Domestic Energy Storage Analysis: Mandatory Allocation Exit, Independent Storage Emerges

This report analyzes the transformation of China's domestic energy storage market from mandatory allocation to independent storage, driven by policy changes like Document No. 136. The shift is supported by capacity tariff compensation policies in provinces such as Inner Mongolia, Gansu, and Hebei, which establish market-based revenue mechanisms and improve project IRRs to 8-12% or higher. Demand for energy storage remains strong, with installations forecasted to reach 149 GWh in 2025 and 194 GWh in 2026, fueled by electricity market reforms and data center growth. However, energy storage cell supply is expected to remain tight until H2 2026, benefiting leading manufacturers like CATL and Sungrow Power Supply. The report highlights the emergence of independent storage as a proven business model, with integrated system integrators and software-capable firms gaining advantages. Investment recommendations focus on top picks in the large-scale storage sector, while risks include intensified competition and policy changes.