Regional spotlight: Long-duration energy storage (LDES) in China — what's different and why it matters

China installed 35.3 GW of new energy storage capacity in 2025, more than the rest of the world combined, with long-duration energy storage (LDES) systems accounting for 8.7 GW of that total, a 142% year-over-year increase according to the China Energy Storage Alliance (CNESA, 2025). While Western markets debate pilot programs and technology readiness, China is deploying LDES at utility scale across its grid, driven by a combination of aggressive renewable mandates, provincial storage requirements, and state-directed investment that has no equivalent elsewhere. Understanding how China's LDES market operates is essential for anyone tracking the global energy transition, because Chinese pricing, technology choices, and deployment timelines increasingly set the benchmarks that shape international markets.

Why It Matters

China's power system faces a storage challenge unlike any other country's. The nation added 217 GW of solar and 76 GW of wind capacity in 2025 alone, bringing total installed renewables to over 1,400 GW (National Energy Administration, 2025). This extraordinary buildout has created massive curtailment problems: 83 TWh of renewable generation was curtailed in 2025, representing approximately $4.5 billion in lost clean energy value. The geographic mismatch between where renewables are generated (predominantly in the northern and western provinces of Inner Mongolia, Gansu, Qinghai, and Xinjiang) and where electricity is consumed (the eastern coastal megacities of Shanghai, Guangzhou, and Beijing) means that short-duration lithium-ion batteries alone cannot solve the integration challenge.

LDES, defined in China's technical standards as storage systems capable of discharging for 4 hours or more at rated power, fills this gap. Provincial grid operators need storage that can shift large volumes of renewable generation from midday solar peaks and nighttime wind peaks to morning and evening demand peaks. In northern China, where heating loads dominate winter demand profiles, storage systems that can operate across 8- to 12-hour discharge windows are increasingly viewed as grid infrastructure rather than optional flexibility assets.

The global implications are significant. China's LDES deployment is driving manufacturing scale and cost reductions that will eventually reach international markets. Vanadium redox flow battery costs in China fell 38% between 2023 and 2025, reaching approximately $180 per kWh of installed capacity, a price point that Western manufacturers are unlikely to match before 2028 (CNESA, 2025). Iron-air, compressed air energy storage (CAES), and gravity-based systems are all being deployed at scales that generate operational data unavailable anywhere else.

Key Concepts

Provincial mandatory storage requirements: Since 2021, most Chinese provinces have required new renewable energy projects to co-locate energy storage capacity equal to 10 to 20% of the project's rated power, with discharge durations of 2 to 4 hours. Several provinces, including Shandong, Hebei, and Inner Mongolia, increased these requirements to 15 to 25% with 4-hour duration in 2025, effectively mandating LDES (National Energy Administration, 2025).

State-directed technology diversification: China's 14th Five-Year Plan for Energy Storage (2021 to 2025) explicitly targets technology diversification beyond lithium-ion, setting deployment goals for flow batteries, compressed air, molten salt thermal storage, and gravity-based systems. The 15th Five-Year Plan draft, circulated in late 2025, sets a target of 100 GW of total energy storage by 2030, with LDES expected to represent 30 to 40% of new installations (State Council, 2025).

Two-settlement pricing structure: China's evolving electricity market allows storage operators in pilot provinces (Shandong, Shanxi, Guangdong, Zhejiang) to earn revenue through both energy arbitrage (buying low, selling high across daily price cycles) and capacity payments from grid operators for guaranteed availability during peak periods. This dual-revenue model significantly improves LDES project economics compared to markets that rely on arbitrage alone.

Ultra-high-voltage (UHV) transmission integration: China's State Grid Corporation operates 38 UHV transmission lines connecting western renewable generation zones to eastern load centers. LDES is increasingly co-located with UHV converter stations to smooth power flows and maximize line utilization, a deployment model with no parallel in other markets.

What's Working

Vanadium redox flow batteries at scale. Dalian Rongke Power's 400 MWh vanadium flow battery installation in Dalian, Liaoning Province, commissioned in stages from 2022 to 2025, is the world's largest flow battery system. The facility provides 100 MW of power capacity with 4-hour discharge duration to the Liaoning provincial grid, primarily absorbing excess wind generation from coastal wind farms during nighttime hours and discharging during morning and evening demand peaks. Operational data from the first full year shows round-trip efficiency of 72 to 75%, with capacity degradation of less than 0.5% per year, validating claims that flow battery electrolytes maintain performance over 15,000 to 20,000 cycles (Rongke Power, 2025). The project's economics benefit from China's domestic vanadium supply chain: China produces approximately 57% of global vanadium, giving Chinese flow battery manufacturers a structural cost advantage.

Compressed air energy storage in salt caverns. The Feicheng CAES project in Shandong Province, developed by China Energy Engineering Group (CEEC), achieved 300 MW of discharge capacity with 6-hour duration in its Phase 2 expansion completed in late 2025. The project stores compressed air in underground salt caverns at depths of 800 to 1,000 meters, utilizing geologic formations that have been mapped and characterized by China's geological survey agencies over decades. Round-trip efficiency reaches 68 to 70% using advanced adiabatic designs that store compression heat in molten salt thermal reservoirs and return it during expansion. The Shandong provincial grid operator contracts the facility as a capacity resource, paying fixed monthly capacity fees of approximately $8 per kW-month in addition to energy arbitrage revenues (CEEC, 2025).

Gravity energy storage deployment. EV International (formerly Energy Vault) and China Tianying jointly completed a 100 MWh gravity-based storage facility in Rudong, Jiangsu Province, using composite blocks lifted and lowered by electric motor-generators in a 150-meter tower structure. The system provides 25 MW of power capacity with 4-hour discharge duration. While gravity storage remains more expensive than lithium-ion or flow batteries on a per-kWh basis, its 35-year design life and near-zero degradation make lifecycle costs competitive for applications requiring daily cycling over decades. The Jiangsu facility operates as a peaking resource, absorbing offshore wind generation and providing evening peak capacity to the Nantong municipal grid (China Tianying, 2025).

What's Not Working

Mandatory storage economics remain challenging. Despite the policy mandates, many storage assets installed to satisfy provincial co-location requirements operate at low utilization rates. A 2025 survey by the China Electricity Council found that 42% of mandated storage systems operated fewer than 200 full cycles per year, well below the 300 to 500 cycles needed for positive investment returns (CEC, 2025). The root cause is structural: storage systems built to satisfy permitting requirements rather than to capture market value are often undersized, poorly sited, or disconnected from dispatch systems. Developers frequently install the cheapest possible lithium-ion systems to meet the letter of the mandate, resulting in storage that grid operators cannot effectively integrate.

Revenue certainty remains fragmented. China's electricity market reform is progressing province by province, creating a patchwork of compensation mechanisms. In provinces with active spot markets (Shandong, Guangdong), LDES operators can capture meaningful arbitrage spreads of $30 to $60 per MWh between off-peak and peak prices. In provinces that still operate under regulated tariff structures, storage operators may receive only a fraction of the value their systems provide to the grid. The lack of a national capacity market or standardized ancillary services compensation framework means that project economics vary dramatically by location, discouraging private investment in provinces with less favorable market structures.

Vanadium supply chain concentration risks. China's dominance in vanadium production is both an advantage and a vulnerability. Domestic vanadium prices experienced a 45% spike in the first half of 2025 due to simultaneous demand from the steel industry (vanadium is used in high-strength steel alloys) and the rapidly expanding flow battery sector. This price volatility directly impacts flow battery project economics, since the electrolyte represents 35 to 40% of total system cost. Several developers reported delaying projects by 6 to 12 months while waiting for vanadium prices to stabilize, highlighting the tension between China's ambition to deploy flow batteries at scale and the physical constraints of raw material supply.

Safety incidents at lithium-ion installations. While not strictly LDES, safety incidents at lithium-ion storage facilities have created regulatory uncertainty that affects all storage technologies. A series of thermal runaway events at battery storage stations in 2024 and 2025, including a major fire at a facility in Hunan Province that burned for 38 hours, prompted several provinces to impose temporary moratoria on new battery storage approvals pending updated safety standards. These moratoria delayed LDES projects that use inherently safer chemistries, such as flow batteries and CAES, due to the broad language of the regulatory orders.

Key Players

Established Companies

• Dalian Rongke Power: China's largest vanadium redox flow battery manufacturer, responsible for the 400 MWh Dalian installation and multiple provincial-scale deployments across northern China
• State Grid Corporation of China: the world's largest utility, operating 38 UHV transmission lines and increasingly integrating LDES at converter stations for power flow optimization
• China Energy Engineering Group (CEEC): state-owned enterprise leading compressed air energy storage development, with operational CAES projects in Shandong and Jiangsu provinces
• CATL (Contemporary Amperex Technology): the world's largest battery manufacturer, expanding from lithium-ion into sodium-ion and condensed-matter batteries for grid-scale LDES applications

Startups

• Wuhan Nari (NARI Technology): developing advanced power electronics and battery management systems optimized for flow battery integration with provincial grids
• Zhonghe Energy Storage: commercializing iron-chromium flow battery technology as a lower-cost alternative to vanadium systems, with pilot installations in Gansu Province
• Qingdao Conson: deploying liquid CO2-based energy storage systems in Shandong, targeting 6- to 10-hour discharge durations at costs below $150 per kWh

Investors and Funding

• China Development Bank: primary source of project-level debt financing for state-backed LDES installations, providing 15- to 20-year loans at subsidized rates
• National Green Development Fund: $14.5 billion sovereign fund directing capital toward energy storage and grid modernization projects across central and western provinces
• Sequoia Capital China: leading private venture investment in LDES startups, with portfolio companies across flow battery, CAES, and thermal storage segments

Action Checklist

• Monitor provincial storage mandate updates quarterly, particularly in Shandong, Inner Mongolia, and Hebei, where requirements are evolving most rapidly
• Track vanadium and other critical mineral pricing alongside LDES deployment forecasts to assess supply chain risk exposure
• Evaluate CAES feasibility for projects near geologic formations suitable for underground air storage, as Chinese operational data demonstrates commercial viability at 300 MW scale
• Assess whether Chinese LDES technology exports and cost benchmarks will affect domestic project economics in your market within 2 to 3 years
• Review provincial electricity market reform timelines to identify jurisdictions where dual-revenue (arbitrage plus capacity) models are available for storage projects
• Study Dalian flow battery and Feicheng CAES operational performance data as reference benchmarks for technology selection decisions

FAQ

Q: How does China's LDES cost compare to other markets? A: Chinese LDES installed costs are 30 to 50% lower than equivalent systems in North America or Europe, primarily due to lower labor costs, domestic manufacturing scale, and state-subsidized financing. Vanadium flow battery systems in China cost approximately $180 per kWh installed, compared to $280 to $350 per kWh for comparable systems in the US. CAES systems benefit from lower tunneling and construction costs, with the Feicheng project reporting all-in costs of approximately $120 per kWh. These cost advantages are partially offset by lower revenue per kWh stored, since Chinese wholesale electricity prices are generally lower than in Western markets.

Q: Which LDES technology is winning in China? A: No single technology dominates. Vanadium flow batteries lead in deployed capacity for electrochemical LDES, with approximately 3.2 GW installed through 2025. Compressed air energy storage is growing fastest in absolute terms, benefiting from favorable geology in Shandong, Hebei, and Jiangsu provinces. Lithium iron phosphate (LFP) batteries configured for 4-hour duration remain the most commonly deployed technology overall due to lower upfront costs, but their 10- to 15-year lifespan disadvantage relative to flow batteries (25+ years) and CAES (30+ years) is driving a shift toward longer-lived technologies for new utility-scale projects.

Q: Can international companies participate in China's LDES market? A: Participation is possible but constrained. Foreign companies can supply components and technology licenses but face restrictions on direct project ownership in the power sector. Joint ventures with Chinese state-owned enterprises remain the primary market entry pathway. Companies including Hydrostor (Canadian CAES developer) and ESS Inc. (US iron flow battery manufacturer) have established technology licensing agreements with Chinese partners. The more immediate opportunity for international companies is leveraging Chinese manufacturing scale by procuring LDES equipment from Chinese suppliers for deployment in other markets, a trend accelerating as Chinese manufacturers seek export revenue.

Q: What are the key policy signals to watch? A: The most consequential near-term policy signal is the final version of China's 15th Five-Year Plan for Energy Storage, expected in mid-2026, which will set LDES deployment targets through 2030. Additionally, the ongoing expansion of provincial spot electricity markets will determine whether LDES operators can capture sufficient revenue to justify investment without continued policy mandates. The National Development and Reform Commission's planned national capacity market framework, targeted for pilot implementation in 2027, could fundamentally reshape LDES economics by providing long-term revenue certainty.

Sources

• China Energy Storage Alliance (CNESA). (2025). 2025 Annual Energy Storage Industry Report: Deployment, Technology, and Market Trends. Beijing: CNESA.
• National Energy Administration (NEA). (2025). Renewable Energy Development Statistical Report 2025. Beijing: National Energy Administration of China.
• State Council of the People's Republic of China. (2025). Draft 15th Five-Year Plan for New Energy Storage Development (2026-2030). Beijing: State Council.
• China Electricity Council (CEC). (2025). National Energy Storage Utilization and Performance Assessment Report. Beijing: CEC.
• China Energy Engineering Group (CEEC). (2025). Feicheng Advanced Compressed Air Energy Storage Project: Phase 2 Commissioning and Performance Report. Beijing: CEEC.
• Rongke Power. (2025). Dalian 400 MWh Vanadium Flow Battery System: First Full-Year Operational Performance Summary. Dalian: Dalian Rongke Power Co., Ltd.
• China Tianying. (2025). Rudong Gravity Energy Storage Demonstration Project: Commissioning Report and Grid Integration Results. Nantong: China Tianying Inc.
• International Renewable Energy Agency (IRENA). (2025). Innovation Outlook: Long-Duration Energy Storage Technologies and Markets. Abu Dhabi: IRENA.