China to Boost Batteries Sector with New Grid Backup Policy

2muk4zrn}vu)3oj{4[84{8hm_media_dl_1.png BloombergNEF

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(Bloomberg) — The Chinese government will help underpin the nationwide boom in large-scale batteries by expanding its subsidies for energy storage.  

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Beijing has for the first time instructed provinces to include batteries in a payment program that’s designed to ensure reliable electricity supplies and enhance the green transition, according to a notice from economic planners late last week. The move could boost revenues and unlock even more growth in an industry already marked as a key driver of economic development. 

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The new payments will provide “missing money” for struggling grid projects, said Ian Yao, a senior manager focusing on electricity markets at consultancy The Lantau Group. “It’s definitely a positive signal,” he said. “If you invest in battery storage, you can get a payment based on your capacity, so you don’t need to always worry about whether you get dispatched.” 

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China’s rapid adoption of renewable energy requires a flexible power source to smooth out fluctuations in wind and solar generation. China’s old policy, formulated in 2023 after a spate of severe blackouts, rewarded the country’s vast fleet of coal-fired power plants for maintaining readiness to meet peak electricity demand. 

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The first phase of the new policy will allow batteries, and other energy storage options like pumped hydro, to benefit alongside coal from the subsidies. A second stage is envisaged that opens up the market to competition, with payments based on “reliability rather than installed capacity,” BloombergNEF said in a note.

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Leveling the playing field is likely to put coal under competitive pressure, and could favor the smaller, though fast-growing battery sector.

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By establishing a comprehensive compensation system for energy storage projects, the sector is officially entering a new phase of development that will be led by the market, Chen Haisheng, director general of the China Energy Storage Alliance, said at a briefing on Tuesday.

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Local versions of the policy have already had an impact. National installations of energy storage systems reached 183 gigawatt-hours in 2025, about 30% above expectations, according to HSBC Holdings Plc. The bank cited capacity payments in western China as helping to drive the increase.

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Although China continues to lean heavily on coal as a power source, the fossil fuel is being recast to a supporting role. Solar generating capacity should surpass coal for the first time this year, according to the country’s electricity lobby, cementing the need for developing more storage. 

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On the Wire

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