Energy Storage: A Tale of Survival and Struggle
The energy storage industry is currently facing a critical juncture, with over 30,000 companies having already succumbed to the pressures of the market. Experts predict that within the next three years, more than 60,000 energy storage firms may not survive. The new survival strategy for this sector is shifting from price wars to value creation.
Currently, the energy storage sector, much like the photovoltaic industry, is not only grappling with a pricing crisis but is also entering a fierce competition for survival. Following the release of comprehensive new energy policies in February, many small and medium-sized storage companies are now confronted with the urgent need to adapt or face extinction. A popular saying in the market captures the situation: “No matter how low you price your services, there will always be someone who can offer a lower rate.” For instance, the average bidding price for large-scale energy storage systems fell drastically from 0.93 RMB/Wh in January 2024 to approximately 0.445 RMB/Wh by the end of that year, marking a 50% reduction within just one year, with prices continuing to decline into 2025.
The number of players in the energy storage arena is rapidly decreasing. Reports from the Battery China CBEA indicate that the total number of related enterprises in the energy storage supply chain has skyrocketed to an astonishing 290,000. The harsh reality is that over 30,000 firms have already collapsed, with many experiencing issues such as cancellation, suspension, or liquidation. If the recent closure rates of photovoltaic companies are any indication, it is forecasted that more than 60,000 energy storage enterprises could vanish in the next three years. Clearly, competing solely on price offers no viable future.
In this new landscape, the core metrics for assessing competitiveness will revolve around the lifecycle cost per kilowatt-hour and revenue-generating capabilities of energy storage systems. Leading companies like CATL and Envision are pioneering a model driven by technological breakthroughs, AI integration, and intelligent trading strategies, significantly enhancing returns for owners and fostering a new ecosystem of “value co-creation.”
01: Ending Mandatory Storage Requirements Opens New Market Opportunities
The original intention behind mandating energy storage installations for wind and solar projects was to stabilize energy fluctuations and enhance grid reliability. However, this has devolved into a mere equipment competition, resulting in inefficient outcomes. Mandatory storage regulations often carry an administrative imposition, leading to several adverse effects. Firstly, the efficiency of energy storage utilization has been dismally low, with many facilities constructed merely to meet approval requirements, leading to an underutilization rate of just 17%. Surveys in certain provinces reveal that energy storage systems are only dispatched once every five days on average, resulting in significant resource wastage.
Secondly, these mandates also lead to cost-shifting burdens. For example, in a typical 100 MW wind-solar project requiring 10% energy storage (10 MW/20 MWh), the estimated costs for energy storage systems could reach between 20 to 30 million RMB, costs that often cannot be recovered through energy generation revenues. Thirdly, this has created a reverse selection issue during bidding processes, where the focus on securing renewable energy quotas overshadows the actual regulatory benefits of energy storage. Consequently, low-quality, low-cost storage devices are frequently favored in tenders, while high-performance products are pushed out of the market.
This ineffective approach results in nearly 10 billion RMB in wasted investments annually and severely hinders technological advancements in energy storage. However, the recent policy update released on February 9, titled “Notice on Deepening Market-Oriented Reforms of Renewable Energy Pricing to Promote High-Quality Development,” has dramatically altered the situation. This policy explicitly states that “unreasonable cost-sharing with renewable energy sources is prohibited, and energy storage configuration cannot be a precondition for project approval or grid connection.” This policy shift allows for a transition from administrative mandates to market-driven choices, giving renewable energy owners the flexibility to decide on energy storage configurations based on actual needs and economic benefits.
While this change might seem to diminish the “mandatory status” of energy storage, it actually opens up greater opportunities for its development and will intensify industry differentiation. Previously, mandatory storage requirements constituted a significant portion of the energy storage market. Now, following the cessation of these requirements, we can expect a substantial reduction in demand, impacting companies that relied on low-quality, low-cost strategies to gain market share. Those unable to adapt will likely be forced out of the market.
02: The Emergence of New Value in Energy Storage
Historically, competition in the energy storage sector has primarily revolved around price. Companies have resorted to cutting equipment costs and sacrificing performance to capture market share, resulting in an oversaturation of low-quality products. However, with the implementation of new policies and deeper market reforms, the competitive logic of the energy storage industry is undergoing a fundamental shift from price wars to value creation.
Post-policy changes, significant market shifts have begun to manifest. For instance, user-side energy storage is surging. The cessation of mandatory storage has led to profound adjustments on the generation side, simultaneously opening up new avenues for user-side energy storage. In Jiangsu, the registration volume for user-side storage surged by 300% year-on-year in 2024. One industrial park has successfully utilized “storage + photovoltaics” to achieve a system of “self-use during peak hours, charging during off-peak hours, and selling electricity at high prices,” reducing the investment payback period to just 4.2 years—60% faster than under the mandatory model.
Moreover, the threshold for technological prowess is rising. In 2024, 90% of energy storage tenders in China stipulated a battery cycle life of at least 1,500 cycles, favoring leading companies like CATL, Envision, and BYD for their advantages in lifecycle cost (LCOS). Envision’s EnOS platform integrates weather, power, and market data to enable integrated scheduling of energy storage plants, achieving an impressive bidding accuracy of 92% compared to the industry average of 75% in Jiangsu’s spot market.
Additionally, technological innovations are yielding visible premiums. For example, the 250MW/500MWh energy storage plant in Sheyang, Jiangsu, has achieved remarkable operational performance since its grid connection on July 12, setting multiple records for the province. Financially, it has generated revenue approximately 11.7% higher than the average, translating to an additional 21.3 million RMB over its lifecycle compared to similar products. During peak summer demand, it set a provincial revenue record, earning 40 million RMB in just 40 days, with single-day averages exceeding one million RMB and total revenue outpacing competitors.
As the market evolves, trading capabilities will differentiate revenue outcomes even further. The Sheyang plant has engaged in spot market trading, utilizing its EnOS platform to implement AI-driven trading strategies that adapt to local market rules, achieving a remarkable income of 11.54 million RMB over a 14-day settlement period—54.2% higher than the average.
In the wake of policy relaxation, the market is beginning to “vote with its wallet.” High-performance energy storage devices are characterized by superior charge-discharge efficiency, cycle life, and safety. Simultaneously, intelligent trading systems have become crucial for value creation in energy storage. Given the frequent and complex fluctuations in electricity prices, manual trading is often inadequate for optimizing timing, while AI-driven systems can dynamically adjust strategies based on real-time data.
03: Building a Symbiotic Ecosystem for Energy Storage
The transition from “bad money driving out good” to bad money exiting the market signifies a crucial process of market refinement and innovation. Inefficient capacities and ineffective installations must be removed for high-quality production and efficient installations to thrive. In this context, the new policy’s cessation of ineffective mandatory storage requirements compels innovation and efficiency improvements in energy storage technologies, potentially paving the way for high-quality future development in this field.
Looking ahead, the greater value of energy storage lies in evolving from mere storage solutions to comprehensive “storage +” solutions that foster a new ecosystem of value co-creation. Integrated projects such as “solar (wind) + storage + hydrogen production” are emerging as new models, demonstrating clear economic benefits. However, the successful implementation of these new policies requires complementary efforts, such as establishing a robust revenue settlement mechanism for energy storage, clarifying ancillary service market regulations, and promoting the nationwide adoption of electricity spot markets—all of which are pressing issues that need to be addressed.
Furthermore, collaboration among energy storage companies, renewable power generators, and grid operators is essential to build a healthy industrial ecosystem. Only through the combined efforts of policy, market dynamics, and technological advancements can the energy storage sector transition from “insufficient revenue” to a state of “revenue sharing.”
