In Depth: Soaring Energy Storage Stocks Mask an Industry at a Crossroads

Chinese energy storage companies have experienced explosive growth in 2024, propelled by new government policies focused on supporting green energy and modernizing the power sector. Stocks of leading firms such as Contemporary Amperex Technology Co. Ltd. (CATL), Eve Energy Co. Ltd., CALB Group, Sungrow Power Supply Co. Ltd., and Pylon Technologies Co. Ltd. have surged dramatically, posting gains from 32% up to 192% from their yearly lows. This market rally was underpinned by policy changes that shifted the industry toward a more market-driven approach and away from previous requirements for compulsory installations of storage alongside renewables. [para. 1][para. 2][para. 3][para. 4]

Key to this transformation was a February policy that instructed the industry to focus on market demand rather than mandates. By September, the National Development and Reform Commission and the National Energy Administration had outlined a plan to build over 180 gigawatts of new storage by 2027, requiring around 250 billion yuan ($34.5 billion) in investment. China’s rapidly expanding storage capacity—up 68% year-on-year in the first half of 2024—reflects manufacturers running at maximum capacity to meet surging orders. [para. 4][para. 5][para. 6]

Despite the boom, the shift away from mandate-driven installations has created significant uncertainty. The industry is scrambling to find sustainable, profitable business models as the previous system of forced installations is dismantled. Energy storage is seen as vital for integrating China’s growing share of wind and solar power into a national grid struggling with underused renewables: wind and solar curtailment rates reached 6.8% and 6% respectively in the first half of 2024. Industry experts stress that the scale and quality of storage will determine the effectiveness of China’s energy transition in the coming years. [para. 7][para. 8][para. 9][para. 10]

Previously, China addressed renewable intermittency by requiring projects to install storage equaling 15–20% of their power capacity, a method first used in 2017. While this boosted storage deployment, it led to low average utilization rates—in 2024, electrochemical storage was utilized just 41% of the time despite improvement. Cost pressures forced developers to favor cheaper suppliers, triggering a price war that disadvantaged higher-quality manufacturers. The scrapping of mandatory pairing by government directive in February marked a major shift, with all new projects required to sell on the open power market from June 1. This initially caused a rush to install storage, followed by a sharp decline in new tenders, but market sentiment has since recovered. [para. 11][para. 12][para. 13][para. 14][para. 15][para. 16]

The elimination of mandatory storage pairing upended the business model of independent storage stations, many of which relied on capacity leasing to renewable projects. With falling lease prices and terminated contracts, some have seen incomes cut by up to half, leading to project delays. Many are now seeking new revenues through price arbitrage in China’s expanding electricity “spot” markets, but these spreads are often too small to ensure profitability. As of June 2024, spot markets operated in 27 out of 31 provincial-level regions, but industry models remain under stress. [para. 17][para. 18][para. 19][para. 20][para. 21][para. 22][para. 23][para. 24][para. 25][para. 26][para. 27]

Looking forward, industry stakeholders expect conditions to improve over the next three to five years as market mechanisms mature and storage becomes critical for grid stability. New policies encourage “new energy + storage” to participate jointly in market trading, and more local governments are supporting such initiatives. Renewables’ share of China’s power mix reached 26% in early 2025, up 4.4 percentage points year-on-year, intensifying the need for longer-duration storage. Most current systems—relying primarily on lithium batteries—provide two to four hours of output, a limit stemming from earlier regulatory mandates. Experts predict a substantial increase in demand for advanced storage solutions as China’s energy transition accelerates. [para. 28][para. 29][para. 30][para. 31][para. 32][para. 33][para. 34][para. 35][para. 36][para. 37]