China’s energy storage sector is experiencing explosive growth as power market reforms boost domestic profitability while global demand surges from AI data centers and renewable energy projects, positioning Chinese manufacturers to dominate the global battery storage market.
The global energy storage market is undergoing a seismic shift, and Chinese manufacturers are positioned to capture the lion’s share of this explosive growth. A combination of domestic power market reforms and unprecedented international demand from artificial intelligence data centers and renewable energy projects has created perfect conditions for China’s battery industry to dominate this critical sector.
The Perfect Storm for Energy Storage
Chinese firms are projected to achieve a remarkable 75% increase in global shipments of lithium-ion battery cells for energy storage this year alone. This surge represents one of the most significant developments in China’s energy sector, with manufacturers working double shifts to meet overwhelming demand according to industry analysts.
The boom is driven by multiple converging factors:
- China’s electricity market reforms making storage operations profitable
- Global AI data center expansion requiring reliable backup power
- Renewable energy growth necessitating storage solutions
- Aging electrical grids in developed markets needing modernization
Chinese battery exports, including both energy storage and electric vehicle batteries, have exceeded $65 billion this year, establishing batteries as China’s most lucrative clean-technology export since 2022, surpassing solar photovoltaics.
China’s Manufacturing Dominance
China’s dominance in energy storage cell production is nearly absolute. All six of the top global cell suppliers are Chinese companies: Contemporary Amperex Technology Ltd (CATL), HiTHIUM, EVE Energy, BYD, CALB, and REPT BATTERO. Of the top ten manufacturers globally, only Japan’s AESC originates from outside China.
This manufacturing supremacy translates directly to market performance. EVE Energy reported a 35.51% increase in energy storage sales volumes in the first three quarters of 2025 compared to the same period last year. REPT BATTERO achieved record-high battery shipments in the third quarter, reflecting the industry-wide acceleration.
The International Energy Agency forecasts global investment in battery storage facilities will rise 16% this year to $66 billion, with Chinese firms positioned to capture the majority of this growth due to their manufacturing scale and cost advantages.
Power Market Reforms: Game Changer for Profitability
China’s energy storage sector transformation began in earnest with June’s electricity market reforms, which fundamentally changed how storage projects operate profitably. The reforms required newly built projects to sell their power through market-based auctions instead of at fixed rates, creating economic incentives for storage operators.
This policy shift represents what analysts describe as “the most decisive policy shift for energy storage in over a decade.” The new market structure allows storage plants to profit by recharging when electricity prices are low and discharging when prices are high, creating a viable business model for the first time.
The results have been immediate and dramatic. Energy storage plants ran for an average of 3.08 hours per day in the third quarter following the reforms—an increase of 0.78 hours from a year earlier and 0.23 hours from the previous three months.
The AI Data Center Revolution
Perhaps the most significant driver of energy storage demand comes from the artificial intelligence sector. AI data centers require enormous amounts of reliable power, and pairing solar with storage has effectively become the only solution for meeting these power needs in many markets.
UBS analysts recently raised their 2026 forecast for global battery-energy storage installations by 25%, citing robust AI data center power demand as a key factor. The United States faces particular challenges as AI power demand grows rapidly while baseload power sources—including gas, nuclear, and thermal—show limited growth potential over the next five years.
This creates a perfect scenario for energy storage solutions, particularly those manufactured by Chinese companies that can deliver at scale and competitive prices.
Global Expansion and Challenges
China’s battery exports for energy storage and other non-automotive applications grew 51.4% in the first 11 months of 2025 compared to the same period last year, outpacing the 40.6% growth in EV battery exports. This trend underscores the shifting focus within China’s battery industry toward energy storage applications.
Consultancy Infolink anticipates global energy storage cell shipments could rise to 800 gigawatt-hours in the coming year—a 33% to 43% increase from current forecasts. This growth will be driven by multiple international markets:
- European grids requiring modernization and backup capacity
- Middle Eastern renewable energy projects developed by Chinese companies
- North American AI data center expansion
- Global renewable energy integration challenges
However, Chinese manufacturers face challenges from U.S. restrictions on projects receiving investment tax credits that involve designated “foreign entities of concern,” which include China. These restrictions could limit Chinese participation in certain lucrative markets despite their technological and cost advantages.
Strategic Government Support
China’s battery storage boom receives significant government support through both national policy and provincial initiatives. A new $35 billion government plan aims to nearly double battery storage capacity by 2027, creating additional domestic demand that will further strengthen Chinese manufacturers.
Since late 2024, ten Chinese provinces have rolled out capacity tariffs—special payments for providers to keep capacity on standby—in addition to other subsidies. These policies create financial incentives for storage deployment beyond what market mechanisms alone would support.
China already hosts the world’s largest battery energy storage fleet, representing approximately 40% of the global total. This year, battery storage capacity in China overtook conventional pumped hydro capacity, marking a significant milestone in the country’s energy transition.
The Future of Energy Storage
The convergence of technological advancement, policy support, and market demand has positioned energy storage as one of the most critical components of the global energy transition. Chinese manufacturers, with their scale, experience from the electric vehicle revolution, and government support, are uniquely positioned to lead this transformation.
As power markets continue to evolve globally and renewable energy penetration increases, the importance of energy storage will only grow. The companies that can manufacture reliable, cost-effective storage solutions at scale will play a crucial role in determining how quickly the world can transition to cleaner energy systems.
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