China’s power market shift lifts battery storage exports

• China’s power market reforms are making battery storage profitable to operate.
• Rising price-driven demand is lifting Chinese exports as grids and data centres come under strain.

Battery storage in China is beginning to behave like a real business rather than a policy add-on. That shift is rippling through global supply chains at a moment when demand for reliable power is rising almost everywhere.

For years, large amounts of battery capacity inside China sat underused. Projects were built to meet policy requirements, not market signals, and fixed electricity prices left little room to profit from storing power. As reported by Reutersrecent changes to China’s electricity market are starting to reverse that logic. Storage operators can now earn money by charging when power is cheap and discharging when prices rise.

That change is coinciding with a sharp increase in overseas demand, giving Chinese manufacturers an opening to expand exports at speed.

Global shipments of lithium-ion cells used for energy storage are expected to rise sharply this year, with Chinese producers accounting for most of the growth. One estimate puts the year-on-year increase in shipments at roughly 75 per cent. In value terms, China has already exported more than US$65 billion worth of batteries used in energy storage systems and electric vehicles.

Those exports support sectors that are under growing strain. Renewable energy needs backup when the sun and wind fall short. Power grids in Europe are ageing. Data centres, especially those running AI workloads, are consuming electricity at rates that existing infrastructure was not designed to handle.

Demand is no longer local

Energy storage demand inside China is rising, driven by data centres and the continued build-out of wind and solar. At the same time, overseas buyers are placing larger orders as power reliability becomes a constraint rather than a background issue.

Europe’s grid challenges are one factor. Another is the expansion of renewable projects in regions such as the Middle East, where Chinese firms are often involved in construction and financing. Together, these pressures are pulling more Chinese battery output into international markets.

“These leading energy storage cell makers, they have full orders. Many of them are basically working double shifts now to try and meet demand,” said Cosimo Ries, an analyst at policy research firm Trivium China. The boom “is one of the biggest surprises of the year, I think, in China’s energy space.”

Forecasts are being revised accordingly. UBS raised its outlook for global battery energy storage installations in 2026 by 25 per cent. The International Energy Agency expects global investment in battery storage to reach US$66 billion this year, up 16 per cent from last year.

While companies such as Tesla lead the market for complete energy storage systems, the battery cells inside those systems largely come from China. That imbalance matters because cell production sets the pace for how quickly new storage capacity can be built.

All six of the world’s largest battery cell suppliers are Chinese, according to Infolink rankings covering the first nine months of the year. Japan’s AESC is the only non-Chinese company among the global top ten.

Some manufacturers are already reporting strong gains. EVE Energy said its energy storage sales volumes rose 35.51 per cent in the first three quarters compared with a year earlier. REPT BATTERO reported record battery shipments in the third quarter.

For larger electric-vehicle battery producers such as CATL and BYD, energy storage remains a smaller share of overall revenue. Even so, that share is increasing as storage demand grows faster than the EV market in some regions.

Power constraints meet AI growth

One reason storage is moving up the priority list is the expansion of AI data centres, particularly in the United States.

“Pairing solar with storage has effectively become the only solution for meeting US AI data-centre power needs,” UBS analyst Yishu Yan said during a media briefing.

“US AI data centre power demand is very robust, but power is the biggest bottleneck, and US baseload power — gas, nuclear, thermal — they won’t grow much in the next five years.”

That creates opportunities for storage suppliers, but also risks. Yan noted that Chinese manufacturers could be affected by US rules that restrict access to investment tax credits for projects involving “foreign entities of concern,” which include China.

China’s domestic reset

Inside China, exports are being reinforced by changes at home. Battery exports of all types reached US$66.761 billion in the first ten months of the year, according to Ember. Batteries have been China’s largest clean-technology export since 2022, overtaking solar panels.

Growth may continue as Infolink expects global energy storage cell shipments to reach up to 800 gigawatt-hours next year, an increase of 33 to 43 per cent compared with this year’s projections.

China’s exports of energy storage and other non-automotive batteries rose 51.4 per cent in the first eleven months of the year, faster than the growth rate for electric-vehicle battery exports, according to the China Electric Vehicle Industry Technology Innovation Strategic Alliance.

China also operates the world’s largest installed base of battery energy storage, accounting for around 40 per cent of global capacity. Much of that capacity was added to meet local requirements that wind and solar projects include storage.

Until recently, much of it did little work. That changed after reforms introduced in June required new power projects to sell electricity through market-based auctions rather than fixed prices. Storage operators can now respond to price swings instead of sitting idle.

Data from the China Electricity Council show that battery storage facilities ran for an average of 3.08 hours per day in the third quarter. That was 0.78 hours more than a year earlier and higher than the previous quarter.

Policy support is adding momentum. A US$35 billion national plan aims to nearly double battery storage capacity by 2027. Since late 2024, ten provinces have introduced capacity payments that compensate operators for keeping power available, alongside other subsidies.

It is “the most decisive policy shift for energy storage in over a decade,” Jefferies analyst Johnson Wan wrote in a research note.

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