Just a few years ago, China’s energy-storage industry was riding high on a sugar rush of subsidies, soaring demand, and sky-is-the-limit optimism. But this is 2025, and China is waking up with a tariff-sized headache and a hangover from its own price war.
At the heart of the drama is the battery energy storage sector (BESS)—those magical boxes that soak up solar and wind energy and spit it back out when the grid needs it. In theory, BESS are the unsung heroes of the clean energy revolution. In practice, they’re now ground zero for a perfect storm of geopolitical friction, supply glut, and disappearing margins.
The first punch landed in January, when the Biden administration handed down sweeping sanctions on Russian oil, prompting China’s independent refiners to double down on Russian imports. But the bigger wallop came in April, courtesy of President Trump 2.0, who slapped China with new tariffs—some as high as 125%—on energy gear, including BESS. That’s bad news for Chinese firms that relied on the U.S. for nearly half their export profits.
WaterRock Energy Economics estimates that Chinese producers will cut capital spending by up to 20% this year. That means expansion plans are being shelved, with projected new capacity slumping from 42GW in 2024 to as low as 30GW in 2025. For a country that once aimed to dominate the global battery game, that’s a rude awakening.
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But if you’re expecting a quiet period of recalibration, think again. China’s BESS producers are still entangled in a brutal price war sparked by their own success. The sector’s capacity grew nearly tenfold between 2020 and 2023, but much of that growth turned out to be speculative. Over 70,000 companies registered in the sector last year alone. The result? Too many players chasing too few real orders.
According to customs data, export prices for BESS fell a staggering 39% between 2020 and 2024. Local media reported that the China Photovoltaic Industry Association had to call a closed-door meeting with the country’s energy-storage bigwigs—Huawei, Sungrow, CATL—to plead for an end to “vicious competition.” It’s a rare moment when industry watchdogs step in not to boost sales, but to stop companies from bleeding themselves out.
The market’s structural issues are just as serious. China’s rapid renewables buildout—301 GW in 2023 alone—hasn’t been matched by grid capacity or intelligent deployment of storage. In regions like Inner Mongolia and Gansu, gigawatts of clean energy are being wasted due to poor absorption rates. Mandatory storage policies, designed to bundle batteries with wind and solar farms, have created fields of underutilized capacity. Bloomberg reports that in many areas, storage units are operating less than 10% of the time.
And now, U.S. tariffs are threatening to pull the rug out from under China’s most lucrative export markets. Analysts say companies like Sungrow, which rely heavily on U.S. demand, could see profits fall off a cliff.
Citigroup, never one to sugarcoat, downgraded earnings forecasts across the board. They warned that the new tariffs would not only reduce shipment volumes but also crush already razor-thin margins on solar inverters and storage units.
But it’s not all doom and dimming LED lights. China’s pivot is already underway. Industry players are looking toward Europe, the Middle East, and Southeast Asia, where demand is still solid and political crossfire less intense. In fact, some see opportunity in the chaos. As weaker competitors drop out, the survivors—often the ones with better tech, deeper pockets, and actual customers—could consolidate power and take the industry in a healthier direction.
China’s long-term plan still stands. The 14th Five-Year Plan for Energy Storage targets 100GW of new capacity by 2030 and a 30% reduction in per-unit costs by 2025. It’s betting big that energy storage—whether battery, compressed air, or thermal—will be the keystone of its carbon-neutral future.
But for now, the sector has to survive 2025. That means weathering geopolitical shocks, outlasting its own overproduction, and figuring out how to make energy storage not just essential—but profitable.
In short, China’s energy-storage industry needs a reset. Not just a clean battery, but a clean slate.
By Julianne Geiger for Oilprice.com