On February 9, China’s National Development and Reform Commission (NDRC) and National Energy Agency (NEA) jointly published the Notice on Deepening Market-Based Reform of Renewable Energy On-Grid Tariffs to Promote High-Quality Renewable Energy Development. Hereafter referred to as the Notice, or as Document 136, this policy not only signals a shift in China’s new energy generation model—from reliance on fixed tariffs, subsidies, and guaranteed procurement toward market-based competition—but also presents both new opportunities and significant challenges for the country’s energy storage market. In this article, we explore the impact of this new policy on China’s energy storage sector from the perspectives of policy adjustments and market mechanisms.
What the new policy means for the energy storage market
The new measures break away from the traditional model of mandatory storage allocation
The Notice clearly stipulates that "the inclusion of energy storage shall not be used as a prerequisite for the approval, grid connection, or grid access of new energy projects." It also sets June 1, 2025, as the cutoff date for distinguishing between existing and new projects, both of which will be incorporated into the "market-based pricing mechanism."
Short-term impacts:
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This Notice may impact energy storage demand in the short term. Up until 2024, mandatory storage allocation policies were always the primary driver of China’s energy storage market. In 2024, for instance, energy storage installations tied to new energy projects accounted for nearly 40% of total capacity. Following the release of this Notice, some low-return planned-but-unexecuted energy storage projects are expected to be delayed or canceled.
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Following the release of the Notice, a surge in installations of energy storage projects coupled with new energy is expected ahead of the June 1 cutoff. Compared with existing projects, newly added projects face greater pricing uncertainty under the market-based mechanism during the final bidding phase. As a result, some companies may advance the grid connection of their wind and solar projects to before June 1 to avoid complex profit forecasting and market bidding rules, thereby ensuring stable project returns.
Currently, the rush to install energy storage is largely driven by the acceleration of PV project timelines. In alignment with the June 1 deadline for solar PV projects, energy storage timelines have also been brought forward accordingly. - With the cancellation of mandatory storage allocation, market attention has shifted to standalone energy storage. However, the economic viability of standalone projects remains under pressure. Historically, a major revenue source for standalone energy storage plants has been capacity leasing fees paid by projects coupled with new energy. Following the policy shift, the sustainability of such leasing income is now in question, and specific follow-up measures from provincial governments are needed to support the business case for standalone energy storage. As of now, capacity-based pricing is one of the potential policy directions under consideration.
For example, on March 12, the Energy Bureau of Inner Mongolia issued the Notice on Accelerating the Construction of New-Type Energy Storage in Inner Mongolia Autonomous Region, which outlined a flexible capacity compensation mechanism. The notice states that standalone new-type energy storage plants included in the provincial development plan will receive compensation for electricity discharged to the public grid. Compensation standards will be set annually and announced before the end of September for the following year, with a fixed execution period of ten years once the standard is released.
For 2025, the compensation standard for standalone new-type energy storage is set at RMB 0.35/kWh. Projects that fail to begin construction by June 30, 2025, will not be eligible for the 2025 compensation. As one of the leading regions for standalone energy storage capacity, Inner Mongolia’s policy direction may serve as an indicator for other regions.
Market-based pricing brings new opportunities for energy storage
The Notice suggests “improving spot market trading and pricing mechanisms,” which is expected to enhance returns for energy storage projects by relaxing spot price limits.
With low electricity prices during high renewable output periods (e.g., midday solar generation causing price drops) and high prices during times of limited system flexibility (e.g., evening peak demand with reduced renewable output), the spot market offers growing opportunities for price arbitrage, further highlighting the value of energy storage.
Conclusion
The current Notice sets the framework for energy storage policy, while detailed rules will be made by each Chinese province based on local conditions by the end of 2025. This transition period may cause short-term market fluctuations, so industry players should stay flexible and prepared.
Based on current energy storage market and the Notice, InfoLink expects China’s new energy storage installations to reach 112 GWh in 2025, up 9% YoY. But if local policies or incentives (e.g., capacity pricing or compensation for grid services) fall short, the industry may face some challenges in 2026–2027. Still, due to the ongoing need for renewable integration and grid flexibility, a sharp drop in demand is unlikely.
The industry is also entering a reshuffling phase. With the end of mandatory storage requirements, the focus is shifting from fast, policy-driven growth to value creation. In the past, many projects were built only to meet policy targets, leading to problems like similar technology and fast efficiency loss. Now, the focus is on economic value and long-term performance. Companies with strong technology and innovative business models are likely to grow, and the industry becomes more competitive and refined.
