China’s renewable energy and energy storage sector is entering a new phase as authorities move to control overcapacity, improve project quality and curb aggressive price competition. After several years of rapid expansion, government departments are reassessing planned energy storage projects to ensure that market growth remains sustainable.
Under proposed policy adjustments, new energy storage projects that are still in the planning stage and have not officially started construction could face temporary suspension. However, projects that have already been registered and started construction are expected to remain unaffected. The approach is aimed at slowing excessive expansion while avoiding a blanket restriction on the industry.
China’s cumulative installed capacity of new energy storage reached 168.3 GW/448.7 GWh by mid-2026. Despite this large base, new installations during the first half of the year declined by 18% in power capacity and 16% in energy capacity compared with the same period last year. Market conditions were influenced by temporary factors, including mandatory energy storage requirements linked to renewable energy projects and increased overseas demand ahead of changes to export tax rebates.
At the same time, the supply outlook remains challenging. Industry plans indicate that energy storage cell production capacity could reach as much as 1.5 TWh by the end of 2026, while total planned production capacity has already exceeded 2 TWh. This has raised concerns that supply could significantly outpace global demand, increasing pressure on manufacturers and intensifying price competition.
Regulators are therefore strengthening measures to address low-price competition and excessive capacity. Greater emphasis is being placed on construction standards, product quality, operational safety and market supervision. Mandatory national standards covering thermal runaway prevention and battery safety are also expected to raise entry barriers and remove lower-quality products from the market.
Energy storage companies are responding by shifting their strategies from simply increasing production volumes to developing application-specific solutions. BESS providers are increasingly targeting complex applications such as mining operations, industrial facilities, ports and microgrids, where customized systems can deliver greater value.
Long-duration energy storage is also emerging as an important growth opportunity. As increasing solar generation creates periods of oversupply and pushes low electricity-price windows to six or even eight hours, longer-duration storage will become increasingly important for absorbing surplus renewable power.
The industry is consequently moving toward a model focused on reliability, safety, cost efficiency and integration capabilities rather than capacity alone.
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