Review and Outlook of ESS Market in China

China's electrochemical energy storage capacity grew rapidly, with 5 GWh added in 2021 (an 89% year-on-year increase) and 15.3 GWh added in 2022 (a 206% year-on-year increase). This growth is driven by higher energy storage configuration ratio requirements and regulations stipulating energy storage as a precondition before grid connection in many provinces, namely the policies of mandatory energy storage integration and priority to grid connection for projects with certain configuration ratios. In response, tenders for energy storage capacity increased significantly, with 31 GWh estimated in 2022 (a 139% year-on-year increase), mainly from the FTM market.

China added 54.9 GW of installed PV capacity in 2021, a 13.9% year-on-year increase, and 87.4 GW in 2022, a 59.2% year-on-year increase. In 2023, after the substantial rise in annual installed capacity, the growth of grid-connected capacity is expected to slow, increasing by 37.2% year-on-year to 120 GW. As renewable energy installations surge, China's wind and PV curtailment tick up. Given that, several local authorities pose higher energy storage configuration ratio requirements.

Economically, renewable-storage integration is still less advantaged than traditional energy sources. For now, policies remain the main driver behind the Chinese energy storage market. Chinese electrochemical energy storage market, with the policy of mandatory energy storage integration dominating the generation side. However, the market sees bad money drives out good due to its inefficiency. Issues such as poor actual operating rates of renewable-storage integrated facilities continue to strangle the development of energy storage in China.

Currently, China is still managing to refrain from fossil fuel imports, aiming to reach carbon peak and carbon neutrality by 2060. The long-term solution for China to achieve energy self-sufficiency comprises renewables reaching grid parity and sufficient energy storage capacity. Over the past decade, China has been laying the groundwork, becoming a world leader in PV, onshore wind, and lithium battery industries. The most prominent outcome is the drastically reduced production costs of PV, onshore wind, and electrochemical energy storage systems.  

InfoLink expects China to add three times more electrochemical energy storage capacity than the nation’s official target by 2025. The main reason for such an optimistic projection lies in China's increasing reliance on electricity due to faster electrification and stronger energy storage demand to maintain power supply and load stability, as a large amount of intermittent renewable energies, such as PV and wind, change the conventional power dispatch schedules, posing challenges to grid stability.

To meet the demand from its power system, China will have to cumulate 460 GWh of energy storage capacity by 2030, among which 350 GWh shall be battery or electrochemical energy storage, and 110 GW pumped hydro storage. Since storage demand correlates with the scale of renewable energy installation, the actual number will vary according to the progress of installations.