China’s big bet on battery storage

What happened

On 12 September 2025, China released its Special Action Plan for Large-Scale Construction of New Energy Storage (2025-2027), aiming for >180 GW cumulative energy storage by 2027. This nearly doubles the current installed base of just over 100 GW.

The plan is expected to mobilize roughly RMB 250 bn (USD 35 bn) over three years and makes energy storage a cornerstone of China’s energy transition strategy.

Impact on our Investment Case

Shift from EVs to ESS

The plan reshapes the product mix and economics of the battery sector. Energy storage is moving from niche to core demand. While electric vehicle (EV) battery growth is decelerating to around 14% in 2025 versus 20% in 2024, stationary storage is accelerating. Capacity that might have gone underutilized in autos is being absorbed by energy storage systems (ESS).

Better economics, more use cases

Energy storage is critical for integrating intermittent solar and wind generation into the grid and shaving peak loads (reducing electricity demand spikes during high-consumption hours). The plan calls for adding storage both next to large solar and wind farms and as standalone systems in areas where the grid is congested. These systems can earn revenues from peak-valley price arbitrage (buying electricity when it is cheap and selling it back to the grid when prices are high) and from capacity payments (fixed fees paid to keep storage available for grid stability). The plan also encourages deploying storage for new applications such as industrial micro-grids, solar-charging hubs, and data centers. This breadth of deployment opens up multiple revenue streams for storage operators and battery manufacturers.

Tight supply, rising margins

Global ESS shipments are up more than 100% YoY in 2025, with Chinese manufacturers supplying over 90% of volumes. Supply tightness has ended the multi-year downtrend in battery prices. ESS cell prices have increased by roughly RMB 0.02-0.03 per Wh since early summer (~4-6%), marking the first sustained price recovery since 2022. The move has more than offset input cost inflation, expanding margins for the first time in years. Leaders such as CATL and BYD are running very high utilization rates, lowering unit costs and boosting profit per watt-hour sold.

Exports add upside

Overseas demand is building as utilities and developers in the U.S., E.U., India, and the Middle East pair storage with renewables. Shipments to the U.S. and E.U. are up more than 150% YoY in 2025 despite tariffs. Chinese suppliers continue to win orders on scale and cost, especially in LFP batteries (lithium iron phosphate, cheaper and safer). In Europe, supportive subsidies and tax incentives allow attractive double-digit project returns over the life of the assets, reinforcing order visibility.

Leaders pull ahead

This global demand surge strengthens our conviction in sector leaders with scale, balance sheet strength, and technology depth. CATL remains the standout, with a net cash position to keep investing in capacity and system integration. Its ability to deliver turnkey solutions and fulfill mega-orders at low unit cost positions it to consolidate its market share as storage grows. While Chinese players dominate the global storage market today, we also see LG Energy Solution as one of the few international players capable of gaining market share, supported by its growing U.S. footprint and partnerships with utilities and developers. Together, these leaders should continue to outpace smaller, capital-constrained peers that may struggle to fund the capacity and innovation required to keep up.

Our Takeaway

China’s new storage plan reinforces our view that the energy transition now hinges not just on adding generation but on building a more flexible power system. Earlier this month, we highlighted our increased focus on transmission and distribution equipment to relieve grid bottlenecks. Stationary energy storage is the natural complement, enabling renewable integration and balancing power flows across the grid.

This theme also strengthens our broader China allocation (~26% of the strategy), where we have concentrated positions not only in batteries but also in wind and other clean-tech enablers. As highlighted in our recent piece, Beijing is pursuing the most aggressive liquidity and fiscal support globally, creating a favorable backdrop for Chinese equities.

With policy tailwinds, improving fundamentals, and strong demand visibility, we remain confident that our portfolio is well-placed to capture the upside from China’s energy-transition leadership and the global build-out of energy storage.