China ESS integrators and global ESS installation outlook Report Interpretation

Overview

This industry report examines the outlook for Chinese ESS integrators. JPMorgan expects installation growth to remain strong through 2027, driven especially by European storage economics and supported by China’s policy framework and project pipeline, but argues that higher battery costs, weaker export rebates and competition will weigh on margins.

Core views

JPMorgan expects global ESS installations to remain on a strong growth path through 2026-27. Management commentary across major manufacturers supports this view: Sungrow cited more than 50% year-on-year global ESS installation growth in 2026 and implied 30-50% growth across key markets in 2027, with Europe at about 50%, China at about 30%, and the Americas at about 20-30%. Sineng expects overseas ESS demand to rise by more than 50% year-on-year in 2027, while Deye raised its FY26 new-energy revenue target to RMB24bn from RMB20bn. Shipments are expected to be weighted toward 2H26, with Sungrow expecting more than 60% of full-year shipment volumes in the second half and Deye’s revised target implying about RMB14bn of 2H26 revenue versus about RMB10bn in 1H26. Europe is the report’s key incremental market. JPMorgan’s analysis of France, Germany, the Netherlands and Spain finds that the power-price “duck curve” is becoming more pronounced: increased wind and solar output is lowering midday power prices, while evening prices remain supported by tighter net load, fuel-linked marginal costs and ramping constraints. Renewables account for about 34% of power supply across core European power markets, up from about 24% in 2021. The resulting wider intraday price spreads increase the value of flexibility; ESS can monetize this through demand response and peak shaving. JPMorgan therefore expects European ESS project returns to improve as long as spreads remain elevated, supporting a secular installation-growth outlook. China provides a second support pillar. The NDRC’s September 2025 action plan calls for cumulative ESS installations of 180GW by 2027, versus about 75GW at FY24. JPMorgan considers the target achievable and expects China to exceed it, arguing that the more important implication is reassurance that ending mandatory ESS attachment does not represent a structural retreat from storage deployment. A January 2026 NDRC and NEA notice allows eligible grid-side independent ESS projects supporting system security to receive capacity fees benchmarked to local coal-fired capacity payments, adjusted for peak-discharge capability, alongside reliability compensation and participation in energy and ancillary-service markets. JPMorgan views this as improving project economics and allowing local governments to add incentives. Independent ESS represented 69% of new installations in 1H26, up 13.9 percentage points year on year, indicating a shift toward grid-side projects. Pipeline indicators reinforce the constructive China installation view, while the report notes that registrations do not all translate into installations. New project registrations were 263GW/665GWh in 1H25, up 109%/120% year on year, and another source reported 401GW/1,030GWh in 1H26; JPMorgan treats the comparison cautiously because the sources differ, but sees it as indicating more than 50% year-on-year growth in activity. In 1H26, ESS-system tenders totaled 24.5GW/148.1GWh, down 3.4% in GW but up 88.3% in GWh year on year, while ESS EPC tenders reached 80.1GW/227.9GWh, up 98.7%/112.2% year on year. The demand outlook is offset by margin pressure. Higher lithium and LFP-cell prices, a lower export tax rebate and foreign-exchange losses reduced Deye’s 2Q ESS battery-pack gross margin. The export rebate was cut from 9% to 6% in April 2026 and is due to fall to zero from January 2027. Deye said passing costs through has been difficult amid competition and plans more aggressive pricing to gain share. Sungrow reported broadly stable overseas new-order system pricing of about RMB0.8/Wh in 1H26; JPMorgan believes this indicates partial cost pass-through despite a mix shift toward longer-duration systems, which mechanically lowers RMB/Wh. However, 2H26 revenue will largely reflect shipments produced with elevated lithium-related inputs while underlying orders were likely contracted in 2H25, so JPMorgan expects gross margins to trend lower in 2H26 and into 2027. Pass-through should be more feasible for new utility-scale orders in developed markets, but vary by region and product. Competition is intensifying as distributed-generation specialists Deye and Sigenergy enter utility-scale ESS and Sungrow expands in distributed-generation ESS. JPMorgan argues that utility-scale projects have higher entry barriers because customers require bankability, quality and operating track record, and brand recognition; it therefore sees Sungrow retaining an advantage in utility-scale ESS, particularly in developed markets. It expects Deye to maintain leadership in emerging-market distributed-generation ESS through first-mover advantage and cost leadership. AIDC is viewed as a further demand source: Sungrow has won about 2GWh of AIDC ESS orders and cites a pipeline above 10GWh, while GoodWe and Sineng have secured smaller overseas orders. US policy uncertainty is an incremental negative for Sungrow, particularly for utility-scale systems linked to grid connection and transmission, whereas behind-the-meter solutions, including AIDC ESS, appear lower risk under the report’s interpretation of the policy focus.

Analysis framework

JPMorgan combines manufacturer guidance and shipment targets with European hourly power-price patterns, renewable-generation trends, Chinese policy measures, installation shares, project registrations and tender data. It then links storage demand to the economics of power-price volatility and assesses integrator profitability through input costs, export rebates, order timing, pricing and competitive positioning.

Methodology notes

• Industry AnalysisSupply-demand framework

  ESS demand-and-supply assessment using company shipment guidance, installations, registrations and tender volumes.

  The report uses forward demand indicators and manufacturer commentary to assess the likely pace of ESS installations through 2027.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Input-cost and export-rebate transmission into ESS integrator pricing and gross margins.

  Higher LFP-cell costs and lower export rebates affect integrator margins depending on order timing, region, product type and the ability to pass costs to customers.

Asset mapping & comparison

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

• Deye - A (605117.SS)

  JPMorgan favors Deye for exposure to European and commercial-and-industrial ESS growth.

  Strengths

  Raised FY26 new-energy revenue target to RMB24bn; first-mover advantage and cost leadership in emerging-market distributed-generation ESS.

  Weaknesses

  Battery-pack gross margin declined in 2Q due to higher LFP-cell costs, lower export rebates and FX losses.

  Comparison

  Expected to sustain leadership in emerging-market distributed-generation ESS, while Sungrow retains the stronger utility-scale position.

  Risks

  Difficulty passing higher costs through amid competition and more aggressive pricing to gain share.

• Sungrow - A (300274.SZ)

  JPMorgan maintains an Overweight rating, supported by integration capability and an ex-US ESS installation outlook.

  Strengths

  Strong ESS integration capabilities; competitive advantage in utility-scale ESS, particularly in developed markets; about 2GWh of AIDC orders and a pipeline above 10GWh.

  Weaknesses

  About 40% underperformance versus the SHCOMP Index since 1 July, according to the report.

  Comparison

  Viewed as stronger in utility-scale ESS, while Deye is expected to lead emerging-market distributed-generation ESS.

  Risks

  US market-access uncertainty, especially for utility-scale ESS, and sector-wide gross-margin pressure.

Key data

• Sungrow global ESS installation growth>50% YoY in 2026Management guidance; Europe is expected to be the strongest major market in 2027 at about 50% growth.
• Deye FY26 new-energy revenue targetRMB24bnRaised from RMB20bn; implies about RMB14bn in 2H26 versus about RMB10bn in 1H26.
• China cumulative ESS target180GW by 2027Versus about 75GW at FY24.
• Independent ESS share of new China installations69% in 1H26Up 13.9 percentage points year on year.
• China ESS-system tenders24.5GW / 148.1GWh in 1H26-3.4% / +88.3% year on year.
• China ESS EPC tenders80.1GW / 227.9GWh in 1H26+98.7% / +112.2% year on year.
• Export tax rebate9% to 6% in April 2026; 0% from January 2027A stated gross-margin headwind.

Impact & implications

JPMorgan sees Europe’s widening intraday price spreads and China’s supportive policy and project pipeline as foundations for continued ESS installation growth through 2027. For integrators, the report distinguishes favorable demand conditions from profitability: margin outcomes depend on input-cost inflation, export-rebate changes, pricing power, product mix and regional exposure.

Risks

• Higher lithium and LFP-cell prices, lower export rebates and limited cost pass-through could reduce ESS gross margins in 2H26 and 2027.
• Intensifying competition may require more aggressive pricing and constrain profitability.
• US geopolitical and policy uncertainty could restrict Sungrow’s market access, with utility-scale ESS facing the greatest risk.
• Project registrations and tender volumes may not fully convert into actual ESS installations.

What to watch

• Whether European midday-to-evening power-price spreads remain elevated and continue to support ESS project returns.
• 2H26 shipment progression, including Sungrow’s second-half volume mix and Deye’s delivery against its revised FY26 revenue target.
• The January 2027 removal of the export tax rebate and the extent of regional and product-level cost pass-through.
• Implementation of China’s capacity-charge framework and the continued shift toward independent grid-side ESS.
• China ESS registrations, system tenders and EPC tenders as leading indicators for 2027 installations.
• US policy developments affecting utility-scale and behind-the-meter ESS market access.