Battery utilisation gap persists as China ends storage mandate

It installed nearly 150 Gw of lithium-ion battery storage by the first quarter of 2026.

China moves its battery storage sector from rapid capacity expansion towards improving utilisation and commercial returns, as policymakers shift away from mandatory installations and introduce market-based mechanisms.

Ember said in a report published on 16 July that the country had installed nearly 150 gigawatts (GW) of lithium-ion battery storage by the first quarter of 2026, accounting for more than half of global battery energy storage system capacity.

However, many of these batteries were underused, creating a challenge for China's next stage of storage development.

Batteries co-located with renewable energy projects recorded lower utilisation than standalone systems in 2025.

Standalone batteries completed 299 cycles per year, whilst co-located batteries completed 199 cycles, a gap of 100 cycles.

"China has built the world's largest battery storage fleet in record time—but having the batteries is not the same as using them," said Siming Liu, Group Strategy Senior Manager, TrinaSolar. "The next phase of China's storage story will be defined not by how many gigawatts are added, but by how well they can support the new power system."

The difference reflects how storage assets were deployed, as China required new wind and solar projects to install batteries as part of efforts to reduce renewable energy curtailment, or electricity generation that cannot be absorbed by the grid.

Wind curtailment exceeded 17% nationwide in 2016, with some provinces recording rates above 40%. Battery requirements helped reduce curtailment to below 5% between 2022 and 2024.

The report said many co-located batteries were designed to support renewable projects rather than operate as independent grid assets. These systems typically charge during the midday solar peak to cut curtailment, often completing a single charge-discharge cycle a day.

Standalone batteries can participate in more revenue streams, including energy arbitrage, ancillary services such as frequency regulation, capacity leasing, and capacity pricing mechanisms.

China began changing its storage policy framework in 2025.

In February, the government removed mandatory battery co-location requirements for new renewable projects, allowing developers to decide whether storage was commercially viable.

In January 2026, China expanded its capacity payment mechanism to include standalone battery storage, allowing operators to receive payments for maintaining grid support capacity rather than relying only on electricity sales.

The changes are expected to increase the role of revenue stacking, where batteries earn income from multiple grid services instead of a single function.

Ember estimated that if co-located batteries had matched the utilisation rates of standalone systems in 2025, China could have shifted an additional 9.5 terawatt-hours (TWh) of renewable electricity over the year.

If the country's utility-scale battery fleet had run at an optimised rate of 350 cycles per year, it could have shifted an additional 23TWh of renewable energy to peak demand hours, according to the report.

"China doubled its battery storage capacity in 2025 against a backdrop of major policy shifts," said Biqing Yang, Energy Analyst for Asia at Ember. "With so much changing so quickly, now is the moment to watch how these market transitions actually play out."

"Ensuring policy fully recognises this value and facilitating storage projects to stack revenues will be crucial to driving sustainable, long-term sector development beyond scale expansion," Yang said.

The report said the next phase of China's storage market depends on business models that improve battery utilisation, including virtual power plants and demand-side response through aggregators.

China updated its national target for new energy storage to 300GW by 2030, under the 15th Five-Year Plan issued in June 2026.