Ma Jinpeng: My Perspective on the Leading Brand of Commercial and Industrial Energy Storage Solutions in China in 2025
Recently, I attended the 7th Energy Storage Carnival and the 2024 Annual Global Shipment Ranking Conference for Chinese Energy Storage Companies organized by the Energy Storage Leaders Alliance in Wuhan. Representatives from battery manufacturers, system integrators, investors, and asset operators were all present. After reviewing the released statistical data, I was filled with emotions. During the evening banquet, a leader from a newly listed energy storage company in China gave a speech. When discussing the industry’s challenges, he was visibly moved, even choked up. Despite this, his company’s financial performance for 2024 was commendable. In contrast, many leaders in the audience were grappling with negative net profits, which left me feeling conflicted.
The development of new energy storage in China truly seems to have compressed the 10-year growth trajectory of photovoltaics and wind energy into just two years. It feels as if the industry has skipped over the phase of enjoying the benefits of policy-driven market channels. If the growth of photovoltaics and wind energy was akin to “feeling one’s way across a river,” then the development of energy storage appears to be shaped by those who have already crossed, resulting in some impatience or market distortions driven by supply and demand.
From the discussions at the conference and exchanges with industry peers, I synthesized a few key points: First, the annual shipment rankings for commercial and industrial energy storage in China from 2022 to 2024 have seen significant changes, indicating that the industry’s landscape is still far from being established. Second, including the 472Ah square cell announced by a competitor at the event, the market has seen a surge in various specifications of cells (2XX, 3XX, 4XX, 5XX, 6XX) that are delivery-ready, which is even more bewildering than the variety found in photovoltaic modules. Third, a company introduced a 125kW/261kWh energy storage cabinet product, with conventional sales prices dropping to nearly 0.5 yuan per watt-hour, yet system integrators are struggling with profitability, with very few achieving positive net profits.
During the forum that afternoon, I actively called for “the ability of system integrators to sustain profitability is the foundation for the industry’s healthy and sustainable development; it is the assurance for energy storage investors and asset operators to continue their operations.” The energy and power sector’s evolution is indeed a process aimed at systematically reducing the cost per kilowatt-hour or unit energy consumption. However, it seems everyone on stage speaks of value while those in the audience are eager to secure orders at prices close to BOM costs, which is both tiresome and unavoidable.
Fourth, signs of differentiation in the roles of investors, asset operators, and system integrators are emerging. Specialized asset operators are beginning to evolve from coarser market practices to more refined competitive strategies. Companies like Xingji Yuneng and Huagong Energy are capitalizing on their expertise in asset operation to uncover substantial profits through demand management, power sales integration, and demand-side response strategies. I believe this is a positive development for the industry.
Fifth, virtual power plants (VPP) should represent the ultimate form of commercial and industrial energy storage, while energy management on the distribution side is the ultimate positioning for investors and asset operators, indicating that companies should no longer establish a separate power department.
It has been over a year since I last wrote about “My Perspective on Commercial and Industrial Energy Storage in China.” During this time, the development of commercial and industrial energy storage in China has experienced ups and downs. Factors such as development cycles, development costs, revenue sharing ratios, delivery cycles, financing costs, and contract terms have all been fiercely competitive. Nonetheless, as a sector that has achieved a technical and economic viability closed loop, it still shows signs of sustainable development.
In 2024, I will have taken approximately 150 trips, most of which involve discussions with investors, developers, and operators. Engaging with various stakeholders has renewed my understanding of the industry. As a product and solution provider, I have gained fresh insights from the perspectives of energy storage investors and asset operators, inspiring me to draft a new version for 2025—my vision of the leading brand of commercial and industrial energy storage solutions in China.
In the past year, several issues have emerged: First, there is an over-reliance on investments with insufficient attention to operations. Early investors depended too heavily on the single revenue source of peak-valley price differences, and policy changes have caused operational data to fall below expectations, complicating the path to conservative revenue growth through refined operations. This issue is becoming more pronounced. In the same region, the revenue-sharing ratio for projects that began operations two years ago can reach 9:1, and it has even dropped to a 5:5 sharing of price difference revenue. In some cases, owners have defaulted, demanding adjustments to the sharing ratio. This is particularly challenging for high-static investments over two years.
Second, there are concerns regarding the reliability of technical indicators. Issues such as charging and discharging efficiency, capacity retention rate, equipment online rate, fault recovery time, system adaptability to scenarios, and even the sustainability of solution providers have raised eyebrows. Last year, several integrators exited the market, raising questions about how to support EMC-15 years of operation.
As we move into 2025, a series of energy and power policies have been introduced at both national and local levels. Whether it’s the management measures for distributed photovoltaic power generation or Document No. 136, these show the determination and genuine efforts of the national and local governments to accelerate the construction of a new power system and promote sustainable high-quality development of renewable energy.
According to the International Energy Agency’s definition of low-carbon transition in power systems, China has entered the third phase of a six-phase process. This stage is characterized by increasing difficulty in balancing power supply and demand, necessitating systematic improvements in the flexibility of the power system. Existing facilities and improved operating methods are insufficient to meet flexibility needs, requiring investments in new flexibility.
Previously, revenue from grid-side energy storage heavily relied on the capacity leasing of renewable energy sources, which is a transitional phenomenon in the development of new energy storage and lacks sustainability in the long run. The commercial logic remains debatable. Document No. 136 will effectively guide the transition of front-end energy storage from a cost-oriented perspective to a value asset perspective, while the acceleration of the electricity spot market’s normalization and the moderately expanding price differences (currently, the spot price range in regions like Inner Mongolia, Shanxi, and Guangdong is 0-1.5 yuan, while in Gansu, it’s 0.04-0.65 yuan, and in Zhejiang, 0.20-0.80 yuan) will significantly enhance the integration of renewable energy and improve the penetration rate of renewable energy into the grid.
Looking ahead to 2025 and the following years, what should domestic commercial and industrial energy storage product and solution providers do? It should not be about continuously undercutting prices. In the long run, price competition is detrimental to investors, operators, and product and solution providers alike. So, what strategies should we pursue to become the leading brand of solution providers in the coming years? Here are some thoughts for consideration.
To conclude, the value proposition of the leading brand should always return to the financial models of investors and asset operators, providing solutions that minimize cost per kilowatt-hour while effectively safeguarding the financial metrics of investors. This includes overall investment returns, static payback period, and cumulative net cash flow throughout the project’s lifecycle. The foundational elements supporting these critical financial indicators encompass all aspects from project development to recovery, including static investment, operational and maintenance costs, capacity assessment, revenue assurance, financing feasibility, state of health (SOH) retention, charging and discharging efficiency, depth of discharge (DoD), failure rates, recovery times, insurance measures, algorithm strategies, and operational friendliness (EMS).
This is also where the leading brand’s value proposition lies. First, we should return to a multidimensional consideration of optimizing static investment projects based on financial models. The market supply chain information has become exceptionally clear, and obtaining BOM pricing for equipment is relatively straightforward. In some respects, this is a competition of supply chain negotiation capabilities. However, selecting different components and battery cells leads to variations in price, lifespan, and performance. Additionally, warranty costs are becoming more significant; many companies are hesitant to accept orders for just a few cabinets, as repeated service visits can erode their profits.
The choice of battery cells also reflects the investor’s endurance and value proposition. I have spoken with many investors, and when project yield meets expectations, it’s not merely about driving equipment prices lower to enhance yield further. Equipment manufacturers also need to make profits. In pursuit of orders, there is a genuine risk of compromising configuration and quality, increasing the likelihood of operational issues in the future. The operational revenue from energy storage stations may not cover losses and compensation arising from problems. This situation cannot be approached with a speculative mindset; currently, there is no absolutely perfect safety plan for energy storage systems. Instead, we are implementing incremental safety strategies and making patchwork adjustments. Safety must be viewed as a cost to be invested in, and while investors understandably desire better yields, commercial energy storage is inherently a high-finance asset. It is crucial to maintain a balance between static investment management and refined operational management, steering clear of speculative attitudes.
Abandoning speculative mindsets sometimes requires experiencing issues and learning lessons. Value transfer is not an easy task. Last month, a residential energy storage system in a villa in Europe experienced overcharging and exploded, causing significant damage to half the villa. I shudder to think what would happen if a system with 1000 or 10000 kWh of energy faced similar issues.
One of our investment partners has a business logic: “I need the companies providing me solutions to maintain a gross profit margin of over 15%. If equipment manufacturers are thriving, it’s a better guarantee for our investments.” I resonate with this perspective.
The following table outlines the integrated cost (including tax) based on the BOM of a 125kW/261kWh energy storage cabinet. Selling it below 0.55 yuan will inevitably lead to extensive product substitutions, embedding significant risks regarding quality and safety. If companies wish to remain profitable, they must consider appropriate pricing.
Second, we must build a closed-loop and reliable operational management capability. Operation and maintenance (O&M) is an essential aspect that cannot be overlooked. The O&M of energy storage devices is quite similar to that of communication equipment, where preventive maintenance and corrective maintenance are equally important. Equipment failures often begin with minor issues in specific parts, which can then affect other components, leading to substantial problems. This is a domino effect within the system. Preventive maintenance can reduce or avoid minor damages, allowing for the timely elimination of potential hazards before they escalate into more serious faults. Proper preventive maintenance can lower repair costs. Generally, planned work is three to four times more efficient than unplanned work. Preventive maintenance can allow for the pre-research of maintenance plans, preparation of drawings, tools, and auxiliary materials, and stocking of spare parts. When a breakdown occurs, the maintenance work can be completed efficiently. In contrast, if it’s a post-failure repair, people scramble to diagnose issues and find tools and materials, leading to repair times extending from half a day to one and a half days or even two days. This clearly increases costs, particularly when considering the potential for further damages caused by delayed repairs.
One should not underestimate the importance of service metrics like failure rates and recovery times. For the demand control mode of energy storage operations, operators can potentially reduce the demand charges from 180,000 yuan to 120,000 yuan through refined demand control. However, if equipment fails on the last day of the month and takes two days to recover, any high demand during those two days can render the operators’ month-long efforts in demand management null and void, resulting in lost opportunity costs.
In a future scenario with strong operational demands, the energy storage system, as a foundational asset, will be crucial for generating greater revenues through operations. Clearly, the stability of equipment and operational capabilities will be core competitive points for the leading brand in the future.
Third, we must develop an adaptable capacity assessment capability. Capacity assessment is crucial for investor earnings. As the revenue streams from commercial and industrial energy storage become more diversified, capacity assessment must consider not only 15-minute load data but also factors like time-of-use electricity pricing and demand charge management. This entails a multidimensional constraint relationship. It also involves evaluating the collaborative configuration of primary energy sources (distributed photovoltaics, decentralized wind power), load management, and secondary energy sources (new energy storage). Furthermore, the methods and tools for capacity assessment need to be recognized and adopted by financing institutions, which is another capability that solution providers must construct. The scientific and practical nature of capacity assessment tools must align with the perspectives of asset operators, integrating operational thinking into the overall layout. Capacity assessment has now incorporated operational thinking and planning, requiring a comprehensive understanding of enterprises, distribution networks, load characteristics, and process characteristics, which must be achieved through intelligent tools and iterative project investment and operational practice.
Fourth, we should build capabilities that enhance investors’ project financing viability. Currently, private investors primarily rely on financing leasing companies for project financing, with annualized financing rates ranging from 6% to 7.5%. The overall sentiment is that financing costs are high, and achieving non-recourse financing is challenging. Leading brand product and solution providers have the opportunity to leverage their solutions and sound financial assurances to proactively collaborate with industry financing institutions to offer investors more accessible and cost-effective financing options. If we can reduce financing costs from 7% to 4%, this can inject positive energy into healthier industry development, creating a virtuous cycle where integrators can profit, investors face fewer concerns, and yield rates are assured.
The construction of financial solutions can be approached from two dimensions: first, solutions favorable to investors, and second, those beneficial to users (electricity consumers).
Fifth, we must establish refined operational capabilities for projects. Whether viewed as a singular financial asset, a key scheduling element in a park’s source-network-load-storage integration, or a core asset in a virtual power plant, refined operations are increasingly under scrutiny and have entered the spotlight. A superior combination of diversified revenue streams and algorithmic support is the essence of operations. Currently, mainstream control strategies for commercial and industrial energy storage primarily rely on fixed-time differences in peak, flat, and valley electricity prices for charging and discharging. This model fails to adapt to dynamic changes in load demand and is not compatible with electricity markets. Algorithms can achieve multi-faceted optimizations, from capacity planning to revenue enhancement, maximizing peak-valley price difference revenues, integrating strategies to reduce demand charge expenditures, and maximizing self-consumption of green energy. They can also utilize load forecasting and historical data to AI-generate load plan power curves. By considering multiple constraints and optimization objectives—such as peak-valley price differences, battery degradation coefficients, and AC system efficiency—these algorithms can derive optimal charging and discharging strategies.
I know of a startup commercial and industrial energy storage asset operator managing several demand-billed energy storage stations in Jiangsu. Over the past year, 63% of their revenues came from peak-valley price arbitrage, while 37% resulted from sharing savings on demand charges. To reduce demand, they sometimes discharged during valley hours, yielding an 18% increase in revenue compared to relying solely on peak-valley price arbitrage. This raises the question: should we pursue such strategies? Recently, I have engaged in extensive discussions with many asset operators, and most are opting to establish their own asset operation management platforms (EMS). Operators often evaluate that many equipment manufacturers’ EMS platforms merely present data without significant algorithmic integration. Of course, many equipment manufacturers are striving to build operational capabilities and aim for a hybrid positioning. Achieving excellence in this area is a challenging task, as manufacturers often wish to consolidate all capabilities (cells, PACK, BMS, PCS, EMS, recycling, etc.) into an integrated solution. For investors, the best solutions should be those that offer a series of strongly coupled value combinations.
Leading brand product and solution providers should focus on self-research to a significant extent while forming partnerships with outstanding industry asset operators, integrating the capabilities of professional asset operators, recycling institutions, and digital twin technology providers, thereby creating composite solution offerings that deliver optimal solutions to investors. Consider why Apple does not manufacture its batteries or screens but sources them from ATL and other suppliers. Expanding boundaries, merging strengths, and establishing an ecosystem of products through collaborative research and development should be the optimal approach to solution construction for investors. The complex applications of AI, BI, blockchain, and digital twins require altruistic cooperation among partners throughout the supply chain.
Every enterprise has its own genetic makeup and strengths. For instance, the investment in new energy assets emphasizes and tests a company’s ability to sustainably procure low-cost financing. Companies lacking this capability should exercise caution, as mismatched capabilities can lead to adverse outcomes. Innovation is undoubtedly important, yet the pace of innovation may be even more critical in this era. The integration and fusion capabilities of platform companies can provide clients with better and more timely solutions.
Sixth, we must enhance the core technical indicators of energy storage systems, such as capacity retention (SOH), AC-side charging and discharging efficiency, and depth of discharge (DoD). Currently, battery manufacturers typically promise lifespan indicators under standard conditions—25 degrees Celsius and DoD of 100%—with commitments of 6000 cycles (SOH 80%) and 8000 cycles (SOH 70%). However, it is widely recognized that the degradation of battery cells and systems will be less effective than promised. Based on operational data from energy storage stations that have been online for several years, systems generally degrade to 70% capacity after approximately 5500 cycles (8 years), leading investors to factor in a battery replacement cost of 0.4-0.5 yuan per watt-hour by the eighth year. Realistically, this often means replacing the entire system or, more accurately, recreating the project. This is akin to purchasing an electric vehicle that is advertised to travel 700 kilometers under standard conditions but only achieves 490 kilometers under real-world conditions. How can we provide close to actual operational performance data? This is of immense value to investors. Currently, investors are beginning to demand assurances from system integrators regarding annual capacity retention over ten years.
By achieving two charge cycles and two discharge cycles daily, and operating for 330 days a year, systems that can handle 10,000 cycles with superior technology (like the Kunlun cells from Xinneng An, which have completed 10,000 cycles) provide opportunities to extend the lifespan of energy storage systems to 15 years. This allows us to promise clients a capacity retention rate of no less than 70% by the end of year 15, which is undeniably valuable to investors.
From a financial modeling perspective, considering the environmental characteristics of regions like Zhejiang, Guangzhou, Jiangsu, and Hunan, we find that transitioning from two charge and discharge cycles to one results in significant optimization of the static payback period, overall investment return rate, and cumulative net cash flow throughout the project’s lifecycle compared to conventional energy storage systems. Moreover, AC-side charging and discharging efficiency and depth of discharge are critical indicators determining the throughput capacity and efficiency of energy storage systems, whether for peak-valley arbitrage, spot market arbitrage, or demand-side response.
Seventh, we must construct insurance coverage capabilities for energy storage systems. On December 25, 2023, the Guangzhou Development and Reform Commission issued several measures to support the high-quality development of the new energy storage industry, emphasizing the need for financial support for new energy storage projects, including guiding insurance institutions to expand their specialized insurance offerings. On April 25, 2024, the National Financial Regulatory Administration released guidelines aimed at promoting the high-quality development of green insurance, proposing the exploration of insurance innovations in new energy fields such as energy storage and hydrogen energy, which cover critical risks in R&D, manufacturing, and operations, providing risk solutions for constructing a new power system. Furthermore, on July 16, 2024, the Jiangsu Financial Regulatory Bureau encouraged banking and insurance institutions to provide financial support for projects or activities aligned with the “Green and Low-Carbon Transition Industry Guidance Catalogue (2024 Edition),” reinforcing support for green transitions in energy structure and urban-rural development.
On July 15, 2024, the Shenzhen Financial Regulatory Bureau announced its commitment to building an insurance service system for new power systems. This system will cover over 70 types of insurance products addressing risks across the entire lifecycle of solar and wind power generation, storage, and associated operations. From a policy perspective, the government has begun to focus on the concurrent advancement of insurance products alongside the healthy development of the energy storage industry. The commercial general liability insurance currently applicable to energy storage industries aims to mitigate the economic liabilities that enterprises face due to issues arising during energy storage station operations that may cause third-party injuries or property damage.
This coverage encompasses four core scenarios: 1. Operational risks at facilities—such as property damage due to fires in shopping malls or hotels. 2. Product liability risks—causing consumer injuries or property damage due to defects in energy storage products. 3. Operational risks—resulting from improper actions during construction or installation. 4. Completion risks—due to defects in prior operations causing damage post-project completion. Energy storage systems face various risks during operation, including fire, explosion, battery degradation, and equipment failures. Past incidents in energy storage projects have heightened the industry’s awareness of risks, leading energy storage companies and project investors to place greater emphasis on insurance. To ensure stable project operations and investment security, all involved parties should actively seek insurance solutions. Leading brand product and solution providers should proactively integrate insurance products into their solutions to safeguard the entire lifecycle, which is crucial for electricity users, investors, and sustainable operations.
Lastly, we must construct capabilities for recycling and residual value management of energy storage systems. Market products and solution providers are increasingly discussing full lifecycle solutions, which must encompass two key aspects: First, do product and solution providers have sustainable development capabilities for 15 years? Is their business model closed-loop? Is their financial health robust? Second, can the solution achieve a truly closed loop across its entire lifecycle? For instance, does the energy storage system recycling process have viable solutions? Regarding energy storage battery recycling, this not only affects the residual value parameters set in investors’ financial models but directly influences their yield rates as well. Additionally, establishing a recycling mechanism has numerous positive implications, such as: avoiding potential environmental pollution from toxic materials like lithium, cobalt, and nickel present in retired batteries; preventing resource waste since retired batteries still contain recoverable materials; and mitigating safety risks associated with fire and explosions if retired batteries are not properly managed. For instance, in April 2023, a battery recycling facility in Shanghai caught fire, resulting in significant losses.
Currently, leading recycling firms have achieved over 99.3% total recovery rates of core metals from battery products. In 2023, a global lithium-ion battery leader recovered 100,000 tons of used batteries and regenerated 13,000 tons of lithium carbonate, achieving a recovery rate of 91% for lithium, and 99.6% for nickel and cobalt. Providing a recycling mechanism for energy storage systems is crucial for closed-loop solutions and empowering investors.
Looking ahead to 2025, we can expect several market changes. First, existing distributed photovoltaic stations will require energy storage. According to the “Management Measures for Distributed Photovoltaics” released in January by the National Energy Administration, projects registered prior to this publication and scheduled to be operational by May 1, 2025, will continue to follow existing policies. After April 30, commercial photovoltaics above 6MW will need to be fully self-consumed or participate in spot trading. On March 17, the Ningxia Hui Autonomous Region Development and Reform Commission issued a notice soliciting opinions on the “Implementation Rules for Distributed Photovoltaic Development and Construction (Draft for Comments),” which specifies self-consumption ratios for commercial distributed projects at a minimum of 30% or 50%, with excess not being settled for electricity fees! Moreover, large commercial projects will generally adopt a fully self-consumption model, allowing surplus electricity to be sold only after the electricity spot market is operational.
On March 25, the Hubei Provincial Energy Bureau issued the “Implementation Rules for Distributed Photovoltaic Development and Construction (Draft for Comments),” which states that for general commercial distributed photovoltaics utilizing factory roofs, the annual grid-connected electricity generation should not exceed 50% of total generation. Any excess will not be settled by the grid company. This will provide additional growth opportunities for commercial energy storage in the future.
Second, commercial energy storage in foreign markets is experiencing rapid growth. In Europe and North America, the high level of marketization in the electricity sector, along with clear pricing policies and incentives, will continue to drive the development of commercial energy storage. These mature electricity markets need substantial demand for commercial energy storage equipment. Southeast Asia and some underpowered nations in Africa are presenting opportunities for solar-storage diesel replacements.
Third, larger commercial energy storage projects will become the norm, with single-cluster container solutions becoming the primary selection for medium to high voltage connections. I have summarized several larger commercial energy storage projects that are currently being executed in 2024: a 121MW/630MWh commercial energy storage station project; a 198MW/396MWh distributed energy storage station project; a 34.5074MW distributed photovoltaic combined with a 40MW/135MWh energy storage station project; a 45MW/133MWh user-side energy storage project; and a 120MWh energy storage project. These will lay a solid foundation for the rapid development of commercial energy storage in 2025.
From 2022 to 2024, the shipment rankings for commercial and industrial energy storage in China have shown significant fluctuations, with the industry’s structure still far from being established. This is a competition of comprehensive capabilities and value combinations. The ultimate oligopoly has yet to appear on this list, and the path ahead is characterized by endurance, persistence, altruism, and a deep understanding of and engagement with the industry. As Warren Buffett stated, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” A greater emphasis on industry self-discipline and a respectful approach to safety can guide technology toward minimizing costs per kilowatt-hour, enabling more sustainable and healthy industry growth.
As I write these words, the sunlight outside gradually breaks through the clouds, shining brightly on the photovoltaic modules on the roof. I would like to conclude this report with a poetic line: “Shouldering great responsibilities, we will march forward with song, and our efforts will not be in vain.” My team and I will adhere to these principles to advance the industry, and you can look forward to our solution releases.
