Everbright Securities has released a research report stating that the projected installation volume of China's large-scale energy storage for 2026/2027 is currently the most critical variable in judging lithium battery demand. For installations driven by economic factors in 2026/2027, three key indicators require continuous monitoring: the pricing of coal power capacity tariffs across different regions; the scale of energy storage project lists in various regions; and changes in spot market price spreads. These factors significantly influence the investment value of sectors with tight supply, such as lithium carbonate and lithium hexafluorophosphate. As China's energy storage industry moves onto a path of healthy development, leading companies stand to benefit. The main points from Everbright Securities are as follows:
Energy storage investment is returning to first principles. The issuance of the "Document No. 114" has accelerated the rationalization of the profit model for energy storage power stations. For project investors and operators, beyond capacity tariffs, a comprehensive assessment of the economic benefits of energy storage stations is necessary. Consequently, investors and operators must conduct prudent evaluations of a project's Internal Rate of Return (IRR). For local governments, the pricing of capacity tariffs requires systematic evaluation. In the following analysis, an equity IRR of 6.5% is used as the benchmark to determine whether a project has sound investment value.
The factors affecting the IRR of an energy storage station are diverse, with four core indicators: (1) Capacity tariff level: This primarily depends on three factors: the coal power capacity tariff, the annual duration of the peak net load, and power system demand. In the base case scenario, it is assumed the coal power capacity tariff is 165 yuan/kW·year, the annual peak net load duration is 6 hours, and the capacity supply-demand coefficient is 0.9. (2) Spot market arbitrage spread and daily full charge-discharge cycles: It is assumed there is one full cycle per day, with an arbitrage spread of 0.35 yuan/kWh. (3) Energy Storage EPC cost: This mainly depends on storage duration and battery cell prices. It is assumed the storage duration is 4 hours, with an EPC cost of 0.9 yuan/Wh. (4) Lifespan and cycle count of the energy storage station: It is assumed the station has a 10-year lifespan without equipment replacement.
Under the base scenario, the equity IRR for an energy storage station is 5.5%. (1) Discussion on capacity tariffs: When the coal power capacity tariff is 165 yuan/kW·year, the spot market arbitrage spread needs to reach 0.36 yuan/kWh for the equity IRR to exceed 6.5%. If the coal power capacity tariff is assumed to be 330 yuan/kW·year, the corresponding equity IRR reaches 15.4%. (2) Discussion on spot market arbitrage spread and daily cycles: The spot market arbitrage spread is a core metric affecting IRR. An increase of 0.01 yuan/kWh in the spread raises the project IRR by 1.4 percentage points. The number of daily full charge-discharge cycles has a significant impact; an increase of 0.1 cycles raises the project IRR by 4.4 percentage points. (3) Discussion on Energy Storage EPC cost: Assuming lithium carbonate prices of 120,000/200,000/240,000 yuan per ton, and all other conditions unchanged, the spot market arbitrage spread would need to reach 0.37/0.39/0.41 yuan/kWh, respectively, to meet the 6.5% return target. Alternatively, for every 100,000 yuan/ton increase in lithium carbonate price, the coal power capacity tariff would need to increase by approximately 50-60 yuan/kW·year to effectively offset the cost. (4) Discussion on lifespan and cycle count: If the lifespan increases to 11 years, the equity IRR would increase by 2.9 percentage points to 8.4%. If the lifespan increases to 15 years, the equity IRR would rise to 13.3%.
Calculations for typical provinces show that among regions with year-round spot market operation in 2025, Shanxi, Inner Mongolia, Shandong, and Gansu have equity IRRs above 6.5%. Based on short-term data since the spot market commenced, Hainan, Jiangxi, Xinjiang, Liaoning, Yunnan, and Hebei also show IRRs exceeding 6.5%.
Key areas requiring close attention include: monthly changes in spot market price spreads across provinces, the pricing of coal power capacity tariffs for 2026 in each province, and fluctuations in raw material prices such as lithium carbonate.
Risk warnings include: risks of policies falling short of expectations; risks associated with slower-than-expected development of the power spot market; and risks of intensifying industry competition.