China’s energy storage market is crucial for supporting the country’s clean energy transition, showing rapid growth but also facing significant challenges. This market plays a key role in optimizing the use of renewable energy from solar and wind power, especially as China’s overall solar and wind capacity has already surpassed its 2030 goals.
Massive Investments Reflect Ambition
Projects like the large-scale Shandong salt-cavern energy storage facility exemplify the level of investment and ambition in this sector.
Challenges Facing the Market
Overcapacity and Low Utilization: Government mandates requiring new renewable energy projects to include energy storage have led to overcapacity. In 2022, energy storage systems at renewable plants operated for only 2.18 hours per day on average, leading to underutilized facilities and financial strain on companies.
Economic Challenges: The cost of complying with storage mandates has inflated the initial costs of renewable projects, reducing profitability. Many companies view the required energy storage systems as a sunk cost, resulting in the installation of low-quality systems that are rarely used.
Market Saturation and Falling Prices: Rapid expansion, driven by government policies and subsidies, has led to market saturation. Increased competition among providers has driven down prices, making it difficult for companies to turn a profit.
Technological and Regulatory Barriers: While lithium-ion batteries dominate the market, they have limitations such as fire risks and are not ideal for long-duration storage. China is exploring alternative technologies like sodium-ion and sulphur-based flow batteries, but these are still in early development stages. Additionally, barriers to interprovincial electricity trading and rigid power pricing models further complicate the economic viability of energy storage.
Path to Market Stabilization
To stabilize the market, experts suggest continued reform of China’s power market, technological innovation, and the development of new business models. Aligning storage expansion with actual grid and market needs is essential to avoid further overcapacity and ensure sustainable growth.
Future Outlook: Potential for a Trillion-Yuan Industry
Despite the challenges, innovation in both technology and business practices could help realize the market’s potential as a trillion-yuan industry in the coming years.
Source: scmp.com
