Source: Economic View
Chen Haisheng
Director, Energy Storage Specialized Committee, China Energy Research Society
Chairman, China Energy Storage Alliance (CNESA)
Director, Institute of Engineering Thermophysics, Chinese Academy of Sciences
According to data from the National Development and Reform Commission (NDRC), China's nationwide installed capacity of new-type energy storage has exceeded 100 GW, more than 30 times the level at the end of the 13th Five-Year Plan period.
Driven by Three Forces, the Energy Storage Market Reaches
a New Milestone
This development is the result of the combined effects of multiple key factors, including market demand, technological breakthroughs, and policy support.
First, rigid demand from the energy transition. Driven by China's “dual carbon” goals, installed capacity of renewable energy such as wind and solar has grown rapidly. Due to the intermittency and instability of renewables, their high penetration has significantly increased pressure on grid integration. As a key solution for renewable energy grid connection, energy storage has therefore seen a sharp rise in market demand.
Second, continuous breakthroughs in energy storage technologies. After a long period of accumulation, decisive breakthroughs have been achieved over the past five years. Lithium-ion battery technologies have continued to advance, enabling large-scale production of storage batteries. System performance has improved significantly while costs have continued to decline. At the same time, other technology pathways such as compressed air energy storage and flow batteries are gradually being commercialized, laying a solid foundation for large-scale deployment.
Third, strong support from the policy framework. At the national level, a series of major policies have been introduced to support industry development. These include the Guiding Opinions on Accelerating the Development of New Energy Storage issued by the NDRC and the National Energy Administration, and the Opinions on Improving the Price Governance Mechanism issued by the General Office of the CPC Central Committee and the State Council. By advancing and refining pricing mechanisms and market rules, these policies provide a clearer market environment for energy storage projects. Local governments have also introduced specific market and pricing policies tailored to their development characteristics, greatly stimulating the enthusiasm of market participants.
Based on current trends, the author believes that over the next three to five years, both the pace and scale of development of the new-type energy storage market will continue to increase significantly.
First, demand for energy storage will continue to rise. As renewable energy installations keep expanding, the role of energy storage will become increasingly prominent, driving rapid growth in demand.
Second, policy support will remain strong. A series of national policies have been introduced to promote the development of the energy storage industry. The Action Plan for the Large-Scale Construction of New-Type Energy Storage (2025-2027) proposes that by 2027, China's installed capacity of new-type energy storage will exceed 180 GW, driving approximately RMB 250 billion in direct project investment. This has effectively boosted market expectations. In addition, in September this year, China announced a new round of Nationally Determined Contribution (NDC) targets, clearly stating that by 2035, total installed capacity of wind and solar power will exceed six times the 2020 level, with a target of reaching 3.6 TW. To meet these goals, strong national support for energy storage is expected to continue.
Third, technological progress and cost reductions will continue. With ongoing innovation and scaling-up of energy storage technologies, new technologies and products will continue to emerge, while there remains room for further cost reductions at the system level.
Fourth, business models will gradually mature, with diversified revenue streams including capacity payments, spot market arbitrage, and ancillary services.
Fifth, overseas market demand remains strong. As the share of renewable energy generation continues to increase globally and supportive policies are introduced in many regions, further improvements in the economics of energy storage are expected to drive continued expansion of overseas markets.
According to forecasts by the Zhongguancun Energy Storage Industry Technology Alliance, new-type energy storage will reach the next “100 GW” milestone in 2027-2028, with China's installed capacity reaching 200 GW. Around 2030, China is expected to reach the third “100 GW” milestone, with cumulative installed capacity reaching 300 GW.
How to Shift from “Scaled Deployment” to “High-Quality Operation”?
However, to achieve a transition to high-quality operation over the next one to two years, concentrated breakthroughs are still needed in key areas such as market mechanisms, technological optimization, safety risk prevention, and full life-cycle management.
In terms of market mechanisms, it is necessary to gradually improve market and pricing mechanisms for new-type energy storage, promote the business model of “capacity payments + energy arbitrage + ancillary services,” appropriately expand spot price spreads, incorporate new types of ancillary services-such as ramping, inertia, reserves, and black start-into the pricing mechanism, and promote linkage between green power trading and energy storage discharge volumes to realize explicit monetization of environmental attributes.
In terms of safety risk prevention, a solid safety defense must be built from three aspects: monitoring and early warning, protection mechanisms, and standards and regulations. A unified system of safety technical standards should be established rapidly, clearly defining safety indicators for equipment selection, installation and commissioning, operation, and maintenance of energy storage power stations. Research should also be conducted on implementing a battery traceability system to ensure accountability for safety responsibilities.
In terms of technological R&D, first, continued strong development of lithium batteries is needed, with further optimization of the operation and application of existing lithium-based energy storage systems. Second, priority should be given to promoting demonstration and application of long-duration energy storage technologies such as variable-speed pumped storage, compressed air energy storage, and flow batteries. Greater efforts should also be made to advance R&D and validation of new technologies such as solid-state batteries, sodium-ion batteries, and grid-forming energy storage, fostering a development pattern in which multiple storage technologies progress in coordination.
In terms of industrial coordination, efforts should be made to enhance self-sufficiency in key materials. Targeting weak links such as core materials for energy storage cells and key equipment for long-duration storage, breakthroughs should be pursued through industry-university-research innovation consortia. Industrial development order should be standardized by curbing inefficient and repetitive construction through dynamic monitoring of project filings, and guiding capital toward projects with high utilization rates and high safety performance.
To promote the healthy and sustainable development of the industry, the author believes that further policy efforts are needed. First, market-based revenue policies should be improved by further refining energy storage pricing mechanisms, clarifying pricing calculation rules for different regions and application scenarios, expanding revenue channels from ancillary services, and smoothing cost-sharing mechanisms for such services, while continuing to promote business models involving capacity prices, energy prices, and ancillary services.
Second, full-chain safety policies should be strengthened by improving safety standards and regulations, refining safety supervision processes, implementing regular safety inspection systems, and clearly defining safety acceptance standards for all stages of energy storage power stations, from design and construction to operation and maintenance.
Third, research on energy storage pricing should be conducted by promoting cost tracking for major mainstream energy storage technologies, studying cost structures across key segments of energy storage systems, and guiding the industry toward rational assessments of energy storage costs.
Finally, industry self-regulation should be promoted by strengthening dynamic monitoring of data such as energy storage output, continuously paying attention to industry development issues, advancing technological iteration and safety performance upgrades of energy storage products, supporting industry-led self-regulatory initiatives, and guiding the sector toward a virtuous development path that emphasizes safety performance and value creation.
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