“The Chinese regulator says enough! Is the price war in the energy storage market over?”
The decision announced at the end of November by the Ministry of Industry and Information Technology (MIIT) represents one of the strongest regulatory signals for the global energy-storage sector in recent years. The ministry announced urgent actions to curb so-called irrational competition in the battery and BESS industries — a practice that has begun to threaten the stability of the entire ecosystem in China.
Market situation
Excessive production capacity and aggressive price competition have led to a situation in which manufacturers’ margins have been severely compressed. In some tenders, system prices have fallen to around USD 65/kWh. While such levels are difficult to imagine in Western markets, in China they have become a symptom of deep market involution — quantitative expansion without improvements in quality or profitability.
During a meeting with battery-industry executives, Minister Li Lecheng emphasized that the development of the energy-battery sector is of strategic importance. Continuing to tolerate destructive price wars would be inconsistent with the country’s long-term industrial objectives.
Regulation instead of chaos
MIIT’s stance marks a clear departure from the previous period of nearly unlimited expansion. The ministry plans to strengthen oversight of production capacities, increase quality control, and react more decisively to intellectual-property violations. At the same time, companies are to be encouraged to plan capacity more rationally and to internationalize their operations in a structured way, rather than exporting domestic price pressure abroad.
This regulatory shift coincides with bottom-up initiatives. One of the most prominent anti-involution platforms has gained support from 150 companies — from lithium-ion and sodium-ion battery makers to EMS suppliers, system integrators, and installation-safety firms. Earlier, similar calls were made by the China Energy Storage Alliance, which stressed the need for self-regulation and the controlled phase-out of outdated production lines.
This turn resembles the path taken several years ago by China’s photovoltaic sector — from a brutal price war to a phase of consolidation in which innovation, quality, and durable business models gained importance.
Energy storage as the second engine of lithium demand
Paradoxically, efforts to regulate the market coincide with a clear revival in demand for energy-storage systems themselves. Changes to China’s electricity-pricing model introduced in the summer — initially misinterpreted by markets — created a strong economic incentive to install BESS. The primary goal was price arbitrage between peak and off-peak hours.
Analysts at UBS recently admitted they initially underestimated this mechanism. In practice, orders for BESS in China have surged, and some manufacturers’ order books are filled months ahead. Energy storage has thus become the second pillar — alongside electromobility — driving lithium demand. This is already reflected in falling inventories and a notable rebound in raw-material prices.
Although investment banks differ on when the lithium market will shift into deficit, evidence is mounting that BESS is permanently reshaping the supply-demand balance. For investors and manufacturers, this means the need for greater caution. Cheap batteries are no longer solely a function of oversupply but increasingly the result of short-term competitive pressure — precisely what Beijing is now trying to rein in.
In a broader view, MIIT’s actions can be seen as an attempt to stabilize the global energy-storage market. If China succeeds in reducing the most destructive forms of competition, the BESS sector may enter a healthier growth phase — less spectacular in terms of price drops, but far more predictable and economically sustainable.