New Policy Signals Market Liberalization
In a significant move toward electricity market liberalization, China has removed its energy storage mandate for new renewable energy plants and introduced contract-for-difference (CFD) auctions. This policy change, expected to reshape the global battery storage supply chain, could further drive down prices that are already at historic lows, according to S&P Global. Previously, renewable energy developers were required to integrate storage systems to obtain development rights and secure grid connections.
Impact on Energy Storage and Renewable Deployment
Since 2022, China’s energy storage mandates have played a key role in accelerating battery deployment, with more than 20 provinces implementing such policies. Some regions even increased the required energy storage ratio from 10% to 20% over the years. While these requirements aimed to reduce renewable energy curtailment for Renewable Energy Plants, they also significantly raised operational costs for developers. Many project owners reported low utilization rates of their energy storage systems, prompting concerns over financial viability.
Future Outlook and Industry Implications
By scrapping the mandate, China is shifting toward a more flexible renewable energy market, enabling developers to optimize their projects based on economic feasibility rather than regulatory constraints. The move is expected to increase competition in the renewable sector while reducing costs. Additionally, the global battery supply chain is likely to experience further adjustments, with demand fluctuations potentially influencing pricing trends worldwide. As China continues its transition toward a more market-driven electricity sector, the long-term impact on energy storage adoption and grid stability remains to be seen.
Also read: Renewable Energy Surpasses Coal in U.S. Power Generation
