China's energy storage battery production capacity is expanding rapidly, with output expected to exceed 550 GWh this year, while power battery production approaches 1,000 GWh.

This indicates that energy storage battery output will reach half of power battery production this year. Overall, total lithium-ion battery production is projected to surpass 1,500 GWh, representing a year-on-year increase of approximately 28%.

Data from China's Ministry of Industry and Information Technology shows that last year's production of energy storage and power lithium batteries stood at 260 GWh and 826 GWh respectively, with the former accounting for about 30% of the latter.

As the share of renewable energy sources like wind and solar power continues to climb, the importance of the energy storage industry is steadily increasing. Before the energy storage boom around 2020, the production ratio between energy storage and power batteries was 1:9 to 1:10. Now, it is set to jump to 1:2.

In recent months, the energy storage battery industry has seen frequent expansion efforts, outpacing the growth of power battery production. If the energy storage sector maintains its growth momentum, the ratio of energy storage batteries to power batteries will soon reach 1:1.

Currently, Chinese battery manufacturers have not fully captured the global power battery market. Certain overseas markets remain dominated by Korean and Japanese companies, which still have demand for ternary battery technology offering long endurance and high energy density. From an industrial landscape and supply-demand perspective, the power battery sector overall remains in a relatively healthy state.

The energy storage battery sector, however, is in a rapid expansion phase, inevitably leading to short-term supply-demand mismatches. Shi Jiayan noted that current energy storage battery production simultaneously meets both present and future installation demands, though this demand does not immediately manifest on the installation side.

Additionally, reasons for energy storage production exceeding new installations include unreported battery cell applications, such as backup power and mobile energy storage.

Bloomberg New Energy Finance forecasts that global energy storage installations will hit a new record high this year, reaching 240 GWh, with sustained relatively high growth in the long term.

For the Chinese market, new energy storage installations are projected to rise 22% year-on-year to 130.4 GWh this year, with potential for over 25% growth to 165 GWh next year.

Overseas demand for energy storage has recently surged significantly. According to CCTV Finance, Chinese energy storage companies secured 163 GWh in new overseas orders during the first half of this year, a 246% year-on-year increase. Against the backdrop of accelerating global energy transition, Chinese energy storage enterprises are experiencing a concentrated surge in overseas market demand.

For instance, leading company Sungrow Power Supply (300274.SZ) saw its energy storage product shipments grow 70% year-on-year in the first three quarters, with overseas shipments rising from 63% to 83% of total shipments compared to the same period last year.

The unexpectedly strong growth in energy storage demand has prevented the supply-side consolidation previously anticipated by the market.

Analytical data indicates that while differentiation exists among energy storage companies, market share for leading firms has not consistently increased. Instead, smaller companies have steadily secured new orders, eroding market share from some top players.

From the perspective of domestic capacity utilization, last year's industry utilization rates were relatively low. The Ministry of Industry and Information Technology (MIIT) proposed “countering internal competition” and called for improved battery production capacity utilization. Concurrently, overseas markets have rebounded, with many orders being front-loaded into 2025. Currently, leading companies operate at high capacity utilization rates, with many nearing full production capacity.

The 2024 revision of the “Lithium-ion Battery Industry Standardization Conditions” explicitly stipulates that when applying for compliance certification, a company's actual production volume in the previous year must not be less than 50% of its actual production capacity for that year. This metric directly curbs companies' tendency to expand capacity indiscriminately while operating inefficiently.

Bloomberg New Energy Finance data indicates that the average capacity utilization rate of battery factories nationwide has rebounded this year, reaching nearly 50%, and is projected to exceed 50% by year-end.

Regarding product pricing trends, both lithium iron phosphate battery prices and profitability are on an upward trajectory, with profit recovery driven by advance orders. Cell manufacturers are actively passing upstream raw material cost increases to system integrators.

Earlier this year, China issued Document No. 136, abolishing mandatory energy storage quotas. However, demand for energy storage in many regions has not ceased.

China's energy storage market is evolving from a purely policy-driven model toward greater market-driven momentum.

The state has rolled out a series of policies accelerating power market development, transforming previously theoretical returns into quantifiable, certain benefits. Consequently, the energy storage sector is in an overall upward trajectory.

However, in the short term, the returns driven by these policies may not be as high as anticipated, meaning the industry will still face some headwinds in the near term.

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