The Dual Life and Death of Energy Storage: A Profit Gap Exceeding 50%, 60,000 Companies at Risk

As of now, over 30,000 companies in the energy storage sector have ceased operations, with projections indicating that more than 60,000 energy storage companies may not survive in the next three years. The new survival rule in the energy storage industry is shifting from price wars to value creation.

The current state of the energy storage industry mirrors that of the photovoltaic sector, facing not only a pricing crisis but also a “death race.” Following the announcement of comprehensive policies for new energy market entry in February, many small and medium-sized energy storage companies are grappling with survival challenges as mandatory energy storage requirements are enforced.

In terms of pricing, a popular saying in the market is: “No matter how low your bid, there will always be someone willing to go lower.” For instance, in January 2024, the average winning bid for a large-scale energy storage system with a two-hour duration was ¥0.93/Wh. By the end of 2024, this price had plummeted to approximately ¥0.445/Wh, effectively halving within a year, with prices continuing to decline into early 2025.

As for the players in the energy storage field, the reshuffling is intensifying. According to the “Battery China CBEA,” the number of companies in the energy storage-related supply chain has reached an astonishing 290,000. The harsher reality is that over 30,000 companies have already gone under, facing statuses such as cancellation, revocation, liquidation, or suspension. Media forecasts suggest that if the recent closure rate of photovoltaic companies continues, more than 60,000 energy storage firms may not survive in the next three years. It is clear that merely engaging in price competition offers no future.

The new survival strategy for the energy storage industry must transition from price competition to value creation. In the context of the marketization of new energy electricity pricing, the lifecycle cost per kilowatt-hour and revenue capacity of energy storage systems have become core indicators of their competitiveness. Leading storage manufacturers like CATL and Envision Energy have adopted models driven by technological breakthroughs, AI empowerment, and intelligent trading strategies. By deeply engaging in the electricity market, they can significantly enhance the returns for owners, establishing a new ecosystem for “value co-creation.”

Ending Mandatory Energy Storage Opens Up Greater Market Space

The initial idea behind requiring a certain percentage of energy storage facilities for wind and solar projects was to mitigate the fluctuations of renewable energy and enhance grid stability. However, the execution has turned into an “equipment competition,” leading to counterproductive results. The mandatory storage requirements, which carry an administrative command flavor, have several evident drawbacks.

Firstly, the efficiency of energy storage utilization has been low. Renewable energy companies, in a bid to secure project approvals, have passively complied with storage requirements, resulting in many storage facilities being “built but unused,” with utilization rates as low as 17%. Surveys in a western province have shown that storage is invoked only once every five days on average, leading to significant resource waste.

Secondly, the cost transfer trap has been an issue. Mandatory energy storage has substantially increased the construction costs of renewable energy projects. For a typical 100MW wind and solar project, a 10% storage requirement (i.e., 10MW/20MWh) could incur costs between ¥20 million to ¥30 million, often unrecoverable through direct electricity revenues.

Thirdly, the tendering process has led to adverse selection. Many see storage as merely a means to secure renewable energy quotas, with little hope for its actual regulatory impact. This has resulted in a bidding environment where the lowest price wins. Such inefficient use not only wastes resources but also creates market chaos, where low-quality, low-cost energy storage devices frequently win bids, while high-performance products are squeezed out of the market. This “storage for the sake of storage” model has led to nearly ¥10 billion in ineffective investments each year and has severely obstructed technological advancements in energy storage.

The February 9 announcement regarding the deepening market-oriented reform of new energy pricing fundamentally changes this situation. The notice explicitly states, “No unreasonable cost sharing should be imposed on new energy projects, nor should energy storage configuration be a precondition for the approval, grid connection, or market access of new renewable projects.” This regulatory easing signifies a shift from mandated requirements to market-driven choices, allowing renewable energy owners to determine if they want to invest in energy storage based on actual needs and economic benefits.

This change appears to weaken the “mandatory status” of energy storage but actually opens up broader developmental opportunities and intensifies industry differentiation. Prior to the termination of mandatory storage requirements, this segment accounted for nearly half of the energy storage market. Post-repeal, demand in this segment is expected to drop by at least 50-60%, significantly impacting those energy storage manufacturers who relied on low-quality, low-cost strategies to capture market share. Conversely, the new policy allows energy plants to flexibly choose storage solutions based on their needs, driving a transition from “passive compliance” to “active selection.” The core value will shift from merely hardware costs to comprehensive revenue capacity.

In the future, energy storage plants will be able to participate in multiple market transactions, including electricity spot markets and ancillary services, expanding revenue sources from the single “capacity compensation” to over ten scenarios such as “peak-valley arbitrage” and “black start services.” The new regulations allow energy storage to return to its essence as a “problem-solving tool,” rather than merely an accessory to power generation or grid management.

A New Awakening of Energy Storage Value

Previously, competition in the energy storage sector was primarily based on pricing. Manufacturers competed by lowering equipment costs and sacrificing performance, leading to an influx of low-quality products in the market. With the implementation of the new policy and the deepening of market reforms, the competitive logic within the energy storage industry is undergoing a fundamental transformation—from price wars to value creation.

After the new policy clarified that “energy storage configuration cannot be a precondition for project approval,” the market has begun to show significant changes:

• Emergence of User-Side Energy Storage: The cessation of mandatory energy storage for renewable energy projects will lead to profound adjustments on the power supply side, potentially opening new opportunities for user-side energy storage. In 2024, the registration volume for user-side energy storage in Jiangsu increased by 300% year-on-year. One industrial park has achieved “self-use during peak hours, charging during valleys, and selling electricity at high prices,” shortening the investment payback period to 4.2 years (60% improvement over the mandatory storage model).
• Increased Technical Barriers: In 2024, 90% of domestic energy storage tenders explicitly required battery cycle life of ≥1500 times. Leading companies like CATL, Envision Energy, and BYD are becoming preferred choices due to their advantages in lifecycle costs (LCOS). Envision’s EnOS platform integrates meteorological, power, and market data for unified dispatch of energy storage plants across the “source-grid-load-storage” continuum. In Jiangsu’s spot market, its quoting accuracy reached 92%, significantly above the industry average of 75%.
• Significant Premium on Technological Innovation: For instance, the 250MW/500MWh energy storage plant in Sheyang, Jiangsu, is the largest in the province. Since its grid connection on July 12, it has performed exceptionally well, breaking several operational records. In terms of revenue, it earned about 11.7% more per MWh compared to the average, totaling an additional ¥21.3 million over its lifecycle compared to similar storage products. During peak summer, the plant achieved record revenues, generating ¥40 million in 40 days, averaging over ¥1 million per day—30% above average and 15% higher than the second place.

By the end of 2024, the Sheyang plant also participated in the sixth trial operation of Jiangsu’s electricity spot market, where differing trading capabilities will create larger revenue gaps. The plant’s transaction volumes and quotes are optimized via the EnOS integrated management platform, facilitating AI-driven automatic trading that adapts to local market rules and adopts more aggressive pricing strategies.

After the regulatory easing, the market has begun to “vote with real money.” High-performance energy storage devices now demonstrate clear advantages in charging/discharging efficiency, cycle life, and safety. Furthermore, intelligent trading systems have become a critical variable for value creation in energy storage. The volatility and complexity of electricity prices in the spot market make it difficult for manual operations to accurately capture optimal trading moments. AI-driven intelligent trading systems can analyze price trends, grid demands, and storage states in real-time, automatically optimizing quote strategies. For instance, Envision’s platform dynamically adjusts charging and discharging plans based on meteorological data, historical electricity data, and real-time market signals, ensuring storage during low-price periods and discharging during high-price periods to maximize profits. This “hardware + software” integrated solution is setting a new standard in the energy storage industry.

Building a Value-Coexistence Ecosystem for Energy Storage

The transition from “bad money driving out good” to the exit of bad products from the market is a process of淘沙 and market innovation. Without removing inefficient capacity and ineffective installations, attracting high-quality production is challenging. Viewed from this perspective, the new policy’s cessation of inefficient mandatory energy storage compels technological innovation and upgrades in installation efficiency and economic viability, opening a pathway for high-quality development in energy storage.

Looking toward the future of energy storage, its greater value should evolve from singular storage solutions to comprehensive “storage +” offerings, creating a new ecosystem of “value co-existence.” For example, integrated projects combining “photovoltaics (or wind power) + energy storage + hydrogen production” are establishing new models with significantly improved economic benefits.

Of course, the successful implementation of the new policy requires collaborative efforts from supporting regulations, such as establishing a comprehensive energy storage revenue settlement mechanism, clarifying ancillary service market rules, and promoting the nationwide rollout of electricity spot markets. These are urgent issues that need to be addressed in the future. Additionally, the energy storage industry must collaborate with renewable energy generation companies and grid operators to construct a healthy development ecosystem. Only through the joint forces of policy, market, and technology can energy storage genuinely achieve the leap from “insufficient revenue” to “revenue distribution.”