Seller's market for energy storage: Full capacity across the board, hard to find a single core

Ask AI · How do policy documents spark demand for energy storage?

Reporter Zheng Chenyang

In mid-March this year, a Mr. He, an investor who has long tracked the energy storage industry, went to conduct research at several energy storage cell companies in the Pearl River Delta region. What surprised him was not only how busy the production lines were, but also that several companies had quite a number of people lined up at their factory gates waiting to be hired.

“Back then around this time last year, some plants were still cutting output. Now they can’t get enough staff.” Mr. He said.

Hiring is just a snapshot of the energy storage industry heating up. Data from the National Bureau of Statistics shows that from January to February 2026, the output of energy storage lithium batteries increased by 84% year over year. Statistics from the Zhongguancun Energy Storage Industry Technology Alliance also show that from January to February 2026, the domestic newly added installed capacity of new-type energy storage reached 24.18GWh (gigawatt-hours), up 472% year over year. Data from the General Administration of Customs shows that from January to February 2026, the total export value of inverters was $1.66 billion, up 56% year over year.

A more concrete example of the industry’s rise is that on March 25, three central government-owned enterprises—including China Energy Equipment Group, State Power Investment Corporation, and CGN New Energy—issued energy storage centralized procurement notices totaling 32GWh on the same day. It’s not common in the energy storage industry for three central SOEs to place large orders on the same day.

Production is fully booked

Energy storage cells are broadly divided into two categories by capacity.

Small-capacity 100Ah (ampere-hour) cells are mainly used in residential energy storage systems and small energy storage equipment. Each cell can store about 320Wh (watt-hours) of electricity. Large-capacity cells of 314Ah and above (up to 500Ah and beyond) are mainly used in large grid-side energy storage power stations; the installed capacity of a single project can easily reach hundreds of megawatt-hours.

The shortage of 100Ah cells has been persistent since mid-2025. Mr. He recalled that when he visited several companies in the second half of last year, the 100Ah production lines were basically operating at full capacity. Customers who wanted to add orders couldn’t get in. “The whole industry’s orders have turned on since the fourth quarter of last year, but the 100Ah shortage actually began from mid- last year.”

Li Huili, a marketing director at a Shenzhen energy storage cell company, told reporters that the 100Ah production lines are relatively mature. But over the past two years, the residential storage market was sluggish, so manufacturers didn’t expand production at scale. Then demand surged in the second half of 2025, and existing production lines were quickly filled by orders. However, building a new cell production line—from project approval to commissioning—usually takes more than a year, so capacity is difficult to catch up with in the short term.

For large-capacity cells, supply is also tight. Currently, mainstream large-capacity cell products are in a transition period from upgrading from 314Ah to 500Ah and above. Production lines for older specifications are no longer expanding at scale, and capacity for the new specifications has not been released in large quantities.

With tight supply on both ends—small and large cells—InfoLink, a well-known new energy market research institution, judged the supply-demand landscape for the 2026 energy storage cell market as “tight balance in the first half, moderately loose in the second half,” with new capacity releases mainly concentrated in the second half. Li Huili also told reporters that if a new customer places an order now, the earliest they can receive goods is about two months later.

During the interview, reporters also learned that many leading cell companies have seen their production scheduling volumes since the beginning of the year hit historical highs; some companies didn’t stop production throughout the entire Spring Festival holiday of the Year of the Horse.

CATL (300750.SZ), which ranks first globally in energy storage battery shipments, has annual capacity of 772GWh and output of 748GWh. People close to the company told reporters that a large number of customers have already locked in 2026 capacity through prepayments.

Chuanneng New Energy, established only four years ago, had shipments exceeding 90GWh in 2025, up 350% year over year. People close to the company also told reporters that its orders in hand are already scheduled through the end of 2026, and all four production bases are operating at full production capacity.

In addition, Penghui Energy (300438.SZ) said in an announcement released in February 2026 that it plans to invest 3.3 billion yuan to expand energy storage battery production lines in Henan. The project includes two production lines for 587Ah large-capacity cells and 120Ah cells.

With production fully booked, prices are rising as well.

Data from the Zhongguancun Energy Storage Industry Technology Alliance shows that in February 2026, for 4-hour energy storage systems mainly used in large energy storage power stations, the winning bid average price had already returned to above 0.5 yuan/Wh. According to data from GaoGong Industrial Research (GGII), for 314Ah cells used in large energy storage power stations, recent quotes from leading companies have already approached 0.4 yuan/Wh, rebounding by more than 30% from the 2025 low point.

Why it has exploded

Why has energy storage demand concentrated into a surge? This starts with two policy documents.

At the beginning of 2025, the National Development and Reform Commission and the National Energy Administration jointly released the “Notice on Deepening the Market-Oriented Reform of Grid-Connected Electricity Prices for New Energy and Promoting High-Quality Development of New Energy,” which the industry refers to as “Document No. 136.” This document removed the requirement for new energy projects to be forced to configure energy storage. Before this, wind farms and photovoltaic power stations were required to build energy storage facilities at a certain proportion. This drove a large number of low-quality “paired-with-storage” projects—installed but not really used.

After Document No. 136 canceled this requirement, energy storage power stations are no longer a mere accessory to new energy projects; they can participate in electricity market transactions as independent entities.

On January 30, 2026, the National Development and Reform Commission issued the “Notice on Improving the Capacity Price Mechanism on the Generation Side,” which the industry calls “Document No. 114.” For the first time at the national level, this document established a capacity price mechanism for independent new-type energy storage on the grid side.

The revenue of energy storage power stations mainly comes from charging at low prices and discharging at high prices in the electricity market, earning the price spread in between. The problem with this model is that electricity prices fluctuate a lot, making revenues unstable and making it difficult for investors to figure out how much a power station can truly make. What Document No. 114 does is to use the local coal power capacity price as the benchmark, convert it based on the discharge duration of the energy storage power station, and provide independent energy storage with a floor income calculated on an annual basis.

In fact, after Document No. 136 canceled forced “paired storage,” the growth of independent energy storage had already accelerated in 2025. According to the “2025 Industry Statistical Data of Electrochemical Energy Storage Power Stations” released on March 25, 2026 by the China Electricity Council, independent energy storage added 32.33GW (gigawatts) of installed capacity in 2025, up 39% year over year, accounting for 69% of all newly added installed capacity. The average annual equivalent number of charge-discharge cycles for independent energy storage reached 299 times, which is 52 more than in 2024—equivalent to completing a full charge-discharge cycle every 1.2 days.

After Document No. 114 took effect in January 2026, this trend accelerated further. According to data from the Zhongguancun Energy Storage Industry Technology Alliance, from January to February 2026, the domestic bidding scale for newly added new-type energy storage reached 136.7GWh, up 120.8% year over year.

The procurement intensity by central SOEs has also been increased.

Since early 2026, multiple large framework procurements have been implemented one after another, such as China Huadian’s 12GWh, MCC Jingcheng’s 8GWh, and Huaneng’s 4GWh. In the three centralized procurement announcements released on March 25 in the same day mentioned above, China Energy Equipment Group’s cell procurement scale reached 19.8GWh: it procured 3.2V/314Ah square lithium iron phosphate cells (lithium iron phosphate is the mainstream technical route for energy storage batteries today), and the 11 shortlisted suppliers almost cover leading domestic cell makers. State Power Investment Corporation’s 5GWh system centralized procurement has a quoted price range for centralized energy storage of 0.521 to 0.561 yuan/Wh. CGN’s 7.2GWh system framework procurement, across six bid packages, had winning quotes between 0.491 and 0.530 yuan/Wh.

While domestic demand is surging, overseas markets are also expanding.

According to Jibang Energy Storage (JiBan) statistics, from January to February 2026, Chinese energy storage companies secured nearly 50 orders overseas, with a total scale exceeding 33.5GWh, covering Europe, the Middle East, Africa, and Southeast Asia.

Europe is the biggest source of incremental growth. The tense situation in the Middle East combined with disruptions to shipping through the Strait of Hormuz has pushed up European natural gas prices continuously. As of March 26, 2026, the TTF benchmark Dutch natural gas futures price was 55.42 euros/MWh, up more than 80% from the low point earlier this year. Residents’ electricity costs have risen sharply.

Natural gas is an important fuel source for power generation in Europe. When gas prices rise, power generation costs increase, which in turn raises residential electricity prices. The higher the electricity price, the more worthwhile it becomes for households to install a photovoltaic plus energy storage system to generate, store, and use electricity themselves.

In addition, multiple countries are also increasing subsidies at the same time. For example, Australia launched a household energy storage subsidy program in July 2025, offering about a 30% price subsidy to households purchasing residential energy storage equipment. The initial budget was 2.3 billion Australian dollars, but because demand far exceeded expectations, within five months more than 160,000 households applied to install systems. In December 2025, the government increased the budget to 7.2 billion Australian dollars. In the UK, household storage subsidy policies are also expected to be implemented in April this year.

With both economic viability and policy incentives pushing from both sides, overseas residential energy storage demand is heating up quickly.

Zhang Shuping, sales director at an energy storage system integrator in Dongguan, told reporters that recently, European customers’ inquiry volume hit a new high. Some products have even been reserved ahead of shipping from in-transit inventory. Additional orders will likely need to wait at least two to three months.

At present, it’s not only residential storage seeing volume growth; overseas orders for large-scale energy storage and commercial/industrial energy storage are also coming in densely.

On March 18, 2026, Sungrow Power Supply (300274.SZ) signed a 2.5GWh energy storage agreement in Romania. As a result, its cumulative signed contracted capacity in Romania has exceeded 4.5GWh. From March 4 to 6, Reeler/Refers?—Reipurangjun (00666.HK) signed 8.3GWh energy storage system orders with seven European partners at an international renewable energy exhibition held in Rimini, Italy. Also in March, China Energy Engineering Corporation (601669.SH) signed a solar-plus-storage project in the United Arab Emirates for approximately 13.962 billion yuan RMB; the energy storage component alone is 7.75GWh.

In addition, the pull from AI computing power demand on energy storage demand is also emerging—and the incremental impact may be even greater than many people expect.

Data centers are large electricity consumers and require uninterrupted power supply 24/7. With the surge in demand for training and inference of large models, global data center power consumption is rising rapidly. In the 2026 government work report, the concept of “power generation and computing coordination” was proposed for the first time, requiring an increase in the proportion of green electricity used by data centers.

Against this backdrop, energy storage provides data centers with two layers of value: first, to meet the green electricity share requirements by pairing with green electricity sources such as solar and wind; second, when grid capacity is tight, energy storage can smooth load fluctuations and provide backup power, helping data centers complete grid connection faster.

In a research report released by Soochow Securities on December 2025, it estimated that energy storage demand related to U.S. data centers in 2026 would contribute 37GWh. A research report from CICC in the same period estimated that by 2030, the U.S. demand for pairing data centers with energy storage could reach between 100GWh and 200GWh.

How long can it stay hot

With orders overflowing and production scheduling pushed to the maximum, the next question is whether good times can last.

To answer this, first you need to see where the money for buying energy storage equipment ultimately ends up. Central SOEs’ large-scale procurement of cells and energy storage systems ultimately gets installed into independent energy storage power stations. After these power stations are built and begin operating, whether they make money directly determines whether investors dare to place further orders.

Document No. 114 provides capacity compensation as a guaranteed floor income, but the revenue of independent energy storage power stations is not limited to that. Earning the price spread by charging at low prices and discharging at high prices in the electricity spot market is another important source.

An industry analyst Mr. Zhou from the power and new energy sector gave reporters a calculation: taking Gansu as an example, a 100MW/400MWh independent energy storage power station can receive about 22 million yuan RMB every year from capacity compensation alone.

The “2025 Gansu Electricity Market Annual Report” released by the Gansu Power Exchange shows that in 2025, the average electricity price in peak time periods in the Gansu spot market was 313 yuan/MWh. During the mid-day period when photovoltaic generation is high, the average electricity price was 110 yuan/MWh, resulting in an average peak-to-valley price spread of 203 yuan/MWh. In addition, energy storage power stations can also obtain revenue by participating in auxiliary services such as frequency regulation and standby services.

Zhang Shuping, the sales director of the aforementioned energy storage company, told reporters that in the past, the returns from investing in energy storage power stations were uncertain, so many investors had been watching from the sidelines. Now with capacity compensation providing the baseline, plus spot arbitrage and auxiliary services, the total return on investment for a well-operated station can reach around 7%. He said, “At least now we know where the bottom line is.”

The “14th Five-Year Plan for 15th Five-Year Plan Outline” announced officially on March 13, 2026—?—clearly proposes “vigorously developing new-type energy storage,” and includes new-type energy storage among six major emerging pillar industries.

This is the third consecutive year in which the government work report mentions “developing new-type energy storage.” Also, according to incomplete statistics from the Economic Observer, among the 2026 key project lists published by 18 provinces and cities nationwide, there are more than 250 energy storage-related projects, with a total investment exceeding 60 billion yuan RMB.

During the interviews, many industry insiders also expressed optimism about the continued growth of overseas markets. The analyst Mr. Zhou mentioned above told reporters that this domestic boom is supported by both policy and business models, but to judge how long it can last, you still need to look at overseas markets.

Data recently released by the well-known market research firm SNEResearch shows that in 2025, the global shipments of energy storage batteries reached 550GWh, up 79% year over year. The top seven companies by shipment volume are all from China, collectively holding 83.3% of the market share.

Multiple industry insiders told reporters that in 2026, growth momentum in commercial and industrial energy storage and large-scale energy storage in overseas markets may be stronger than that of residential energy storage. A long-time analyst tracking overseas energy storage markets told reporters that Europe’s issue is not only that electricity is expensive; unstable natural gas supply also increases the grid’s regulation pressure. This is exactly where commercial and industrial energy storage and large-scale energy storage are needed to provide support.

The analyst believes overseas energy security demand will not be a passing wave. Since the Russia-Ukraine conflict began in 2022, Europe has been continuously advancing energy independence. Even if the Middle East situation eases, this trend will not reverse. In his view, global energy storage demand growth does not depend on any single market. Europe, Australia, Southeast Asia, and Africa are all in different stages of their energy transitions, and demand for energy storage products will continue to be released.

Demand may not seem scarce, but the market has lessons.

From 2022 to 2023, China’s wind and photovoltaic installed capacity grew rapidly. Combined with the forced paired-storage policies at the time, large amounts of capital poured into the energy storage cell manufacturing segment, and production capacity expanded rapidly. The result was that capacity expanded too fast and demand couldn’t keep up. Cell prices fell continuously starting in 2024, and in the first half of 2025, many small and mid-sized firms were squeezed out of the market.

Now that demand has picked up, energy storage companies naturally want to expand production as well—but will they rush in again and repeat the same mistakes?

In response, many industry insiders told reporters that this round’s production expansion pace is much more cautious.

Li Huili told reporters that in the previous expansion cycle, many companies put production lines into operation right after getting financing, but once capacity was built, demand didn’t follow. This time, people are clearly more cautious about capital expenditures—especially since large storage cells are in a technology transition period from 314Ah to above 500Ah. The new production lines require heavy investment and the processes aren’t yet mature, so no one dares to bet boldly.

Changes can also be seen in companies’ overseas layouts. In February 2026, Sungrow Power Supply started building a manufacturing base in Poland, planning annual production of 12.5GWh of energy storage systems. In the same period, it also started an energy storage factory in Egypt with an annual capacity of 10GWh.

Compared with simply expanding capacity in China, leading companies are more inclined to build capacity in locations closer to customers.

Of course, shortages won’t last forever. In a research report it published recently, InfoLink expects that the release of new capacity for energy storage cells will mainly be concentrated in the second half. At that time, the supply-demand relationship may shift from tight balance to moderate looseness.

In addition, different institutions also disagree on the scale of global energy storage installations in 2026. InfoLink expects system deployments of 353GWh for the full year. Soochow Securities, in its annual strategy released in December 2025, expects global deployments of 428GWh, up 82% year over year. CICC’s forecast for the same period is 408GWh, up 45%.

But the consensus among institutions is that the year-over-year growth rate of global energy storage deployments in 2026 will not be below 40%.

Li Huili also told reporters that the first half of the energy storage market has very high certainty—orders and production scheduling have already been locked in. As for the second half, after thinking for a moment, she said: “Let’s see once the new capacity comes online.”