Energy Storage

How the chain fits together

Grid and commercial battery storage shares its upstream with electric vehicles and then branches off:

• Lithium becomes cathode, which goes into battery cells with anode, electrolyte and a separator.
• Power semiconductors switch the current in power conversion systems (PCS), which connect the batteries to the grid.
• Thermal management suppliers cool the cells and converters with liquid or air cooling units.
• Energy storage systems combine cells, PCS, battery management, cooling and control software in a container or cabinet.
• Battery recycling returns the metals at the end of the cells' life.

Storage is now the faster-growing market for cells. In the first half of 2026 CATL's storage revenue rose 87.54% to ¥53.26bn against 46.02% growth for its EV batteries, and it cites SMM putting global storage cell shipments at about 486 GWh, up 93% (CATL 2026 interim report, pp. 10, 16).

Why demand is changing in China

China changed how storage gets paid. Sineng Electric describes the shift: new solar and wind projects no longer have to install storage, provincial spot power markets were almost everywhere by the end of 2025, and from early 2026 independent storage can earn capacity payments, so income now comes from power price spreads, grid services and capacity (Sineng 2026 interim report, p. 18). HyperStrong adds that capacity income depends on availability and performance tests (2026 interim report, p. 31).

The market abroad matters at least as much. Sungrow's revenue in mainland China fell 54.71% in the half, and 73.40% of its revenue came from overseas (Sungrow 2026 interim report, p. 35).

Where China is strong

• Cells. Citing ICCSino, CATL says it ranked first in global storage battery shipments in January to June 2026 (CATL p. 10). EVE Energy's storage batteries brought in ¥15.09bn, up 69.15% (EVE 2026 interim report, p. 19).
• Converters. Kehua Data and Sineng each cite rankings placing them at the top of China's storage PCS shipments (Kehua 2026 interim report, p. 14; Sineng p. 18).
• Systems. Sungrow's storage systems were ¥15.46bn, half its revenue, and HyperStrong says it has delivered more than 60 GWh in total (Sungrow p. 35; HyperStrong p. 20).

Where the weak points are

• Trade barriers. Sungrow and HyperStrong warn of tariffs and local-content rules in the US and Europe; Sungrow also cites the lower export VAT rebate on batteries (Sungrow p. 41; HyperStrong p. 31).
• Price competition. Sungrow says new entrants are adding capacity fast and prices keep falling; its storage margin fell 7.49 points to 32.43% (Sungrow pp. 34, 42).
• Imported chips. HyperStrong says cells are now highly localised, but high-end parts such as BMS controller chips still rely on imported brands (HyperStrong p. 30).
• Cash. HyperStrong's operating cash flow was negative ¥1.21bn in the half, despite doubled profit (HyperStrong p. 8).

Margins along the chain

The chart below sets reported gross margins side by side, from lithium mining to integrated systems. The bases differ, so it shows where margin sits rather than a like-for-like ranking.

Our view: in storage, owning the cell does not decide who earns the most. Sungrow's storage systems earned 32.43% and CATL's storage cells 23.96%, while EVE's storage batteries earned 12.51%. One factor is where they sell: overseas sales carried higher margins at CATL (29.97% against 21.16% at home) and at Kehua (36.37% against 19.89%) (CATL p. 16; Kehua p. 18).