China is taking a significant step to curb rampant growth in its energy storage sector, with authorities reportedly halting approvals for new production capacity projects. This move comes as concerns mount over escalating overcapacity and potential price wars within the industry, according to multiple sources within the supply chain.
Capacity Surge and Market Realities
Industry insiders reveal that relevant government departments are currently conducting a comprehensive review of existing and planned energy storage production capacity. The focus is particularly sharp on battery cells, a key component in the storage ecosystem. Projects that are still in the planning phase and have not yet commenced construction are being temporarily suspended from approval and advancement. However, projects that have already been registered and are currently under construction will not be affected by this new directive.
This tightening of regulations is not a complete shutdown, industry insiders emphasize. Instead, it’s a dynamic adjustment expected to be recalibrated based on actual market demand. The urgency behind this action is underscored by alarming projections. Tian Qingjun, Senior Vice President at Envision Energy, highlighted that planned expansion for energy storage cells this year alone has exceeded 800 GWh. By the end of the year, actual built capacity is estimated to reach 1.2-1.5 TWh, with total planned capacity soaring past 2 TWh. Tian explicitly stated, “This already far exceeds the real demand of the global market.” He further warned that in an overcapacity scenario, battery cell manufacturers, fighting for survival, would inevitably engage in price wars, leading to a race to the bottom.
Government Efforts to Regulate Competition
This regulatory intervention aligns with previous government efforts to foster a more sustainable and rational competitive landscape. Several high-level meetings have been convened to address the issue of “irrational competition” in the power and energy storage battery industries.
- In November 2025, the Ministry of Industry and Information Technology (MIIT) organized a symposium for manufacturing enterprises in the power and energy storage battery sectors, explicitly calling for the “governance of irrational competition in the power and energy storage battery industry in accordance with laws and regulations.”
- Subsequently, in January 2026, the MIIT, along with the National Development and Reform Commission (NDRC), the State Administration for Market Regulation (SAMR), and the National Energy Administration (NEA), held another joint symposium to discuss and deploy measures for further standardizing the competitive order in the power and energy storage battery industry.
- Furthering these efforts, a kick-off meeting for the group standard General Principles for Cost Accounting Models of Power and Energy Storage Batteries was held on July 30, 2026. This initiative aims to steer enterprises away from blindly competing on price towards refined operational management, preventing internal and external “involution” (a term referring to a state of unproductive, zero-sum competition), and promoting the high-quality, standardized development of the entire power and energy storage battery industry.
These coordinated actions signal a clear intent from Chinese authorities to guide the rapidly expanding energy storage sector towards a more stable and sustainable future, preventing a potential collapse triggered by excessive production and cutthroat pricing.
