China is building twice as much wind and solar energy production capacity as the rest of the entire world combined. While this runaway expansion is great news for the country’s decarbonization goals, it is putting strain on energy grids and energy markets, even leading to occasional negative energy prices in some areas. Chinese grid officials are reportedly decreasing output from turbines and solar panels this year to avoid overwhelming power lines.
“With annual wind and solar installations booming and potentially allowing for an early peak in emissions in the world’s biggest polluter, the focus has shifted from generating clean energy to making sure it can be used,” Bloomberg recently reported. In order to more effectively support these massive renewable energy additions, China is getting serious about energy storage, which is heating up to be a major market in the coming months and years.
Solar and wind power are variable energy sources, meaning that their power production levels fluctuate according to the weather, time of day, and the seasons in ways that are not always predictable. This presents challenges to balancing inflows and outflows of energy to the grid, as wind and solar production cannot be manipulated to match energy demand, unlike energy derived from fossil fuels.
This is where energy storage comes in. Storage technologies capture and stockpile excess energy when renewable energy supply outstrips demand, and later feed that energy back into the grid when demand outstrips supply. This stabilizes inflows and outflows to the grid while also mitigating market volatility through a process known as arbitrage. Due to these essential energy security services, it has been argued that energy storage is the backbone of the renewable revolution.
As of July 2024 analysis from Global Energy Monitor, China was developing 180 gigawatts of large solar projects and 159 gigawatts of large wind projects. Together, these developments amount to almost two-thirds of the entire world’s incoming wind and solar capacity. But while the country’s combined wind and solar capacity has topped 1,200 gigawatts, installed battery storage capacity has reached just 44 gigawatts.
While battery storage capacity has lagged far behind renewable energy capacity additions, China’s energy storage is on a massive growth trajectory. Installed capacity already grew by 40% in the first half of 2024, and is expected to reach 300 gigawatts of battery storage by 2030, according to Qian Zhimin, former chairman of the Chinese mega-utility State Power Investment Corp.
Energy storage is a nascent sector and many energy storage technologies are still in the research and development phase. Batteries are just one option, and they have some distinct disadvantages, as they are only able to hold power for short time periods. However, the market is currently dominated by lithium-ion battery storage, as it is a proven technology with plenty of existing infrastructure, well-established supply chains, relatively low-cost installation, and, as luck would have it, a current surplus of manufacturing. Bloomberg reports that “battery makers have over-invested in factories in recent years, leaving the industry with massive overcapacity.”
The explosive growth of the energy storage sector is therefore great news for the battery industry. To reach zero-emissions targets, it is estimated that worldwide installed battery storage capacity needs to grow to more than a terawatt (TW) by 2030, and nearly 5TW by 2050. For context, total capacity totalled less than 200 gigawatts (GW) in 2023.
China is not the only place that energy storage is taking off. Markets for energy storage are growing at a rapid clip in the United States and Europe as well. On a global scale, energy storage is heating up to be “clean energy’s next trillion-dollar business.” But nowhere is this buildout as important as in China, where warpspeed additions of wind and solar energy production threaten to overwhelm energy grids, undermine national energy security, and potentially even render all of those additions useless.