China’s energy-storage industry is facing a challenging outlook this year due to the escalating US-China trade war and weaker government support, prompting one industry group to caution against price competition.
With exports to its biggest market in the US likely to be hit by higher tariffs, the nation’s producers are projected to trim their capital expenditure by 10 to 20 per cent this year, according to consultancy WaterRock Energy Economics. As a result, annual expansion of battery energy-storage systems (BESS) could shrink to as low as 30 gigawatts (GW) this year from 42GW in 2024, it said.
“We expect BESS prices will continue to fall in the local market this year,” said Zhang Liutong, director at WaterRock. “For exports, the BESS producers will need to cultivate non-US markets.”
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BESS are devices that enable energy from renewable sources to be stored and then released when needed. They are crucial in the global transition towards clean energy, with China and the US accounting for a combined 80 per cent of installed capacity in 2024, according to Infolink Consulting.
China’s energy-storage sector is still reeling from a relentless price war after years of overproduction. Overall capacity in the new-type energy-storage sector rose by almost 10 times between 2020 and 2023, the National Energy Administration said last week. Excess supply also led to cutthroat price rivalry, causing average export prices to slump 39 per cent between 2020 and 2024, customs data showed.
Last week, China Photovoltaic Industry Association held a closed-door meeting with more than 20 major energy-storage producers and integrators including Sungrow Power Supply, Huawei Technologies and Contemporary Amperex Technology, urging them to ensure healthy development and avoid “vicious competition”, according to local media reports.
After the meeting, Citigroup lowered its earnings forecast for Sungrow by 15 per cent, citing the firm’s big reliance on the US for almost half of its annual profit. US tariffs could shrink margins on energy-storage systems and solar inverters as well as shipment volumes, the US bank said in a report last week.
US President Donald Trump earlier this month launched a trade war against most of its trading partners, applying a 10 per cent base levy and extra “reciprocal tariffs” of as high as 245 per cent on some Chinese goods.
Meanwhile, growth in China’s wind and solar projects is expected to cool as the renewable-energy sector adopts market-based pricing from June 1. The cancellation of mandatory energy storage requirements for new clean-energy projects could also weigh on BESS demand, according to Citigroup.
The BESS industry would be forced to consolidate to overcome falling demand in the second half of this year, according to Chen Shan, a senior analyst at Rystad Energy. Leading enterprises were likely to strengthen their market dominance and “backward capacity” would be eliminated in the processs, she said.
Other overseas markets, particularly Europe, the Middle East and Australia, could present good opportunities for Chinese BESS players, given the stable demand for energy-storage systems in these regions, Chen added.
Demand for BESS is also growing in Southeast Asia, driven by the need to combine them with solar for hybrid solutions or to support ancillary services in the power sector, according to WaterRock’s Zhang. While still a small market, the size could increase materially over time, he added.
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