China’s new energy storage applications is in three areas

1. Power Generation Side:Storage systems are paired with renewable energy like wind and solar farms (“Wind/Solar + Storage”). This helps smooth out fluctuations in power generation, makes the power more stable for the grid, and reduces wasted wind and solar energy.
2. Grid Side:Storage focuses on balancing supply and demand and stabilizing grid frequency (peak shaving & frequency regulation). Its fast response helps provide grid support services. Storage on local distribution grids also strengthens the grid’s resilience.
3. User Side:This is mainly for businesses and factories. They use storage to save on electricity costs by charging when prices are low and using the stored power when prices are high (taking advantage of time-of-use pricing). Storage is often combined with rooftop solar and EV chargers to create integrated “Solar + Storage + Charging” systems.

Additionally:

In remote areas, storage combined with microgrids provides stable power to places without reliable grid access. This use is also expanding to new areas like 5G base stations and data centers.

As China’s electricity market reforms progress, energy storage is becoming actively involved in power trading through various models, helping to build a new, more flexible power system.

Application Distribution

• Looking at new energy storage installations in 2024 (based on energy capacity – MWh), grid-side storage was the main driver, accounting for 0%of new capacity. This was up 7.6% from 2023.
• Within grid-side storage, independent storage projects dominated, making up 6%of the total new installations. As more regions implement policies shifting from mandatory storage allocation to independent storage projects, this share is expected to keep rising in 2025.
• Generation-side storageaccounted for 3%, with storage paired with solar and wind farms together making up 30.9%.
• User-side storagerepresented 7%. Factories were the primary application here, though storage use in industrial parks and integrated solar+storage+charging setups is also gradually increasing.

2024 New Energy Storage Applications Distribution (MWh)

Generation & Grid-Side Storage Market Analysis

• China’s new renewable energy capacity continued to grow significantly in 2024. According to the National Energy Administration (NEA):

• New solar PV installations: 2 GW
• New wind power installations: 3 GW
  • Driven by increased storage requirements for large-scale renewable energy bases and ongoing cost reductions in the supply chain, new installations for generation & grid-side storage also surged in 2024.
  • Based on EESA (Energy Storage Alliance) statistics:
• China added 8 GW / 98.9 GWhof new generation & grid-side storage capacity in 2024.
• This represents year-on-year growth of 113%.
• Generation & grid-side storage made up a dominant 3%(based on energy capacity) of China’s total new energy storage installations.

New Generation & Grid-Side Storage Installations: 2019 to 2024

Diversified Revenue Models & Profitability

• Driven by policy, China’s generation & grid-side storage has developed multiple revenue streams: capacity leasing, capacity compensation, electricity trading, and ancillary services.
• For independent storage projects, the specific revenue mix varies slightly depending on local policies.
• According to EESA calculations, assuming ideal conditions:

• 2-hour system EPC cost: 1.2 RMB/Wh
• Storage system cost: 0.6 RMB/Wh
• Battery cost: 0.35 RMB/Wh
• Initial capacity leasing rate: 80% (decreasing by 5% every 3 years)
• …independent storage projects in many regions can achieve varying levels of profitability.
  • Furthermore, supply chain cost reductionsare improving project economics. A decrease of 0.2 RMB/Wh in EPC costs can boost a project’s IRR by approximately 2%.

Sustained Demand Drivers

1. Generation-Side Demand Remains:

• Although the mandatory storage allocation policywas cancelled in early 2025, projects initiated under the previous policy are still coming online.
• Under China’s carbon neutrality goals, renewable energy’s shareof total installed capacity is expected to grow significantly, requiring continued storage deployment to manage intermittency.
• Therefore, long-term demand for generation-side storage persists.
  2. Grid-Side Demand Grows:
• As renewables penetration increases, the grid’s reliance on fast-responding resources
• The expansion of the ancillary services marketin 2025 will directly stimulate grid-side storage installations.
• Deploying storage at load centers and critical transmission nodesto delay costly grid upgrades is another key driver for grid-side storage.

2025 Market Outlook (EESA Forecasts – GWh)

• Base-case Scenario:Considering the above factors, EESA forecasts 3 GWh of new generation & grid-side storage installations in 2025, representing 34% year-on-year growth.
• Conservative Scenario:Uncertainty around renewable project profitability under full market participation could lead to lower-than-expected renewable installations, potentially reducing storage demand. Under this scenario, new installations are projected at 4 GWh (up 8% YoY).
• Optimistic Scenario:As the final year of China’s 14th Five-Year Plan (2021-2025), large-scale wind/solar base construction could accelerate. Combined with retrofits of aging storage plants, this could push installations to 2 GWh (up 62% YoY).

User-Side Energy Storage

• User-side energy storage refers to systems installed behind the meter(e.g., in homes, factories, shopping malls). They store electricity during off-peak hours and release it during peak hours, helping users optimize electricity costs and enhance power supply stability.
• Its core functionsinclude:

• Peak-valley price arbitrage
• Reducing basic electricity fees
• Participating in demand response programs
  • It’s mainly divided into commercial & industrial (C&I) storageand residential (household) storage.
  • In China, the residential storage market lagsdue to relatively low household electricity prices. Consequently, C&I storage dominates the current user-side market. Therefore, the following discussion focuses primarily on C&I storage.

C&I Storage Development in 2023-2024

• 2023 was seen as the “first year” of C&I storage developmentin China, with strong optimism from both investors and equipment suppliers for 2024.
• Project deployments grew steadily month-over-month in the first half of 2024.
• However, deployments declined in Q3 2024due to tighter regulations, resulting in full-year growth falling short of initial lofty expectations.
• While many regions introduced stricter regulationsin 2024 (covering project approval/filing, fire safety, and grid connection acceptance), which temporarily dampened investment enthusiasm and caused a staged deceleration in deployments…
• …the rise of the Jiangsu marketand the exploration of more niche application scenarios still drove significant growth for the year.
• Total deployments reached 3.74 GW / 8.2 GWh in 2024, representing 72% year-on-year growth(based on energy capacity) and maintaining strong momentum.

Equipment Price Trends

• Prices for all-in-one C&I storage cabinets:

• Dropped from nearly 5 RMB/Whin mid-2023
• To ~1.0 RMB/Whin early 2024
• Then to ~0.8 RMB/Whby mid-2024
• Finally stabilizing at 0.6-0.7 RMB/Whby early 2025.
  • This continuous price decline reflects intense competitionamong equipment suppliers.
  • However, lower prices have significantly shortened project payback periods, further boosting investor enthusiasm.

New C&I Energy Storage Installations in China: 2019 to 2024 (GW/GWh)

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