A revamp of China’s electricity market is transforming the economics of energy storage just as global demand explodes, unleashing a boom for Chinese battery makers that already dominate the sector.
Chinese companies are on track for a 75% jump in global shipments of lithium-ion cells for energy storage this year, according to one estimate, cementing their grip on a market critical to renewable energy and artificial-intelligence data centres.
Exports of energy storage and electric-vehicle batteries have exceeded $65 billion this year, underlining China’s dominance in a sector increasingly vital for stabilising grids and powering data-hungry AI infrastructure.
Data Centres and Renewables Drive Demand
Rising demand is being fuelled by multiple fronts: the rapid expansion of AI data centres, renewable-energy growth at home, ageing power grids in Europe and Chinese-backed clean-energy projects in the Middle East.
“Many of these leading energy storage cell makers have full order books and are working double shifts,” said Cosimo Ries of Trivium China, calling the surge “one of the biggest surprises of the year” in China’s energy sector.
UBS recently raised its 2026 forecast for global battery-energy storage installations by 25%, while the International Energy Agency expects global investment in battery storage to rise 16% this year to $66 billion.
China Tightens Its Grip on Battery Supply
While Tesla remains the world’s largest supplier of energy storage systems, Chinese firms dominate the production of battery cells inside them.
All six of the world’s largest cell suppliers CATL, HiTHIUM, EVE Energy, BYD, CALB and REPT BATTERO are Chinese, according to Infolink. Of the top 10 globally, only Japan’s AESC is non-Chinese.
Some manufacturers are already seeing sharp gains:
- EVE Energy reported a 35.5% rise in energy storage sales volumes in the first three quarters
- REPT BATTERO posted record battery shipments in the third quarter
For industry leaders CATL and BYD, storage remains a smaller slice of revenue than EVs, but the share is growing rapidly.
AI Power Needs Add Urgency
Energy storage is emerging as a critical solution for powering AI infrastructure, particularly in the United States.
“Pairing solar with storage has effectively become the only solution for meeting U.S. AI data-centre power needs,” UBS analyst Yishu Yan said, noting that U.S. baseload power sources such as gas and nuclear are unlikely to expand significantly in the next five years.
However, Chinese manufacturers face risks from U.S. restrictions on tax credits for projects involving “foreign entities of concern,” a category that includes China.
China’s Power Market Shake-Up Changes the Game
China already accounts for about 40% of global battery energy storage capacity, driven partly by mandates requiring storage at wind and solar projects. But much of that capacity had been unprofitable and underused.
That is changing after June electricity market reforms forced new projects to sell power through competitive auctions rather than fixed rates. The shift has improved returns for storage operators that buy power cheaply and sell when prices spike.
As a result, storage plants ran an average of 3.08 hours per day in the third quarter, up sharply from a year earlier, according to the China Electricity Council.
Policy Backing Supercharges Growth
The reforms coincide with:
- A $35 billion national plan to nearly double battery storage by 2027
- New provincial subsidies, including capacity tariffs in at least 10 provinces since late 2024
Jefferies analyst Johnson Wan called it “the most decisive policy shift for energy storage in over a decade.”
Analysis: China Turns Policy Reform Into Global Advantage
China’s battery boom is no accident it is the result of policy alignment, industrial scale and timing.
By reforming power markets to reward flexibility just as AI-driven electricity demand surges worldwide, Beijing has turned a previously underperforming sector into a profit engine. Domestic reforms are unlocking idle capacity, while global grid stress and data-centre expansion are pulling Chinese batteries into overseas markets.
The result is a feedback loop: stronger domestic economics drive scale, scale drives lower costs, and lower costs reinforce China’s dominance abroad. Even as geopolitical risks grow especially in the U.S. few competitors can match China’s speed, pricing or manufacturing depth.
Energy storage is fast becoming the backbone of the global energy transition. For now, China is not just participating in that transition it is powering it.
With information from Reuters.
