Battery in China Update: Grid‑Scale Storage Procurement Opens to Foreign JVs — Key Takeaways

Beijing – April 2, 2025. On March 26, 2025, China’s National Energy Administration (NEA) released the latest procurement framework for grid-scale battery storage, formally opening 14.2 GW of tender opportunities to foreign-invested joint ventures (合资企业, hezi qiye) for the first time. This represents a 50% increase in open tender volume compared to 2024, when only domestic firms could bid on 9.5 GW. The policy change effectively removes a de facto barrier that had limited foreign participation to manufacturing and component supply, now allowing overseas companies to co-develop grid-scale storage projects alongside Chinese partners.

Why This Matters

For foreign battery and energy storage firms, China’s grid-scale market has been a tantalizing but largely closed segment. Until now, foreign companies could only supply cells, modules, or balance-of-system equipment to domestic system integrators. The new procurement rules let joint ventures bid directly on projects that will be connected to provincial grids, giving foreign players a share of both the engineering, procurement, and construction (EPC) and long-term operations revenue streams. With China targeting 60 GW of new grid-scale storage by 2027, according to the China Energy Storage Alliance (CNESA), the total addressable market for foreign JVs could exceed ¥120 billion (≈US$16.6 billion) over the next three years.

Key Policy Changes and First Moves

The NEA procurement list covers seven provinces: Shandong, Jiangsu, Zhejiang, Henan, Hunan, Guangdong, and Sichuan. Each province has set aside specific capacity for JV bidders — typically 20–30% of total tendered volume. The first wave of bids closes on May 30, 2025, with project commissioning deadlines ranging from December 2025 to June 2026. Below is a summary of the provincial allocations and significant details.

Total JV-eligible capacity: 4.26 GW out of 14.2 GW — approximately 30%. The remaining 9.94 GW is reserved for domestic companies wholly owned by Chinese entities. This ratio is expected to increase to 40% by 2026 under a pilot programme from the Ministry of Industry and Information Technology (MIIT).

Opportunities for Foreign JVs

While the procurement opening is a major step, foreign companies cannot simply set up a wholly foreign-owned enterprise (WFOE) (外商独资企业, waishang duzi qiye) in the energy storage sector and bid. The NEA requires that the bidding entity be a joint venture (JV) where the foreign partner holds no more than 50% equity. In practice, two models have emerged:

1. Technology-Focused JV: The foreign partner contributes advanced cell chemistry, battery management system (BMS) algorithms, or thermal management IP, while the Chinese partner provides land, permits, and grid connection approvals. Example: Tesla’s LFP cell joint venture with a local provincial-level state-owned enterprise (SOE) in Shandong.

2. Local Manufacturing Plus EPC JV: A foreign battery maker licenses its cell manufacturing process to a JV that also acts as EPC contractor. The JV then bids on provincial projects using its own production capacity. This model is common in Jiangsu, where CATL partners with foreign firms on cathode production, and the JV bids as a system integrator.

Both models require the foreign partner to commit to technology transfer and local procurement thresholds (see table). Failure to meet local content requirements can result in a 20% penalty on the bid bond and a two-year suspension from future tenders.

Checklist for Foreign Companies Entering Grid‑Scale Storage Bids

• Identify a Chinese partner with existing grid infrastructure ties (e.g., provincial grid companies, SOEs in energy or transportation). Most successful JVs are with entities that already operate pumped storage or substations.
• Ensure your technology meets provincial performance thresholds: LFP cells must be ≥125 Ah, cycle life ≥10,000 for Jiangsu projects. Different provinces have varying round-trip efficiency requirements (85% to 92%).
• Prepare for a 60–70% local content ratio: Onshoring cell production, BMS assembly, and thermal management systems is required. Expect a lead time of 8–12 months to set up a local manufacturing line.
• Budget a ¥50–80 million (≈US$7–11 million) investment for a Tier-1 local factory, including regulatory approvals and workforce training. Foreign firms that already have a WFOE in China’s EV battery supply chain may lower that to ¥30 million.
• File your bid by May 30, 2025. Late submissions or incomplete joint venture agreements will be rejected. The NEA also demands a ¥10 million bid bond per project, refundable only if the JV is awarded a contract.
• Register with the provincial Energy Administration at least 30 days before bidding. This process requires a copy of the JV contract, factory location approval, and a technology verification report from CNESA.

Key Risks Foreign Investors Must Navigate

1. Technology Transfer Without IP Protection

China’s grid-scale storage procurement explicitly requires “core technology localization” — often interpreted as sharing cell formulation or BMS source code with the Chinese JV partner. While many foreign firms have signed non-disclosure agreements (NDAs), IP enforcement in China remains uneven. To mitigate risk, structure the JV to have the foreign partner retain ownership of the patent while licensing it to the JV on a royalty basis, with non-compete clauses for the Chinese partner’s other ventures. Several European battery makers have successfully used this model in Jiangsu and Guangdong.

2. Provincial Variability in Approval and Grid Connection

Each province issues its own implementation details beyond the NEA framework. For example, Sichuan requires that storage projects integrate with existing hydropower scheduling, while Shandong demands a 10-year operations and maintenance contract with the local grid company. Foreign JVs must allocate 3–6 months for provincial-level negotiations, which can delay project commissioning and strain cash flow. It is advisable to hire a local regulatory affairs consultant who has direct experience with the specific provincial Energy Administration.

3. Profitability Constraints from Bid Price Caps

The NEA has imposed a maximum bid price of ¥0.65/kWh (≈US$0.09/kWh) for energy storage services in 2025, a 15% reduction from 2024 levels. This cap aims to compress margins and accelerate cost reduction. For a typical 100 MW/200 MWh project, the revenue opportunity over a 10-year contract is roughly ¥1.3 billion, but operating costs (including battery degradation, maintenance, and power conversion losses) eat into 60–70% of that. Foreign JVs with higher upfront costs for imported cells or BMS may find it difficult to compete on price without aggressive local manufacturing. Only proven low-cost cell technologies — such as LFP with a cycle life exceeding 7,000 at ≤30% degradation — are likely to yield positive net present value (NPV).

Where to Go From Here

Foreign executives should consider three distinct paths based on their company’s technology maturity and existing China presence:

Decision Path 1: For companies with a mature LFP cell product (cycle life ≥10,000) and a local team – Form a JV immediately with a provincial-level SOE that has grid connection rights (e.g., Shandong Energy Group or Jiangsu Provincial Electrical Power Company). Target the 2.8 GW Shandong tender and the 2.5 GW Jiangsu tender as pilot projects. Expect to commit at least US$10 million over 18 months, but with a high probability of winning 1–2 large contracts. This path yields maximum revenue but carries higher IP exposure.

Decision Path 2: For companies with strong battery management system (BMS) or thermal management IP but no cell production – Partner with a Chinese cell manufacturer (e.g., CALB or Gotion High-tech) that is already in the NEA approved list. Focus on BMS integration and local assembly of packs. This requires a lower upfront investment of US$4–6 million and less IP transfer risk, but profit margins will be thinner (15–18% vs. 25–30% for full JV). Target Guangdong and Hunan tenders where BMS performance is a key evaluation criterion.

Decision Path 3: For companies that wish to test the market before full commitment – Apply for a technology verification with CNESA and form a “soft JV” (a contractual cooperation without equity investment). Under this model, the Chinese partner bids on a project and sub‑contracts the foreign firm for system design and component supply. No factory investment is needed, but the foreign partner earns only a service fee (typically 10–12% of project value). This path is suitable for 2025 only; from 2026 onward, the NEA plans to require equity JVs for all foreign participation. Use 2025 to build relationships and gather market intelligence before making a major equity decision in early 2026.

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