Beijing freezes plant approvals for energy-storage batteries amid overcapacity fears

Beijing has imposed a temporary halt on new approvals for energy-storage battery production facilities, concerned about an overloaded supply and intense price competition, according to industry insiders. The ban, which bars companies from adding new capacity since May, was implemented by key regulators like the Ministry of Industry and Information Technology (MIIT) to prevent a construction frenzy that could lead to severe overcapacity despite rising global demand for renewable energy, the sources explained.

The ban could be lifted if the supply-demand balance shifts, the insiders added. "The decision to suspend construction of new ESS battery factories was made because dozens of new projects in the pipeline sparked policymakers’ fears about redundancies," said Ivan Li, a researcher at Loyal Wealth Management in Shanghai. "The ministry-level authorities apparently looked to take pre-emptive measures so that sustainable growth could be achieved."

Energy-storage systems, which include batteries along with related equipment, store surplus energy from renewable sources like solar and wind while providing backup power during outages and helping stabilize electricity grids. The MIIT, China's main economic planning agency, along with the National Development and Reform Commission and provincial governments, jointly draft policies for ESS projects.

An advisor to battery firms said the suspension is a form of "window guidance," allowing authorities to inform companies or local authorities about government policies without officially announcing or publishing them. This guidance can be adjusted swiftly.

According to data from the China Industrial Association of Power Sources, over 100 battery factories underwent all approval procedures in the first seven months of the year, with these facilities collectively capable of producing 2,600 gigawatt-hours (GWh) of batteries annually and requiring a total investment of 447 billion yuan (US$66.65 billion).

This represents a 48% increase in planned production capacity from 2025, compared to the 1,755GWh produced by Chinese manufacturers in the same period. The 2,600GWh of ESS batteries could support renewable energy projects with an installed capacity of 1,300 gigawatts (GW), with one GW capable of supplying around 750,000 households annually.

The boom in artificial intelligence has driven demand for renewable energy, creating a massive demand for ESS infrastructure and batteries. Chinese battery companies have accelerated new plant construction following the global energy shock from the Iran conflict, further boosting demand for alternative energy. China leads the global ESS battery industry, with mainland companies accounting for more than 80% of the market.

Global ESS battery demand rose 79% year on year to 550GWh in 2025, as reported by Seoul-based SNE Research. Chinese regulators aim to avoid "involution" in the ESS battery sector, a term referring to intense price competition that undermines sustainable growth and profits.