Energy Storage Market Poised for Explosive Growth

Currently, the global energy system is undergoing a profound green revolution. Renewable energy, represented by photovoltaic (PV) and wind power, is developing rapidly, gradually transitioning from a supplementary energy source to a primary one. However, the intermittency and volatility of wind and solar resources pose significant challenges to the stable operation of power grids. Against this backdrop, energy storage, as a key pillar and "ballast stone" for building a new power system, has become increasingly strategically valuable—evolving from an option to a necessity and entering a golden age of rapid development.

The core logic driving the explosive growth of the energy storage industry stems from the triple resonance of policy, market, and technology.

At the policy level, China’s "dual carbon" goals have been established as a national strategy, with governments at all levels issuing intensive supportive policies. The National Energy Administration’s "Special Action Plan for Large-Scale Development of New Energy Storage (2025—2027)" has set a quantitative target for the first time: by 2027, the cumulative installed capacity of new energy storage nationwide will be no less than 180GW. Compared with the installed base of approximately 74GW at the end of 2024, there will be an incremental space of over 100GW in the next three years, with a high compound annual growth rate, outlining a clear growth ceiling for the industry.

At the market level, the in-depth advancement of power marketization reforms has created diversified profit models for energy storage. Previously, energy storage relied heavily on mandatory supporting construction for new energy power plants, with a strong cost-driven nature. Today, as spot markets, auxiliary service markets, and capacity compensation mechanisms gradually improve, energy storage is transforming into an asset that can independently participate in market transactions and generate stable returns. For example, in pilot provinces like Gansu, independent energy storage projects can achieve an attractive internal rate of return (IRR) of over 8% throughout their life cycle through peak-valley price arbitrage, capacity leasing, and participation in frequency regulation auxiliary services. The mature business model has greatly stimulated the investment enthusiasm of social capital.

At the technology level, the continuous iteration of lithium battery technology has driven a steady decline in costs. Diversified technical routes such as sodium-ion batteries, flow batteries, and compressed air energy storage have also made continuous breakthroughs in their respective applicable scenarios, providing more economical and safer options for different application needs.

From the perspective of market structure, the energy storage market has formed a pattern where three major segments—utility-scale energy storage, residential energy storage, and industrial & commercial (I&C) energy storage—are advancing side by side. Utility-scale energy storage is the absolute main force of the current market, directly serving the power generation and grid sides to enhance renewable energy absorption capacity and ensure grid security. Its core lies in the maturity of the business model. Investors should focus on leading enterprises with profound experience in system integration and power station operation, as well as strong resource integration capabilities, which can better navigate complex market rules and optimize asset returns.

Residential energy storage mainly targets household users, used in conjunction with rooftop PV to achieve self-generation and self-consumption of electricity and reduce electricity bills. Its core competitiveness lies in product brand, performance, and channel construction. Against the backdrop of high overseas electricity prices, demand for residential energy storage remains strong, benefiting manufacturers with strong overseas brands and channels such as Deye Co., Ltd. and Pylon Technologies. Industrial & commercial energy storage serves electricity consumers such as factories and shopping malls, achieving energy-saving benefits through peak-valley price differences. The market has just started and has enormous potential. Its development key lies in a deep understanding of users’ energy consumption habits and precise energy management capabilities.

The surge in downstream demand has transmitted to the upstream, leading to emerging raw material shortages. The unexpected explosion in demand has resulted in full capacity utilization across the industrial chain, from battery cells, copper foil/aluminum foil, and structural components to electrolyte. To lock in next year’s capacity, battery manufacturers have begun signing long-term contracts with upstream suppliers, indicating a significant increase in raw material demand.

According to industry research data, producing 100GWh of energy storage batteries requires approximately 160,000 tons of aluminum, 65,000-70,000 tons of lithium carbonate, and 60,000 tons of copper. Based on this calculation: if the energy storage market maintains a neutral growth rate of 50% next year, demand for the above raw materials will see a significant increase. If the growth rate reaches a more optimistic 80%, some raw materials will face direct shortages.

Among various raw materials, the supply tightness of electrolytic aluminum is the most evident, with the core contradiction lying in production capacity ceilings and power constraints. Domestic production capacity has capped, and China’s electrolytic aluminum capacity has reached its upper limit with no room for new additions. Overseas expansion is hindered: when enterprises shift to building factories in Indonesia (which has bauxite and coal), they face a fundamental constraint—power shortages. Since China has pledged not to build new coal-fired power plants overseas, enterprises need to find local partners to solve power issues, resulting in a power station construction cycle (18-24 months) that is much longer than that of the electrolytic aluminum plant itself. Therefore, a large number of planned production capacities are difficult to convert into actual output, and the output that can be released in 2026-2027 is very limited.