Energy storage demand exceeds 4,000GW under the " net zero scenario "

Not long ago, a redacted document illuminated the future of energy storage. On September 12 , the National Development and Reform Commission and the National Energy Administration issued the "Special Action Plan for Large-Scale Construction of New Energy Storage ( 2025-2027 ) ." The plan proposes that by 2027 , China's installed capacity of new energy storage will reach over 180 GW . By the end of the first half of 2025 , China's installed capacity of new energy storage reached 94.91 GW . Based on a four- hour backup power supply, the average annual installed capacity over the next two years will reach 136 GWh , a 34% increase compared to the 101 GWh  added in 2024 .

Kaiyuan Securities noted in a research report that the release of the new energy storage action plan signals a clear commitment from top leaders to energy storage development and the provision of policy support for demand. Meanwhile, Ningxia, Gansu, Xinjiang, Shandong, Hebei, and other regions have been exploring capacity compensation or electricity pricing policies tailored to new energy storage, further accelerating the refinement of energy storage business models and increasing the profitability of energy storage projects. This dual approach of central and local policies will drive a rebound in energy storage demand and promote the development of the domestic energy storage industry.

In fact, domestic energy storage installed capacity reached a record high in 2024. According to CNESA data, the total installed capacity of new energy storage systems in China reached 43.7GW/109.8GWh in 2024 , a year-on-year increase of 103%/136% . This strong growth momentum continued into 2025. According to CNESA data, in the first half of 2025 , 23.03GW/56.12GWh of new energy storage systems were put into operation in China , a year-on-year increase of 68%/68% .

Behind this is the significant reduction in the cost of energy storage systems and the full marketization of electricity trading.

By 2024 , the cumulative installed capacity of lithium-ion battery energy storage, represented by lithium iron phosphate, will account for 96% of all new energy storage . According to a research report by Industrial Securities, the price of lithium iron phosphate for energy storage is projected to drop by 79% from 158,000 yuan / ton in January 2023 to 32,900 yuan / ton in August 2025. In domestic bidding , the price of a 2-hour lithium -ion energy storage system has dropped from 1.35 yuan /Wh in January 2023 to 0.48 yuan /Wh in July 2025 , a 64% decrease .

With the full implementation of market-based electricity trading, negative electricity prices and widening peak-valley price differentials have made energy storage systems a crucial guarantee for PV power plant investment returns. According to Industrial Securities' calculations, assuming a 100MW PV power plant with a system unit investment of 2.45 yuan /W,  1400 hours of annual effective utilization , and a grid-connected electricity price of 0.24 yuan /KWh,  and equipped with a 20% 2 -hour energy storage system, when the curtailment rate exceeds 5.8% , energy storage systems offer higher IRRs and better economics.

Considering the end of the mandatory energy storage mandate following the release of Document No. 136, the energy storage market is poised to enter a market-oriented phase. Coupled with continued strong overseas market demand, the market has considerable potential for growth. According to the bp World Energy Outlook 2024 , if the global energy system achieves net zero emissions by 2050, the " net zero scenario " will see a 14- fold increase in installed wind and solar capacity, driving demand for energy storage exceeding 4,000 GW .

Photovoltaic leaders deeply deploy energy storage industry chain

The vast growth potential of the energy storage market has many photovoltaic companies eager to enter the market. For example, multiple media outlets recently reported that a leading photovoltaic company, which previously insisted it would not engage in energy storage, was preparing to enter the energy storage market through mergers and acquisitions. Some photovoltaic companies, however, have taken proactive steps to reap the benefits of this energy storage boom.

In the first half of 2025 , the few profitable main industry chain companies like Canadian Solar and inverter companies such as Sungrow Power Supply that have seen significant performance growth all rely on the contribution of the energy storage business.

Let's first look at Canadian Solar. According to its financial report, Canadian Solar's net profit attributable to shareholders reached 731 million yuan during the reporting period. " The main contributors to this operating performance were the company's high-quality photovoltaic business and rapidly growing energy storage business. " Energy storage deliveries reached 2.2GWh in the second quarter , a quarter-over-quarter increase of over 140 % . By the end of the reporting period, the company had a backlog of signed contracts for energy storage systems worth $ 3 billion . The company forecasts that energy storage shipments will reach 2.1-2.3GWh in the third quarter , and 7-9GWh for the full year , becoming the core engine of profit growth.

Now let's look at Sungrow Power Supply. According to its financial report, during the reporting period, Sungrow's operating revenue and net profit attributable to shareholders increased by 40.34% and 55.97% year-on-year , respectively, both reaching new historical highs. Specifically, its energy storage system business grew by 127.78% year-on-year , accounting for 40.89% of the total , surpassing the photovoltaic inverter business for the first time and becoming the core driver of its operating performance growth.

In addition to Canadian Solar and Sungrow, several other photovoltaic companies are making good progress in their energy storage businesses. Trina Solar disclosed in its 2025 interim report that its energy storage business had shipped over 12GWh by the end of the first half of 2025 , and invested 800 million yuan in its subsidiary, Trina Energy Storage, during the reporting period. JinkoSolar disclosed in its 2024 annual report that its energy storage system production line is steadily entering production, and that it has achieved mass production of its own research and development of key core components. Annual energy storage system shipments exceeded 1GWh , with a target of approximately 6GWh for 2025 .

It is worth mentioning that the energy storage business layout of these photovoltaic giants is becoming more and more in-depth, and they are not just looking to make quick money or small money.

In the electrochemical energy storage industry chain, the upstream is primarily focused on battery cells, while the midstream comprises energy storage system integration, including battery packs, battery management systems ( BMS ), energy management systems ( EMS ), power storage inverters ( PCS ), and other electrical equipment . The highest value-added segments are battery cells and PCS , accounting for 47.2% and 26% of the total energy storage system cost, respectively . Furthermore, referring to the power battery market, leading companies in the battery cell segment often hold a significant market share. For example, the CR5 ratio in the lithium battery industry exceeded 70% from 2021 to 2024 .

PV companies seeking to dominate the industry and secure profit margins need to expand into high-value segments. The energy storage business strategies of these aforementioned companies encompass not only the midstream of the supply chain but also, in some cases, upstream. For example, JinkoSolar's 2024 annual report indicates that a 12GWh energy storage integrated system and 12GWh energy storage cell project , with a total investment of 8.43 billion yuan , is currently under construction. Trina Solar 's 2025 interim report indicates that the Yancheng Dafeng 12GWh energy storage battery project (Phase I) is under construction, and that R&D is underway on cutting-edge energy storage technologies, including large-capacity 587Ah cells.

Technology research and development and brand reputation determine the future

As more and more companies enter the energy storage market, will the energy storage market repeat the decline and retrenchment seen in the photovoltaic industry? It's important to note that most companies currently enjoy high gross profit margins in their energy storage businesses. For example, Sungrow's energy storage system business gross profit margin reached 39.93% in the first half of 2025 , and Canadian Solar 's energy storage system business gross profit margin was 30.84% ​​in 2024 .

From the perspective of the industry's lifecycle, with the significant decline in energy storage system costs and the promotion of relevant policies, the energy storage industry will officially enter its growth phase in 2025. Generally speaking, in the early stages of this growth phase, companies with first-mover advantages tend to reap the benefits. For example, in the photovoltaic field, when monocrystalline technology replaced polycrystalline technology and when N- type battery technology evolved, companies that entered the market early on all achieved excess profits.

However, as more and more competitors enter the market, without strong competitive barriers, increasingly fierce market competition will significantly reduce the average profit margin of the entire industry. For example, in the power battery sector, the gross profit margin of leading company CATL has fallen from over 30% before 2018 to around 25% today , and most second- and third-tier manufacturers have already fallen below 20% .

As the energy storage sector shares its roots with power batteries, intensified market competition is likely to lead to a decline in profitability across the industry. The bad news is that capital is pouring into the energy storage sector at an accelerated pace. According to data from LaiMi PEVC , since 2025 , there have been 133 investment and financing events in the energy storage sector , totaling over 5.8 billion RMB. Zeng Yuqun, founder of CATL, also expressed concerns at a recent industry summit: "This year's price war has spread overseas, causing not only a rapid decline in the gross profit margins of energy storage companies, but also a significant loss."

So, are there any variables that can leverage profit margins in the energy storage market?

From a technical perspective, the need for cost reduction is driving the development of larger-capacity energy storage cells. This means that increasing cell capacity reduces system integration complexity, improves system energy density, and reduces the number of cells and components required for a single system, thereby diluting the overall unit cost of the energy storage system. Previously, the energy storage market utilized 280Ah cells for power batteries. However, starting in 2023 , domestic energy storage cell production capacity began to shift from 280Ah to 314Ah , and gradually transitioned to 400+Ah cells. Data shows that by 2024, the penetration rate of 314Ah cell shipments will exceed 40%, and the capacity shift rate will exceed 50%.

As mentioned earlier, companies like Trina Solar have already begun developing large-capacity battery cells, which will ensure their future market competitiveness and even enable them to earn a premium. Data shows that 314Ah cells command a significant price premium in the early stages of adoption, with the average price in early July 2024 being 0.03 yuan /Wh higher than 280Ah cells .

From a market perspective, overseas electricity markets are highly regulated, and customers are less price-sensitive than in the domestic market. They prioritize energy storage project experience and brand reputation, leading to a significant brand-specific compounding effect. For example, in recent years, new orders from Sungrow Power Supply and Canadian Solar BYD have included multiple projects with the same developer. Furthermore , energy storage systems have a long service life. Essentially, system delivery is only the beginning of the sales process; significant operations and maintenance remain. This requires strong after-sales service capabilities from the brand. This long-term operational nature ensures that leading companies remain strong.

Therefore, even if the energy storage market gradually enters a phase of involution, leading companies with a well-developed supply chain and both technological and brand advantages will be able to achieve substantial profitability. For example, CATL, while also impacted by involutionary competition, maintains a respectable gross profit margin compared to the entire manufacturing industry.