In just four months leading into 2025, both national and local governments in China have rolled out a series of new policies, ushering in an unprecedented “policy storm” for the renewable energy sector. This has significantly accelerated the transformation of the energy storage industry from being “policy-driven” to “market-driven.”
National Policy: End of Mandatory Energy Storage Requirements and Establishment of Market Mechanisms
In February 2025, the National Development and Reform Commission and the National Energy Administration issued Document No. 136, which clearly stated that energy storage configuration could not be a prerequisite for the approval of renewable energy projects. This marked the end of the “mandatory energy storage” policy that had been in place since it was first introduced in Qinghai in 2017. Industry experts view Document No. 136 as an innovative step to implement the Renewable Energy Law and the Energy Law under the new circumstances. It aims to refine market trading and pricing mechanisms, facilitating comprehensive entry of renewable energy into the electricity market and ensuring fair participation in trading. Additionally, it establishes a “sustainable price settlement mechanism for renewable energy” (referred to as the “settlement mechanism”) to support wind and solar energy development, promoting sustainability in renewable energy.
The settlement mechanism will operate as a government-authorized difference contract system tailored for the Chinese electricity market. Its implementation is expected to enhance the collaboration between government and market forces, fostering the sustainable development of renewable energy. The significant implication of Document No. 136 is that the government is now focused on addressing market failures, encouraging renewable energy to actively engage in the market, reducing system consumption costs, allowing the market to play a decisive role in resource allocation, restoring electricity market pricing, and promoting policy coordination.
On April 29, the General Office of the National Development and Reform Commission and the Comprehensive Department of the National Energy Administration issued a notice regarding the comprehensive acceleration of electricity spot market construction (Document No. 394). This document explicitly requires achieving near-total coverage of the electricity spot market by the end of 2025. The core focus of Document No. 394 is to tackle the issue of insufficient flexibility in the electricity system through market mechanisms. It specifies that the construction of the spot market is to be advanced province by province: six provinces, including Hubei and Zhejiang, must complete formal operations by the end of 2025, while 16 provinces, including Fujian and Sichuan, will launch continuous settlement trials. Commercial users are expected to have self-reporting and settlement capabilities by the end of 2025, with spot market price signals directly impacting end-user electricity consumption.
In terms of pricing mechanism innovations, the spot market will adopt a 15-minute rolling clearing model. Pilot data from Zhejiang indicates that during peak solar generation periods, electricity prices dropped as low as -0.18 yuan per kilowatt-hour, while peak evening prices soared to 1.45 yuan per kilowatt-hour, with daily price fluctuations generally exceeding 1.5 yuan per kilowatt-hour. This design transforms energy storage from a traditional “peak shaving and valley filling” tool into a “dynamic balancer” for the electricity system, raising the bar for energy storage’s response speed and forecasting accuracy to a minute-level standard. Clearly, this upcoming major test in the electricity market will not only reshape the entire electricity industry landscape but will also profoundly alter the commercial logic and development paths of industrial and commercial energy storage.
Jiangsu’s New Policy: Time-of-Use Pricing is Not a Guarantee for Industrial and Commercial Energy Storage
On April 30, the Jiangsu Provincial Development and Reform Commission officially issued a notice on optimizing the structure of time-of-use electricity pricing to promote the consumption of renewable energy and reduce electricity costs for enterprises. This adjustment has widened the fluctuation ratio of peak and valley electricity prices, adding a low-valley period during lunchtime. The new policy will take effect on June 1.
The document encourages commercial users to actively reduce electricity consumption during peak periods and increase usage during low periods by configuring energy storage systems and engaging in comprehensive energy management. The optimization of time-of-use pricing segments includes a newly added lunch valley period: for summer and winter months (June-August, December-February), the valley pricing will apply from 11:00 AM to 1:00 PM for two hours; and for spring and autumn (March-May, September-November), from 10:00 AM to 2:00 PM for four hours.
For commercial users, the time-of-use pricing structure has been adjusted to change the fluctuation ratio of electricity prices, using the user purchase price as the baseline for price adjustments. In response to concerns about how energy storage projects can adapt to the changes in time-of-use pricing structure and achieve a new wave of development, the Jiangsu Development and Reform Commission stated that the optimization of time-of-use pricing will expand the range of commercial users to include all electricity users, except for those utilizing electrified railway power governed by specific national regulations. This opens up new potential collaboration opportunities for energy storage projects with commercial enterprises.
As technological advancements and increased production capacity reduce the costs of energy storage projects, more profit opportunities will become available. Furthermore, with the ongoing development of the electricity market, energy storage projects can collaborate with renewable energy generation to capitalize on market value from peak shaving.
Once the electricity spot market operates regularly, it will better leverage market mechanisms to discover prices and optimize resource allocation. The price differences in time-of-use trading will widen, allowing energy storage projects to participate directly in electricity markets, especially in spot market trading, to earn profits through low charging and high discharging strategies. During peak summer and winter periods, energy storage projects can also act as load aggregators or virtual power plant users, participating in demand response initiatives to further increase revenues.
Experts have noted that while formulating time-of-use pricing across provinces requires consideration of multiple objectives, promoting industrial and commercial energy storage is not its primary aim, nor is it a guaranteed source of income for commercial storage. The decision-making costs associated with local time-of-use pricing policy adjustments are often lower than those for energy storage policy changes, and the closer the time-of-use pricing structure aligns with market price signals, the more likely it is to achieve all primary objectives outlined in Document No. 1093. Consequently, the stability of such policies, resembling administrative orders, is becoming increasingly difficult to maintain. In reality, using “user purchase price” as the pricing basis, Jiangsu is neither the first nor the last to adopt this approach. In the future, energy storage companies will increasingly rely on market mechanisms and technological innovation, with diverse application scenarios demanding more differentiated energy storage technologies, continuously driving the industry towards precision development.
For the future of industrial and commercial energy storage, high-quality owners will be a scarce resource, while excellent operators will play a critical role. The various operational revenue streams derived from this foundation will be the key direction that industrial and commercial energy storage must rapidly explore and break through.
Policy Direction: Shift in Local Subsidies and Stricter Safety Regulations
The signals indicating a shift in local subsidy policies are clear. Meanwhile, local subsidies are transitioning from “installed capacity” to “discharge volume” and “technological breakthroughs.” For example, the Inner Mongolia Energy Bureau has issued a notice to accelerate the construction of new energy storage systems, providing compensation for the discharge volume of independent energy storage stations included in the autonomous region’s plan to the public grid. The compensation standard is fixed for one year, with a rate of 0.35 yuan per kilowatt-hour for 2025, applicable for ten years. It is reported that as early as November 2023, the Inner Mongolia Energy Bureau had issued implementation guidelines for independent energy storage station projects, stating that the grid-connected independent storage stations included in the demonstration projects would enjoy capacity compensation with an upper limit of 0.35 yuan per kilowatt-hour for discharge volume, applicable for ten years. At that time, the policy still differentiated between grid-side and generation-side storage, with generation-side storage obtaining revenue through capacity leasing and sales. The recent notice further eliminates the distinction between generation-side and grid-side storage, allowing all independent energy storage stations to receive capacity compensation.
Additional new subsidy policies include subsidies of 0.8 yuan per kilowatt-hour for user-side storage in the Ouhai District of Zhejiang, tiered incentives in the Songjiang District of Shanghai for virtual power plant responses based on adjustment amounts, and a maximum subsidy of 0.3 yuan per kilowatt-hour for new energy storage stations in Changzhou, Jiangsu.
Stricter Safety Regulations for Energy Storage Stations
On May 7, the National Energy Administration and four other departments released a notice to strengthen safety management concerning electrochemical energy storage. The notice proposes to enhance the intrinsic safety level of battery systems, evaluate the safety conditions and facilities of electrochemical storage projects, further improve related standards and regulations, assign safety management responsibilities, strengthen inter-departmental coordination and information sharing, and ensure that enterprises fulfill their primary responsibilities for safety production.
This includes enhancing the intrinsic safety of battery systems, conducting evaluations of safety conditions and facilities in electrochemical storage projects, improving relevant standards and regulations, ensuring safety management responsibilities are assigned, enhancing inter-departmental collaboration, and ensuring enterprises take responsibility for safety in production. Previously, various provinces and cities had introduced several management norms for the fire safety and grid connection acceptance of energy storage stations. For instance, Sichuan mandated the prohibition of “sick grid connections,” while Guangdong clarified fire safety responsibilities for energy storage stations. The East China Bureau’s stringent safety order prohibits energy storage stations in densely populated areas and high-rise buildings, mandating the forced exit of non-compliant projects before 2025. At the national level, the production date of battery cells and accident records will also be included in bidding assessments, compelling companies to improve product quality and resulting in accelerated industry concentration.
Industry Trends: Rising Concentration and Accelerated International Expansion of Chinese Enterprises
In light of the shift in policies, technological iterations, and price competition, the energy storage industry continues to exhibit a trend where leading enterprises are becoming stronger, while the survival space for small and medium-sized manufacturers is narrowing. Data shows that by 2024, the concentration ratio of the top 10 enterprises (CR10) in the energy storage cell industry has surpassed 90%, while the concentration of integrators (CR10) exceeds 80%. As the electricity spot market is fully operational by 2025 and inefficient capacity is rapidly cleared out, companies lacking technological barriers and capital reserves will likely disappear in large numbers, while leading firms with advanced technology and substantial financial resources will further consolidate their advantages. It is anticipated that by 2025, the market share of the top 10 energy storage companies will continue to rise.
While domestic policies are undergoing significant changes, the demand for energy storage in markets such as Europe, the United States, and the Middle East is surging. Some institutions predict that the installed capacity of large-scale energy storage overseas will double by 2025. Leading companies are already accelerating their international expansion; for instance, BYD has achieved a market share of over 25% in Europe, EVE Energy’s North American orders have surged by 300%, Envision Energy has secured a £240 million energy storage contract in the UK, and CATL has solidified its advantage through deep partnerships with Tesla.
At the same time, small and medium-sized energy storage companies are venturing into emerging markets in Africa, Asia, and Latin America in search of survival, leading to a highly competitive overseas market in 2025.
Conclusion
Industry insiders believe that the rapid development of renewable energy in constructing China’s new power system is driving changes in the electricity structure, followed by ongoing optimization of time-of-use pricing policies across provinces, ultimately enriching the value connotation of energy storage. This is an inevitable historical process for the energy storage industry as it enters a phase of rational development. In the long term, after the relaxation of policies, independent energy storage stations and virtual power plants are expected to become mainstream. The energy storage industry will transition from “wild growth” and “intense competition” to high-quality and differentiated competition, providing robust support for achieving the country’s dual carbon goals and building a new power system. Thus, the series of “policy storms” from Document No. 136 to Document No. 394 is not the endpoint for energy storage but rather the starting point for the construction of a new power system.
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