China’s energy storage sector is rapidly expanding. As a solution to balancing the country’s growing energy needs and mass renewable energy production, the industry has attracted investments worth hundreds of billions of yuan (tens of billions of dollars).
This has seen China become the world’s largest market for energy storage deployment. Its capacity of “new type” energy storage systems, such as batteries, quadrupled in 2023 alone.
This rapid growth, however, has caused other problems, such as what one analyst described as “temporary structural overcapacity” and low utilisation.
In this Q&A, Carbon Brief explores how China has been driving the sector forwards and how it fits into the nation’s wider energy transition.
Soaring battery deployment
China is currently the world’s largest market for energy storage, followed by the US and Europe, according to BloombergNEF.
This position was driven by a combination of market need for balancing renewable energy and government efforts to build a “new power system”.
China installed a massive 301 gigawatts (GW) of renewable capacity including solar, wind and hydro in 2023 alone – more than the total renewable generating capacity installed in most countries over all time.
As of May 2024, “clean energy” generated a record-high 44% of China’s electricity, according to Carbon Brief analysis.
However, despite the renewable energy boom, China’s power system still struggles to absorb all of the generation, making energy storage – which bridges temporal and geographical gaps between energy supply and demand – a key tool for the country to improve its renewable energy integration.
The majority of China’s storage capacity comes from large-scale storage projects, such as hydropower with reservoirs on the Yangtze River and gigawatt-level battery energy storage systems in Inner Mongolia.
Pumped hydro storage is the most common utility-scale storage system and has a long history in China. It pumps water uphill to a reservoir and then releases it to generate electricity. As of 2023, pumped hydro storage surpassed 50GW, making up over half of the country’s overall storage capacity.
The remaining half is comprised primarily of batteries and emerging technologies, such as compressed air, flywheel, as well as thermal energy.
These technologies, known as the “new type” energy storage in China, have seen rapid growth in recent years. Lithium-ion batteries dominate the “new type” sector.
The deployment of “new type” energy storage capacity almost quadrupled in 2023 in China, increasing to 31.4GW, up from just 8.7GW in 2022, according to data from the National Energy Administration (NEA).
This means that China surpassed its target of reaching 30GW of the “new type” energy storage by 2025 two years earlier than planned. The goal had been set by the NEA and China’s top economic planner the National Development and Reform Commission, under the 14th “five year plan”.
(Read Carbon Brief’s Q&A: What does China’s 14th ‘five year plan’ mean for climate change?)
Wang Shurui, researcher at the Institutes of Science and Development, Chinese Academy of Sciences, tells Carbon Brief:
“Advancements in the storage sector will enable a greater integration of renewable energy into the power grid, enhancing grid stability and helping accelerate China’s emissions reduction.”
High deployment, low usage
To promote battery storage, China has implemented a number of policies, most notably the gradual rollout since 2017 of the “mandatory allocation of energy storage” policy (强制配储政策), which is also known as the “new energy plus storage” model (新能源+储能).
Under the mandate, which applies in dozens of provinces, renewable companies are required to include a certain amount of energy storage capacity alongside new solar and wind generation projects, with the storage allocation rate ranging between 5% to 20%.
“This mandate is driving storage growth, as it pushes the build-out of large-scale energy storage stations,” says Guo Shiyu, climate and energy campaigner from Beijing-based thinktank Greenpeace East Asia. She tells Carbon Brief:
“The stations may not look huge separately, but they are mostly built on the generation side [alongside generating capacity], which are still quite big compared to industrial and commercial self-built storage [on the demand side].”
Cheaper costs led by technology innovation have helped the market’s increasing adoption of batteries too, Sun Yongping, researcher of emissions trading and vice-dean of the Institute of State Governance at Huazhong University of Science and Technology, tells Carbon Brief.
“An interviewee told me in a recent field study that the cost had fallen by over a half these years,” says Sun. “Local development is so fast that too often you can’t grasp it [in a] timely [way] just by looking at the statistical numbers,” he adds.
Despite its positive intentions, the mandatory storage policy has had unintended consequences. Notably, a significant portion of the installed storage capacity remains underutilised.
In regions covered by the State Grid – the government-owned operator that runs the majority of the country’s electricity transmission network – over four-fifths of the storage systems operate less than 10% of the time, with many used only once every two days, according to a Bloomberg report.
Another challenge, according to Guo, is the additional project costs and lack of effective incentives, as many storage facilities were built or rented to fulfil government requirements but went unused afterwards.
Both Guo and Sun argue that China needs a deeper level of electricity market pricing reforms to create incentives to use storage.
For example, having electricity prices that change at different hours could encourage the adoption of storage technologies in China, suggests Sun.
Guo says: “We still hope that each place deploys new energy storage according to its needs and understands its own situation instead of adopting a ‘one-size-fits-all’ approach.”
‘New driving force’ for economy
In 2024, the NEA named the energy storage sector as a “new driving force” for the country’s “new quality productive forces ” (NQPF). It could “propel the upstream and downstream industrial chains, promote scientific and technological innovation, talent training, investment and employment”, said the NEA.
(Read more on Carbon Brief’s Q&A: What China’s push for ‘new quality productive forces’ means for climate action.)
Regional governments are also exploiting the economic opportunity in energy storage. Guangdong, for example, aimed to make energy storage a “strategic pillar industry” of its economy by setting a target of 600bn yuan ($85bn) in annual revenue from the energy storage industry by 2025, eyeing the domestic and overseas market as the global energy transition deepens.
Meanwhile, Zhejiang, Anhui and Guangdong also have ambitious targets of installing local storage capacity of 3GW each by 2025, according to a recent tally by Greenpeace East Asia, based on government documents.
The booming market has attracted more than 100bn yuan ($14bn) since 2021.
But risks of market turmoil also exist. According to battery industrial information provider Gaogong Industrial Institute, last year China saw over 70,000 newly registered companies in the sector, which indicated that the market – already seeing fierce competition – may now be undergoing an “overcapacity” period.
Guo says this period of “overcapacity”, however, is rather “temporary”. She adds:
“There exists a temporary structural overcapacity, as the current expansion of new type energy storage is outpacing the market needs.
“However, if the regional governments could provide more policy support for the application of storage projects, this ‘excess capacity’ due to insufficient market demand could be avoided.”
The post Q&A: How China became the world’s leading market for energy storage appeared first on Carbon Brief.
Q&A: How China became the world’s leading market for energy storage
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Global oil demand is expected to be almost one million barrels per day less than was forecast before the Iran war, as shortages and soaring costs prompt drastic cutbacks by consumers and businesses, a report by the International Energy Agency (IEA) said on Wednesday.
With the closure of the Strait of Hormuz choking off supplies and keeping prices high, less oil is being used to make products such as jet fuel, LPG cooking gas and petrochemicals, the Paris-based IEA said in its monthly oil report, forecasting the biggest quarterly demand drop since the COVID pandemic.
The Iran war “upends our global outlook”, the government-backed agency said, adding that it now expects oil demand to shrink by 80,000 barrels per day in 2026 from last year.
Before the conflict began, the IEA said in February it expected oil demand to rise by 850,000 barrels per day this year, meaning the difference between the pre-war and current estimates is 930,000 barrels a day, or 340 million barrels a year.
That could have a significant impact on the outlook for planet-heating carbon emissions this year.
At an intensity of 434 kg of carbon dioxide per barrel of oil – the estimate used by the US Environmental Protection Agency – the annual reduction in carbon dioxide emissions from oil for 2026, compared with the pre-war forecast, is similar to the amount emitted by the Philippines each year.
Harry Benham, senior advisor at Carbon Tracker, told Climate Home News that he expects at least half of the reduction in oil demand to be permanent because of efficiency gains, behavioural change and faster electrification.
The oil shock is leading to oil being replaced, especially in transport, with electricity and other fuels, just as past oil shocks drove lasting reductions in consumption, he said. “The shock doesn’t delay the transition – it reinforces it,” he added.
Demand takes a hit
While demand for oil has fallen significantly, supplies have fallen even further. Supply in March was 10 million barrels a day less than February, the IEA said, calling it the “largest disruption in history”.
This forecast relies on the assumption that regular deliveries of oil and gas from the Middle East will resume by the middle of the year, the IEA said, although the prospects for this “remain unclear at this stage”.
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Last month, US Energy Secretary Chris Wright told the CERAWeek oil industry conference that prices were not high enough to lead to permanent reductions in demand for oil, known as demand destruction.
But the IEA said on Wednesday that “demand destruction will spread as scarcity and higher prices persist”.
Industries contributing to weaker demand for oil include Asian petrochemical producers, who are cutting production as oil supplies dry up, the report said, while consumers are cutting back on liquefied petroleum gas (LPG), which is mainly used as a cooking gas in developing countries, the IEA said.
Flight cancellations caused by the war have dampened demand for oil-based jet fuel, the IEA said. As well as cancellations caused by risk from the conflict itself, airports have warned that fuel shortages could lead to disruption.
Across the world, governments, businesses and consumers have sought to reduce their oil use after the war. The government of Pakistan has cut the speed limit on its roads, so that people drive at a more fuel-efficient speed, and Laos has encouraged people to work from home to preserve scarce petrol and diesel.
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Consumers in Bangladesh are seeking electric vehicles (EVs) to avoid fuel queues and, in Nigeria, more people are seeking to replace petrol and diesel generators with solar panels, Climate Home News has reported.
In the longer term, the European Union is considering cutting taxes on electricity to help it replace fossil fuels and France is promoting EVs and heat pumps.
IEA urged to help “future-proof” economies
Meanwhile, the IEA came under fire last week from energy security experts, including former military chiefs, who signed an open letter in which they accused the agency of offering “only a temporary response to turbulent markets”, calling for stronger structural action “to future-proof our economies”.
They said that besides releasing emergency oil stocks and offering advice on how to reduce oil demand in the short term, the IEA should show countries how to reduce their exposure to volatile oil and gas markets.
The IEA has also been under pressure from the Trump administration to talk less about the transition away from fossil fuels.
This article was amended on 15 April 2026 to correct the drop in 2026 forecast oil demand from “nearly a billion” to “nearly a million”
The post IEA slashes pre-war oil demand forecast by nearly a million barrels per day appeared first on Climate Home News.
IEA slashes pre-war oil demand forecast by nearly a million barrels per day
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