136 ensures the progression towards marketization, while Document No. 394 offers flexibility in achieving this goal. This policy combination is expected to profoundly shake the new energy industrial chain, reshaping the ecosystem of the energy storage sector, user energy consumption patterns, and regional energy collaboration frameworks.

Specifically, the accelerated construction of the electricity spot market is likely to impact the energy storage industry in three main ways:

• Broadening revenue channels: The high-frequency price fluctuations in the spot market (such as hourly or 15-minute trades) will significantly widen the price gap between peak and off-peak electricity, allowing energy storage to arbitrage through “low charge, high discharge,” thereby enhancing profit margins. During extreme weather or supply-demand tightness, spot electricity prices may spike temporarily, allowing energy storage to capture high-value periods through rapid discharge.
• Driving technological upgrades: The shortened trading cycles in the spot market, now at 15-minute intervals, necessitate faster response times and longer cycle lifetimes for energy storage systems. This presents opportunities for the development of technologies such as flow batteries and flywheel energy storage. Energy storage operators must leverage AI algorithms to optimize charge and discharge strategies, for example, by automatically determining operational plans based on forecasts of next-day price curves.
• Encouraging innovations in business models: Policies now allow energy storage to participate as independent entities in the market without being tied to power plants or users, fostering the large-scale development of independent and shared energy storage as well as grid-side energy storage. Distributed energy storage can also aggregate through virtual power plants to participate in spot market bidding and demand-side responses, enhancing economies of scale (as demonstrated by the Jiangsu VPP pilot project that has integrated user-side energy storage).

Challenges in Commercial Energy Storage Models The impacts of the marketization driven by Documents No. 136 and No. 394 are multifaceted, including significant implications for commercial energy storage. Over the past month, provinces such as Jiangsu, Guizhou, and Sichuan have made intensive adjustments to their time-of-use pricing mechanisms, not only altering pricing structures and periods but also reconstructing the revenue models for distributed photovoltaics and storage projects. The peak-off-peak arbitrage model that commercial energy storage relies on is gradually failing, and the original investment logic is beginning to “collapse.”

On April 30, the Jiangsu Development and Reform Commission announced that starting June 1, 2025, the basis for calculating time-of-use pricing would shift from “end-user prices” to “user purchase prices.” Although peak prices may rise by as much as 80% while off-peak prices may decrease by 65%, the actual price differential between peak and off-peak has narrowed. For example, for two-part users, the previous peak-off-peak price gap exceeded 0.85 yuan/kWh, but under the new policy, it has contracted to around 0.65 yuan/kWh, with the flat-to-peak price gap also compressed to below 0.3 yuan/kWh, making the “charge twice and discharge twice” scheduling strategy untenable.

Additionally, the introduction of a midday off-peak period (from 11:00 AM to 1:00 PM) is designed to encourage users to consume electricity during high solar output periods. However, if storage systems charge during the midday period, they must sell electricity during higher-priced periods to turn a profit, complicating project operations and increasing scheduling challenges.

Sichuan’s new policy, effective May 1, introduces weather-based pricing. The high-demand summer peak period has been extended from 8 hours to 10 hours, with peak prices applied throughout July and August (between 1:00-2:00 PM and 9:00-11:00 PM), and during other months when the temperature exceeds 35°C for three consecutive days, peak pricing will also be triggered. This weather-dependent pricing model forces energy storage operators to constantly monitor weather forecasts and adjust their strategies accordingly.

On May 16, Guizhou Province released a draft for public consultation that directly altered the calculation method for the peak-off-peak price gap. The policy divides the year into winter and non-winter periods, implementing different time-of-use pricing policies, with four additional fees added to the commercial benchmark electricity price excluded from fluctuations, resulting in a reduced peak-off-peak price gap. For instance, the peak-off-peak electricity price difference in May, based on a 10 kV proxy purchase price, decreased by over 30% from previous policies to only 0.48 yuan/kWh. The policy also adjusted peak and off-peak periods, further limiting the charging and discharging periods for energy storage and impacting arbitrage opportunities.

These policies reflect the inevitable choices in response to the market-oriented reform of electricity and the demand for new energy consumption. The adjustments are driving the commercial energy storage sector away from a reliance solely on peak-off-peak price differentials for profits, pushing the sector to a “value-oriented” transformation that emphasizes demand management, comprehensive service capabilities, and diversified revenue models, such as participating in the spot market, electricity adjustment, and virtual power plants.

Pragmatic Shift in Energy Storage Technology Competition Document No. 136 has prompted the energy storage industry to evolve from policy-driven to transaction-oriented, effectively restructuring the value of energy storage. As a crucial aspect of reducing costs and increasing efficiency, competition in the field of large-capacity lithium-ion battery energy storage technology has entered a new phase, where product iterations are becoming increasingly pragmatic and rational, focusing not just on capacity but also on cost, production lines, and process maturity.

Although the competitive landscape for the next generation of large-capacity energy storage cells is yet to be clearly defined, leading cell and system manufacturers are beginning to collaborate to seize control over the next generation of large-capacity cell standards, aiming to bring an end to chaotic, disorderly competition. Products are primarily focusing on specifications of 392Ah, 472Ah, 587Ah, 625Ah, and 688Ah. Notably, Sungrow has derived the 625Ah cell as the optimal solution based on a 5MWh/20-foot cabinet system design and is collaborating with companies like EVE Energy and Ruipu Lanjun to standardize these specifications. CRRC Zhuzhou Electric has partnered with five battery companies to launch the 688Ah cell, compatible with a 20-foot cabinet 6.9MWh system. Contemporary Amperex Technology Co., Limited (CATL) has introduced the “587Ah” cell, while Hicharge Energy and Ganfeng Lithium have also begun to pursue this product line.

Furthermore, the evolution of large-capacity cells is beginning to diverge, with some companies continuing to advance toward 500Ah+ cells, while others are strategically revisiting competition in the 300Ah+ and 400Ah+ cell segments against the 314Ah cell. The rationale behind this strategy is that the technical processes and production line transitions align closely with the 314Ah cell, allowing for rapid mass production and market penetration. For instance, the Wending® 392Ah energy storage cell boasts high compatibility in terms of production line processes, with minimal dimensional changes compared to the 300+Ah series. This results in low modification costs, short cycles, and fast ramp-up to mass production, meeting the urgent demand for next-generation large-capacity energy storage cells and enabling storage systems with a capacity of 6.26MWh.

Similarly, Zhongxin Innovation has stated that its 392Ah energy storage cell improves single-cell capacity by 25% compared to the 314Ah cell, achieving an efficiency of 95% while remaining compatible with the 314Ah production line. Chuangneng New Energy has released its fourth generation of large-capacity 472Ah batteries utilizing a “technology reuse + capacity sharing” strategy, with energy storage systems in 20-foot container configurations reaching up to 7.06MWh. Hicharge Energy has designed its 587Ah battery to cater to the two-hour application demand in the storage market, based on the 6.25MWh storage system platform launched at the end of last year, which was reverse-engineered to yield the ∞Cell 587Ah battery and its system products. All leading companies are striving to achieve the perfect balance of battery capacity, safety, and cost within the limited space of standard 20-foot shipping containers.

For the 587Ah cell, Hicharge Energy believes that considering various dimensions such as energy density, safety, and cycle life, the optimal size of 73.5*286*216mm (W*L*H) has been achieved, providing significant cost advantages while balancing performance, safety, and economic factors. CATL has deconstructed requirements based on typical 20-foot container specifications, matching PCS voltage and overall station demand, further expanding to include the number of layers per cluster, the number of strings in the electrical cabinet, as well as requirements for electrochemical boundaries, material systems, thermal management, and reliability across various manufacturing processes. This extensive research and communication with clients and experimental validation have culminated in the identification of the 587Ah cell as the optimal solution across multiple dimensions, balancing technical boundaries, energy density, and system integration.

For the 392Ah energy storage cell, Zhongxin Innovation has indicated that the 392Ah energy storage cell and its 6.25MWh energy storage system achieve an optimal balance among cost, performance, and returns, providing an efficient and economical solution for the large-scale application of energy storage stations. This represents what is currently the best-performing product in terms of comprehensive capabilities.

Moreover, since the beginning of this year, there has been a noticeable trend among leading companies to sign contracts and commence production immediately upon product launch. For example, Zhongxin Innovation’s 392Ah energy storage cell and 6.25MWh liquid-cooled container system were announced for mass production on the same day as their launch, alongside strategic cooperation agreements. Similarly, Chuangneng’s 472Ah battery was also signed with six companies, including Goldwind Zero Carbon, Shandong Electric Era, Yunda Zhichu, Zhongtian Storage, Lingchu Yuno, and Telon Meichu, on the day of its release. This trend of “launch and sign” signifies that leading companies are no longer relying solely on capacity to attract attention; instead, they are introducing products that are market-recognized and technically mature. Furthermore, a distinct market Matthew effect is evident, as leading companies leverage deeply binding relationships to promote product applications and capture market share.

Conclusion: The evolution of policies from Document No. 136 to Document No. 394 signifies that China’s energy storage industry is undergoing a profound transformation, moving from “administrative allocation” to “market allocation” and from “single arbitrage” to “diversified values.” While policies are receding, regulatory scrutiny is tightening, with five departments jointly issuing the “Safety Management Notice for Electrochemical Energy Storage,” requiring energy storage stations to be equipped with fire warning and firefighting systems, prohibiting the construction of energy storage stations in densely populated areas, and various regions, including Jiangsu and Guangdong, implementing stringent safety regulations to push the industry toward greater safety and longevity. This combination of “easing and tightening” policies presents a rollercoaster challenge for the adaptability of the energy storage industry. In the future, as the spot market achieves full coverage and standardized systems are perfected, energy storage will become a core hub in the new power system, playing an irreplaceable role in the energy transition. Companies must proactively adapt to policy and market changes, forge core competitiveness through technological innovation, build ecological moats through model innovations, and seize opportunities amidst market fluctuations.