China’s energy storage market doubles in size for second consecutive year as price inflection point emerges

From January to May 2026, newly awarded tender volume reached 65.7GW/273.3GWh, a year-on-year increase of over 80%, with procurement value exceeding RMB 200 billion. Group procurement has become the dominant purchasing model, accounting for 29.6% of the total demand (140.4GWh) in 2025 and rising to 39.4% in the first five months of 2026.

Large-scale group procurement unifies technical standards and cuts costs, but it also raises the bar for delivery and capacity, making it difficult for small and medium-sized suppliers to win major bids.

Standalone storage and front-of-the-meter (FTM) long-duration projects are key growth drivers. Tender lots exceeding 200MWh now represent over 82% of the total, with the number of GWh-scale projects continuing to rise.

Regional divergences: Northwest and North China lead long-duration storage

Regional demand is distinctly tiered. In 2025, Xinjiang, Inner Mongolia, and Shandong ranked among the top three in bidding volume, with Northwest and North China remaining the core hubs for long-duration energy storage (LDES).

In Inner Mongolia and Xinjiang, projects of 4-hour duration or above accounted for over 90%, supporting peak-shaving for large-scale renewable energy bases. Driven by strong industrial and commercial loads, East China led in behind-the-meter (BTM) storage. Southwest and Central China were also growing rapidly, with Southwest China’s storage capacity soaring 270.3% year-on-year in 2025.

In 2026, market focus has shifted to Ningxia and Shanxi, which have emerged as major hubs for new tender orders. From January to May, Shanxi ranked first nationwide in tendered power, while Ningxia led in capacity. A clear regional division by duration has taken shape: North and Northwest China prioritise 4-hour-plus long-duration storage; East and Central China mainly deploy 2-hour systems; and short-duration storage is concentrated across multiple central provinces.

Coexistence of technology routes with LFP dominance

Among projects with defined technology roadmaps in 2025, lithium iron phosphate (LFP) accounted for 86.5% of the total power and 86.9% of the total capacity, cementing its market dominance.

Hybrid and emerging long-duration technologies are gaining traction. In the first five months of 2026, the capacity share of hybrid storage rose to 6.6%, fueled by the fast-growing “lithium-sodium” and “lithium-flywheel” combinations. Non-lithium routes, such as compressed air, flow batteries, and molten salt thermal storage, are also advancing steadily. However, their system costs remain significantly higher than LFP, forcing them to compete on longevity and safety in the short term.

The report highlights a fundamental shift in industry evaluation criteria. Bidding assessments no longer prioritise low upfront prices alone. Cycle life, capacity degradation, thermal runaway protection, and full-lifecycle levelised cost of storage (LCOS) have become key differentiators. Products with grid-forming capabilities and stable long-duration operation can now command a clear technology premium.

Prices exit downward trend and return to ‘rational’ levels

The industry has reached a distinct price inflection point. A comprehensive review of winning bids from 2025 through May 2026 confirms that the market has shifted from a prolonged decline to a rational recovery.

Price gaps across technology routes have widened significantly, and pricing logic has evolved from equipment cost assessment to full-lifecycle value evaluation.

Throughout 2025, energy storage prices maintained a consistent downward trend. The weighted average EPC price for LFP storage fell 18.06% year-on-year to RMB 0.9629/Wh, while the average winning price of storage systems dropped 16.53% to RMB 0.4791/Wh. Driven by capacity expansion and large-scale group procurement, the lowest bid price for four-hour systems fell to around RMB 0.4/Wh, bottoming out between July and August. From September onward, rising lithium carbonate prices, tightening cell supply, and growing overseas orders halted the decline and prompted a rebound.

In 2026, upstream cost pressures drove a broad price recovery. In the first five months, the average EPC price rose to RMB 0.9957/Wh, and the average storage system price increased to RMB 0.5329/Wh. By May, monthly averages reached RMB 1.0184/Wh for EPC projects and RMB 0.5937/Wh for storage systems, marking a clear short-term uptick.

Cost gaps persist across technology routes. In 2025, all-vanadium flow battery systems averaged RMB 2.46/Wh, and sodium-ion systems RMB 1.35/Wh, far exceeding LFP levels. In the short term, these routes cannot compete on upfront cost and must rely on differentiated strengths—including longer cycle life, higher safety, and long-duration discharge—to capture niche premiums.

The report concludes that there is little room for further substantial price declines. The market will likely see modest price volatility and structural divergence. Products with grid-forming (GFM) capability, advanced thermal management, and reliable long-term degradation guarantees will command technology premiums.

Meanwhile, bidding criteria are gradually reducing emphasis on low-price factors, with full-lifecycle metrics such as system efficiency, cycle life, warranty, and LCOS becoming core evaluation standards. The industry has moved past low-price competition and entered a new phase of value-driven competition.

Capacity pricing policy takes effect and reshapes long-term revenue logic

At the start of 2026, China issued Document No. 114, establishing the first national capacity pricing mechanism for standalone energy storage.

Benchmarked against local coal-fired power capacity prices, the policy sets tiered compensation based on discharge duration, unlocking a stable revenue stream for FTM storage assets. Combined with earlier provincial compensation policies in nine regions, this framework has significantly improved project financing viability, attracting sustained capital into large-scale, long-duration projects.

The report forecasts robust demand through 2027. Competition will shift from equipment price rivalry to integrated capabilities in project development, power trading and asset O&M. Resources will continue to concentrate among leading players, further clarifying the industry’s path toward sustainable growth.