Energy storage products market: source grid-side energy storage, commercial and industrial energy storage, and household energy storage.
The PV industry has long been divided into three markets: source-side PV (centralized PV), commercial and industrial distributed PV, and household distributed PV. Each presents different market patterns and investment logic. Moreover, the differences between energy storage market segments are even greater than those among the three PV market segments.
1.Source-side energy storage—entering a red sea of competition
Investors in source-grid-side energy storage mainly include original construction and operation companies on the source-grid side. For example, power grid companies like State Grid Xinyuan and traditional large power generation enterprises participate. Source-grid-side energy storage forms a strong buyer’s market. Consequently, few investors face many sellers. This gives investors extremely high bargaining power and keeps sellers’ profit margins low.
Provincial ancillary services markets remain the only channel for source-grid-side energy storage to generate revenue. Therefore, storage providers sell services directly to grid dispatch, which acts as the sole buyer in this segment.
Grid-side energy storage provides services in the centralized ancillary services market, such as standby, frequency regulation, and peak shaving. However, many alternatives compete here, including flexible thermal units, hydro units, combustion turbines, large commercial and industrial storage, and regulated loads acting as virtual power plants.
Technologically, source-grid-side energy storage resembles traditional centralized power products. It uses large-scale units (containers), power-oriented devices with fast ramp-up and ramp-down capability, centralized control, and high redundancy design. In addition, it requires standardized plant automation protocols, real-time performance monitoring, and dispatching interfaces.
With few investors, one downstream buyer, and many substitutes, source-grid-side energy storage has entered a red sea of competition. Thus, fierce competition strengthens buyers’ bargaining power and raises risks that some suppliers may cut corners or inflate capacity, leading to “bad money driving out good money.”
Time will reveal the outcome.
2.Commercial and industrial energy storage—a blue ocean market with unlimited innovation
Investors from all sides are entering the commercial and industrial energy storage sector. Traditional power generation and grid companies, end-users, distributed investors, energy service providers, virtual power plant operators, charging pile companies, and distribution network and power sales companies are all participating. Moreover, this diverse participation fosters innovation and market expansion.
Buyers are mainly commercial and industrial enterprises. They use peak-valley price arbitrage to lower electricity costs. In addition, they may join virtual power plant transactions or participate in demand response programs with grid enterprises. Most commercial and industrial storage projects connect to the grid at 10kV or below. As a result, they fall under municipal or county-level dispatch, not provincial dispatch. Even when bundled as virtual power plants, these projects trade in secondary electricity markets or retail-side markets, which are more active than provincial ancillary service markets.
Strictly speaking, industrial and commercial virtual power plants transact at the distribution level, not at the provincial level.
Adjustable loads and electricity sales companies offering cheaper power compete with commercial and industrial storage. However, this competition remains weak and often turns into cooperation.
As renewable energy penetration rises and electricity markets mature, wholesale-retail price transmission strengthens. Consequently, the peak-valley spread continues to widen. These trends create strong demand for commercial and industrial energy storage. Therefore, a huge market is opening up.
Many buyers and suppliers operate in this sector. Hence, the market landscape stays fragmented. This fosters a blue ocean environment and encourages the emergence of multiple niche sub-markets.
Product form also differs significantly from source-side energy storage:
First, integration is higher. Energy storage cabinets gain recognition over containers. For example, cabinets can connect independently to the grid and expand in cascades.
Second, integration goes further. Whether combined with PV or embedded into industrial and commercial microgrids, storage becomes a flexible component of enterprise energy systems. In addition, companies now offer integrated service solutions that cut overall electricity costs and generate multiple revenue streams. The sales model has shifted from selling hardware to delivering services.
Third, intelligence must improve. To optimize operation in multi-objective, multi-scenario regulation, energy storage products for industrial and commercial microgrids need smarter control. Compared with Tesla’s “cloud-domain controller” architecture, today’s projects still resemble decentralized electronic control systems of fuel cars 20 years ago.
In this sector, commercial and industrial energy storage faces blue ocean competition, rapid technological innovation, and significant potential for capital market valuation.
3.Household energy storage
For years, power generators and grid companies largely ignored the “behind-the-meter” household energy storage market. However, once electricity markets opened up, this gap became an area full of vitality.
In China, household energy storage faces obstacles. Grid companies cross-subsidize residential electricity with industrial and commercial revenues. They have invested heavily in urban and rural network upgrades. These efforts created one of the most reliable residential electricity systems worldwide. At the same time, they limited household storage demand.
Household PV in rural areas has expanded rapidly. Meanwhile, in some regions, penetration already exceeds safe limits. This trend increases safety risks, reduces reliability, and lowers power quality in distribution networks.
From a household economics perspective, the return on investment in energy storage remains low. Therefore, rural household PV may develop through “shared storage” models instead. In this model, storage operates on the public distribution network side and provides “secondary ancillary services” to address PV consumption and network reliability. Consequently, this creates a new product form and business model that may evo
