EU pushes energy storage development, driving upside in Chinese ESS integrator share prices

Overview

This report focuses on the share-price reaction and investment implications for Chinese energy storage system integrators amid the EU's push to develop ESS. J.P. Morgan notes that the EU has signed its first tripartite agreement to promote energy storage development, emphasizing that energy storage is a key missing link in the energy transition and plays an important role in reducing and stabilizing energy prices. The report believes Sungrow and Deye, both with European revenue exposure, will benefit, and reiterates OW ratings on both companies.

Core views

The core views are: first, the EU is positioning ESS as critical infrastructure for the energy transition and electricity price stability, lifting energy storage demand and sector attention; second, Sungrow and Deye have approximately 15% and 35% European revenue exposure, respectively, making them direct beneficiaries among Chinese ESS integrators; third, Sungrow trades at a valuation discount relative to global peers under the AIDC ESS theme, while Deye is supported by growth through its first-mover advantage in distributed energy storage in emerging markets; fourth, the value of ESS lies not only in renewable energy integration, but also in alleviating peak-time power tightness, stabilizing spot electricity prices, and replacing part of backup power in a cleaner and quieter manner.

Analysis framework

The report uses a combination of policy catalyst analysis, company revenue exposure, thematic valuation comparison, and power-system functional analysis: it first observes the market sentiment catalyst from the EU energy storage agreement, then maps this to Sungrow's and Deye's European exposure and business themes, and subsequently uses distributed ESS growth forecasts for emerging markets, AIDC ESS peer valuation themes, and intraday load fluctuation data from New England and NSW to illustrate the practical role of ESS in global power systems.

Methodology notes

• Policy catalyst analysisEU energy storage development agreement

  ESS as a missing link in the energy transition

  The EU agreement links energy storage development with reducing and stabilizing energy prices, forming a short-term catalyst for Chinese ESS integrators' share-price gains and a medium-term demand narrative.

• Company exposure analysisEuropean revenue exposure and business theme mapping

  Identify direct beneficiaries by regional revenue exposure

  Sungrow and Deye have about 15% and 35% revenue exposure to the European market, respectively, and are therefore listed in the report as beneficiary companies under coverage from the EU's energy storage push.

• Valuation and thematic comparisonAIDC ESS peer comparison

  Relative valuation discount under thematic exposure

  The report notes that Sungrow trades at a meaningful discount relative to global peers with AIDC ESS theme exposure, implying potential valuation support if the theme is repriced by the market.

• Power market mechanismPeak-valley load shifting

  Charge during off-peak and discharge during peak to stabilize electricity prices

  ESS can charge during low-load periods and discharge during peak-load periods, easing power supply tightness and suppressing peak-time price increases in some spot power markets.

• Social factor analysisBackup power replacement and social license

  Cleaner and lower-noise characteristics of ESS relative to diesel generators

  In traditional backup power scenarios, ESS has zero carbon emissions and lower noise, which the report links to community concerns over noise pollution around data centers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Sungrow - A (300274.SZ)

  Direct coverage target; a Chinese ESS integrator with exposure to the European ESS and AIDC ESS themes.

  Strengths

  About 15% revenue exposure to the European market; benefits from the EU's ESS push; the report states it trades at a meaningful discount relative to global peers with AIDC ESS theme exposure; rated OW.

  Weaknesses

  Lower European exposure than Deye; the investment thesis depends on continued EU energy storage progress, persistence of the AIDC ESS theme, and narrowing of the valuation discount.

  Comparison

  Compared with Deye, Sungrow has lower European revenue exposure, but the report places greater emphasis on its valuation discount relative to global AIDC ESS peers.

  Risks

  If implementation of EU energy storage policy or AIDC ESS demand falls short of expectations, the re-rating thesis may weaken; the report does not provide a company-specific target price or upside in the main text.

• Deye - A (605117.SS)

  Direct coverage target; a Chinese ESS integrator with exposure to Europe and to distributed generation ESS in emerging markets.

  Strengths

  About 35% revenue exposure to the European market; has a first-mover advantage in the distributed generation ESS market in emerging markets; benefits from BNEF's forecast of strong distributed ESS growth in several emerging market regions during 2025E-2027E; rated OW.

  Weaknesses

  The investment thesis is sensitive to growth in distributed ESS in emerging markets and to European energy storage demand.

  Comparison

  Compared with Sungrow, Deye has higher European revenue exposure, and the report places greater emphasis on its distributed ESS growth drivers in emerging markets.

  Risks

  If distributed ESS growth in emerging markets falls below BNEF forecasts, or if European demand support is weaker than expected, the elasticity of share price and earnings may be affected.

• Chinese ESS integrator sector

  Thematic beneficiary asset; a beneficiary direction of EU energy storage policy and global demand for power-system stability.

  Strengths

  ESS can address renewable energy intermittency, improve clean energy dispatch, alleviate peak-time power supply tightness, and help stabilize electricity prices.

  Weaknesses

  Sector performance is sensitive to policy execution, installation pace, power market pricing mechanisms, and investor thematic preferences.

  Comparison

  Compared with traditional diesel backup power, ESS has better social attributes in terms of carbon emissions and noise.

  Risks

  If spot electricity price volatility, peak-valley spreads, or grid constraints are weaker than expected, the market may mark down the economics and social value of ESS.

Key data

• ESS integrator share-price performanceUp 4%-10%On June 29, 2026, outperforming the approximately 1%-2% gains of HSCEI/SHCOMP.
• Sungrow European revenue exposureAbout 15%One of the Chinese ESS integrators under coverage; the report reiterates OW.
• Deye European revenue exposureAbout 35%One of the Chinese ESS integrators under coverage; the report reiterates OW.
• Deye current price and rating605117.SS / Rmb104.27 / OWPrice as of the close on June 29, 2026.
• Sungrow current price and rating300274.SZ / Rmb155.64 / OWPrice as of the close on June 29, 2026.
• Distributed ESS growth in emerging markets2025E-2027E CAGR 100%-200%BNEF forecasts several emerging market regions will reach this growth range.
• ISO New England typical daily loadMax 13,746 MW; Min 8,972 MW; Fluctuation 53.2%Used to illustrate intraday load volatility and the value of energy storage load shifting.
• NSW typical daily loadMax 8,177 MW; Min 5,575 MW; Fluctuation 46.7%Used to illustrate intraday load volatility and the value of energy storage load shifting.

Impact & implications

The investment implication of the report is that energy storage is rising from being merely supporting equipment for new energy to becoming an infrastructure tool for electricity price stabilization, grid dispatch, and social acceptance management. The EU policy push strengthens the external demand logic for Chinese ESS integrators; issues such as data center expansion, grid queue reform, and the residential electricity price burden may further extend ESS demand from Europe to the United States and other power-constrained markets. For Sungrow, the market may focus on valuation discount narrowing under the AIDC ESS theme; for Deye, high growth in distributed energy storage in emerging markets is the key incremental logic.

Risks

• The report does not provide specific target prices or expected upside, so valuation risk should be referenced against company-specific reports.
• If the EU energy storage agreement and subsequent policy implementation progress are slower than expected, the demand catalyst for Chinese ESS integrators may weaken.
• If BNEF's forecast for high growth in distributed ESS in emerging markets fails to materialize, Deye's related growth narrative will be affected.
• If the AIDC ESS theme cools, or if the valuation center of global peers moves lower, the room for Sungrow's relative discount to narrow may be limited.
• Issues such as data center power tightness, grid queue reform, and the residential electricity price burden may not necessarily translate directly into ESS orders.
• J.P. Morgan discloses that it may act as market maker/liquidity provider for Deye - A, Sungrow - A, or related entities, and may have client relationships and potential investment banking compensation arrangements; investors should take conflict-of-interest disclosures into account.

What to watch

• Follow-up execution of the EU's first tripartite energy storage agreement, supporting policies, and project tender progress.
• Orders, revenue mix, and ESS business growth of Sungrow and Deye in the European market.
• Whether Deye's first-mover advantage in distributed generation ESS in emerging markets translates into sustained order and profit growth.
• Whether the 100%-200% CAGR in distributed ESS in emerging markets for 2025E-2027E forecast by BNEF materializes.
• Valuation changes among global peers under the AIDC ESS theme, and whether Sungrow's relative discount narrows.
• The impact of U.S. data center expansion, grid queue reform, the residential electricity price burden, and related FERC reforms on ESS demand.
• Peak-valley load volatility, spot price volatility, and the dispatch value of energy storage in New England, NSW, and similar power markets.