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With clean energy projects no longer needing to be bundled with energy storage, companies are finding new opportunities at home and abroad. 

By Niu Yuhan, February 4, 2026

In February 2025, China shelved a requirement that new domestic wind and solar projects be bundled with energy storage. The change meant that China’s storage providers could no longer rely on these renewable projects for guaranteed demand. Instead, they now had to compete on the open market.

And yet, despite this, growth in energy storage has remained stable. Battery and battery-energy-storage system exports have hit new highs, seeing a year-on-year growth of 24% for the first three quarters of 2025, according to Reuters. The industry is adapting to the domestic market and looking to expand internationally.

But a year after the mandate ended, key questions remain. How can the industry find a stable profit model? And can exports continue to grow in the face of trade barriers and geopolitical headwinds?

The rise and fall of the energy storage mandate

The central premise of the mandate was simple. Wind and solar generation varies with the time of day and is contingent on the weather. Energy storage is a way to overcome those issues of intermittency. Pumped-storage hydroelectricity (PSH) is the most used method to achieve this, but “new energy storage systems” have emerged rapidly. These alternative systems include: lithium-ion batteries, where energy is stored in solid electrodes; flow batteries, where energy is stored in liquid electrolytes; and compressed air and mechanical systems.

In 2017, Qinghai became the first part of China to put in place the requirement for new energy storage systems, providing a model to be followed. Three years later, the central government issued various policies to support the industry. Provinces moved from encouraging wind and solar projects to be built with energy storage to requiring it, codifying rules for the size and nature of systems to be installed.

These moves sparked exponential growth. Nearly 44 gigawatts of new energy-storage system capacity was installed in 2024, reported the China Energy Storage Alliance. As such, the installed capacity of new systems overtook PSH for the first time, the alliance added.

But there were also challenges, the first of which was energy dispatch.

Data from the China Electricity Council shows that in 2022, new energy storage systems delivered just 6.1% of their potential maximum output. By June 2024, those systems were operating for an average of only 3.74 hours a day.

Wang Zesen, senior engineer at the State Grid Jibei Electric Power Company, identifies two reasons for those low utilisation rates: some areas with good wind and solar resources lack grid connections to transport the power generated; and some systems are too small or inflexible to meet changing demand.

Further, the mandate led to worries over the quality of systems being installed. According to a report in China Energy News, project owners saw storage systems as an expense rather than a source of income. They therefore preferred to keep costs down by buying low-quality batteries, giving rise to safety risks.

Collectively, these concerns led to a change of policy in February 2025, when the mandate was retired. A September 2025 national action plan, however, has set the 2027 target for new energy storage system capacity at 180 gigawatts – about twice the current amount.

Dialogue Earth consulted Li Chenfei, who manages research at the China Energy Storage Alliance, a non-profit organisation in Beijing. Li says the removal of the mandate had two effects: “First, wind and solar projects in certain provinces could secure favourable, fixed-rate tariffs under existing policies if they were connected to the grid before 31 May, encouraging many to accelerate their construction schedules. These projects are still required to be paired with energy storage systems, triggering a rush in installations and a surge in capacity in the first half of the year. Second, it shifts the industry from being policy-led to market-led, meaning firms need to improve technology and operations to compete.”

In the first quarter of 2025, installations of new energy storage systems fell for the first time, only to recover quickly. Data from the National Energy Administration shows that by the end of September 2025, China had 100 gigawatts of new energy storage systems installed. That was 30 times the 2020 figure, and over 40% of the world’s total capacity. “This shows that real demand for new energy storage systems remains stable, and short-term fluctuations aren’t changing the long-term growth trend,” says Yao Yi, a senior climate and energy project manager at Greenpeace.

Making money on the market

The value of energy storage may be clear. The harder question now is how it makes money.

Currently, energy storage facilities can generate revenue in three ways. First is energy arbitrage: storing power when it is cheap and plentiful, then selling it back at higher prices when demand rises. Second is the provision of ancillary services to keep the grid stable.

Third are “capacity payments”, earned by remaining on standby as a back-up source of power.

Last April, the government said electricity spot markets should cover all of China by the end of 2025. In theory, this would allow operators to buy cheap power and sell it later at profit. In practice, however, there were smaller gaps in electricity prices during 2025 in areas with a high proportion of renewables.

Li Chenfei explains: “Under traditional models of operation, energy storage firms use capacity leasing and regular charging and discharging arrangements to make a profit … However, energy-trading markets mean they must be more precise, deciding when to buy and sell power and how to optimise trades on spot and ancillary service markets.”

Pilot projects in places like Guangdong, Fujian and Shandong have been allowing energy storage firms to trade on spot markets and provide ancillary services for years now. But many projects still struggle to turn a profit – gaps between high and low electricity prices remain too small, and the additional electricity needed to provide ancillary services costs too much. In Guangdong, for example, six independent energy storage firms trading in the spot and ancillary services markets incurred losses of CNY 21.38 million (about USD 3 million) in 2024.

But simultaneously, the expansion of renewable capacity is driving up demand for ancillary services. As of the end of 2025, over 20 provinces had set rules for subsidies. Giving frequency regulation as an example, Li says China still lags behind more mature overseas markets in the range and granularity of services offered. But he says based on current trends, the ancillary services market is set to expand, with more specialised offerings including frequency regulation, back-up capacity, ramping and inertia. “These new service types will mean larger and more stable sources of income for energy storage,” he adds.

Some provinces are also exploring capacity payments, whereby storage companies can earn a fixed fee for “effective capacity”. Li says: “During this transitional phase, making payments based on capacity can stimulate the construction of storage. But in the long term, effective capacity better reflects the contribution made to grid security, and is easier to link up to capacity payments made for other flexible resources like thermal power and pumped hydropower.”

Yao Yi argues pricing is not the only challenge – technology and oversight also need attention. Many provinces have put capacity-payment policies in place, but there is no single standard yet for defining “effective capacity” or service hours. “If there are varying standards, it’s hard to make regional comparisons and it will complicate any future cross-provincial and cross-regional electricity trading,” she says.

Overall, energy storage firms are likely to rely on three main sources of income: short-term price arbitrage on spot markets; fees for providing stabilising ancillary services; and revenue from capacity payments. As Yao puts it, policy, markets and technology must work together.

Exports: Opportunities and challenges that coexist

Even as the domestic energy storage market steadily grows, the expansion of renewable capacity overseas is driving surging demand. Chinese energy storage firms are well placed to meet this. Such firms signed 308 deals to export equipment overseas in the first nine months of 2025, according to figures from the China Chemical and Physical Power Sources Industry Association. This represented 210 gigawatts of capacity, twice as much as the previous year. Most of that growth came from Europe, Australia and the Middle East.

In 2024, the European Union and US together accounted for 73% of China’s lithium-storage exports. However, high tariffs have caused demand from the US to shrink. Yao says: “Pressure from policies such as the EU Battery Regulation may also see Europe come to rely less on supplies from China. But there’s huge potential in emerging markets in Southeast Asia, the Middle East and Africa. For example, Vietnam has said it will invest huge amounts of money in renewable energy, and that means a new growth opportunity for Chinese firms.”

But the export rush also carries risks, as fierce competition pushes manufacturers into price wars. According to the People’s Daily, one-third of energy storage retailers are selling products below cost, with domestic price competition spilling into export markets. This is squeezing profitability.

Yao Yi says Chinese companies need to be wary of damaging the corporate ecosystem when competing on price overseas, to avoid making the mistakes seen in the solar sector. Emphasising product quality, operational and maintenance capacity and technical standards is key to ensuring sustainable growth and cultivating a competitive reputation, she says. “What we’ve seen in solar power warns us that excessively low prices will disrupt the market and harm the long-term interests of Chinese firms.”

Yao also argues that Chinese companies ought to be mindful of the risk of other countries becoming overly dependent on imports: “If markets are dependent on Chinese imports in the long term, the development of local manufacturing capacity will be restricted. Many countries have noticed this and are hoping to see deeper cooperation to build better locally.” Chinese companies could play a key role in this cooperation if they choose to.

With the mandate gone, China’s energy storage sector will be defined by how well it navigates markets, policy and global competition.

As the old world order breaks down, we need climate action that speaks the language of cost, security and everyday life, writes Dipankar Ghose. 

By Dipankar Ghose, February 4, 2026

Mark Carney heralding the new world order. The US pulling out of 66 international organisations. A sleeping president arrested in the middle of the night. Greenland and a temper tantrum. Oil at the centre of the world, again. A ceasefire holding only in name. A Board of Peace with a billion-dollar membership fee. And the United Nations could be going bankrupt.

We’ve only had January yet.

It isn’t as if the world hasn’t turned before. In stomach-churning, epoch-defining ways. You don’t have to go very far back in history. The end of the Second World War and the birth of the so-called rules-based order. The fall of the Berlin Wall. The steady ascent of the internet into everyday life. A once-in-a-generation pandemic.

Orders often collapse, reassemble or rename themselves.

And yet this moment, early 2026, feels different. It is different. What has changed is the velocity of change. What existed yesterday cannot be relied upon today. Rules barely matter. Alliances can begin in a heartbeat, and then be quelled in a second heartbeat. Nothing settles long enough to be real.

But even in this sense of disorder, something is becoming clearer. The post-war international order – imperfect, discriminatory, hypocritical, but legible – is teetering on the brink.

When order stops holding

It is important to be clear about one thing: there should be no unqualified paeans to the old order. In the Canadian prime minister’s own words at Davos, those inside it knew the story of the international rules-based system was fiction. The strongest exempted themselves when convenient. Trade rules were enforced asymmetrically. International law was applied with varying standards. Vast swathes of the world have lived the consequence of this order being built on colonialism and plunder; on an economic system that rewarded early industrialisers while lecturing others on restraint. Without ever really thinking about how that early industrialisation was made possible, or the divisions it left behind in the societies it exploited.

And yet, over time, that order came to become every-day. At the very least, it offered a measure of predictability. There was a sense of sequence. Of how the world worked and some learned to navigate within it. There was a façade of cooperation, of internationalism. There was space for issues that spilled across borders: water, climate, energy transition, hunger, the Global South. Imperfect as it was, you could plan within it. You could assume it would still be there tomorrow.

So what does the unravelling of that order mean for the environment, and for the Global South?

Everything.

Because while the great renegotiation is on, it is already clear who is driving the process. Power remains concentrated among those with the strongest militaries, the largest economies, or the leaders in artificial intelligence. Everyone else is fair game, reduced to sum totals of their most valuable resources and defined by two key questions: What do you have? And what can you supply?

Anxiety as politics

When leaders begin to view nations this way, living places turn into disembodied assets. Venezuela becomes oil, or Maduro, or María Corina Machado, not 30 million living, breathing human beings who laugh, love and negotiate life every day. Greenland becomes Denmark, or Trump, or a threat imagined from Putin or Xi, not 57,000 people whose lives hang in the balance of the capricious jousting playing out before the world. What disappears is the fact that it is people who work, fall ill, migrate, protest, and vote. It is people who form the most important pressure group there is. It is people who constitute political will.

What is also clear is that the growing transactionalism of the world feeds directly into personal anxiety. It becomes harder to care about the environment when tariffs imposed elsewhere, by forces beyond your control, threaten to shut down your business or decide whether there is food on the table. This has long been a field of research, and social scientists describe it as a “finite pool of worry”. When anxiety is high, driven by political instability, economic uncertainty, violence, or a sense that the social order itself is fragile, attention shifts toward threats that feel immediate and experiential. Environmental change, by contrast, is often perceived as distant and probabilistic. This does not mean people stop believing the science. It means concern is deferred, indefinitely, in favour of short-term security.

What does this mean for those who believe in, and care about, climate change?

The data is clearer than ever. The impacts are no longer theoretical. But appeals to shared sacrifice travel poorly in a world preoccupied with its own security. As Carney put it in Davos, we must deal with the world as it is, not as we wish it to be. Pretending that goodwill and cooperation will persuade people whose lives already feel brittle seems like a fool’s errand.

The urgent reframing

What follows, then, is an urgent, if uncomfortable, reframing of the climate debate. Not as virtue, but as consequence. There are real, immediate costs to environmental breakdown. Rising heat means workers cannot build the futures we keep imagining. The slow sinking of island nations is not only a profound moral catastrophe but one of the most predictable drivers of migration in the decades ahead. Floods turn infrastructure into a recurring reconstruction bill. Pollution fills children’s lungs and public hospitals in countries already short on resources. For governments, for businesses, and even for journalism, it is fashionable to talk about getting ahead of the curve on artificial intelligence. It is equally urgent to get ahead of the curve on climate change.

Any serious strategy must do the same thing: the worst-case scenario must be brought to people. What happens if we do nothing? Pollution may not be on your relative’s post-mortem report, but it is killing your children now, and it will kill their children after them. It brings down productivity, forces people to leave home, and brings instability and war. As a January UK government report noted, global biodiversity loss and ecosystem collapse affect national security: they disrupt food, water, health and supply chains, and trigger geopolitical instability. They threaten ways of life.

Of course, this is not new. These arguments have always existed, and they surface every time there is a flood, a heatwave, a crop failure, even a war. The problem is that those frames make an appearance, and then they are forgotten by the mainstream. Climate is still spoken about as a parallel crisis, adjacent to questions of jobs, stability, trade or security, instead of as the condition shaping all of them. That must change. Governments of small states negotiating trade deals, international institutions setting priorities, newsrooms picking stories and headlines, and communities struggling to be heard all need to speak of the environmental breakdown in language this moment demands.

Seen and forced into policy this way, heat action plans are not just climate policy; they are public safety policy. Water security is not just environmentalism; it is urban stability. Flood and drought planning is not just green policy; it is state capacity restoration. Energy diversification is not just climate virtue; it is economic survival beyond oil.

When climate is understood in these terms, it re-enters politics differently. Not just as virtue, but as something more valuable: pressure. Voting blocs form around price, safety, survival and quality of life. Governments will move not because they have seen the light, but because they are forced to. Climate action becomes legible in a balkanised world.

This is why the reframing matters. Because the old language no longer works. In a world crowded with denialists, opportunists and strongmen, climate politics cannot afford to sound detached from lived reality. It must refuse the cast of moral theatre, or lifestyle preference, or the preserve of people insulated from consequence. This is not about singing songs of hope. This is about keeping the lights on, food affordable, cities habitable, borders stable. It is about survival – not survival in some abstract, put-off-for-later universal sense, but survival now: migration, heat, the ability to breathe. Now.

And it matters just as much for whatever comes next in global politics. The new world order, if that is what we are entering, is being assembled in real time through tariffs, deals, security doctrines and raw power. But climate change is not a side issue that can be deferred until the dust settles. It is already reshaping economies, migration, conflict and state capacity. Any order that fails to reckon with that will not be durable. It will fracture under the weight of heat, scarcity and instability, just as others have fractured before it.

Mark Carney is right that nostalgia is not a strategy. But neither is denial. Climate action that speaks the language of cost, security and everyday life still has a place. Climate action that does not, will find itself sidelined. Quietly at first, and then completely. And any order that chooses that path will not last very long.

After 25 years, the EU and Mercosur have finalised a trade deal that some experts say could increase emissions and undermine green policies.

By Sam Meadows, Flávia Milhorance, January 23, 2026 

The agreement to create the world’s largest trading bloc could worsen environmental protections, experts warn. They point to a lack of clarity over environmental compliance and the incentivising of extractive projects or trade in “emissions-intensive” food products.

Last week, the European Union and the bloc of five South American countries, Mercosur, finally penned a trade agreement after more than two decades of negotiating. 

The agreement still needs to be ratified by both the European Parliament and Mercosur member states, which experts estimate will happen by the second half of the year.

However, on Wednesday the deal was referred to the European court of justice to rule on its compatibility with EU treaties, which could delay it further. Once approved, it will gather countries with a combined population of more than 700 million into a single free-trade area. 

Brazil’s president Luiz Inácio Lula da Silva called it an “historic day for multilateralism”. Other analysts and commentators hailed it as a boost for Europe’s industries and geopolitical positioning.

However, several environmental experts told Dialogue Earth the agreement is the result of unbalanced negotiations that will leave environments unprotected. 

“This is a harmful agreement that will undermine countries’ efforts to address the climate emergency and pursue a just transition,” says Rômulo Batista, who co-leads Greenpeace Brazil’s forest solutions campaigns.

Dialogue Earth also consulted Ignacio Bartesaghi, who directs the Institute of International Business at the Catholic University of Uruguay: “This agreement matters more for what it represents than for what it actually contains. It is a limited agreement, but it is the most significant thing that has happened to Mercosur since its creation.”

What does the agreement say?

The free-trade agreement has been 25 years in the making. The European Union began negotiating with Mercosur’s bloc of five (Brazil, Argentina, Bolivia, Paraguay and Uruguay) in 1999. That process was finally completed with the signing on 17 January in Asunción, Paraguay.

The deal has been agreed amid rapidly changing geopolitics. Under President Trump, the US has been stepping back from international cooperation. Two weeks ago, his administration withdrew from 66 international agreements, including the UN climate change convention.

“The world is not the same as it was in 1999,” says Magdalena Bas, associate professor of public international law at the University of the Republic of Uruguay (Udelar). “The EU is seeking to position itself as a defender of international law and a rules-based order, in contrast to Donald Trump’s view that ‘deals’ should replace rules.” 

This is especially important considering Trump’s use of tariffs as a negotiating tactic. “The European Union is looking to lower tariffs, establish common standards, and safeguard international trade,” Bas adds.

According to the European Commission, the deal will lower tariffs on a range of goods, including cars, machinery and pharmaceuticals. It will also secure the EU’s access to critical raw materials, including minerals needed in clean energy tech, and allow European firms to bid on South American public works contracts. Some estimates put the economic growth the deal will bring to the EU and Mercosur by 2040 at 0.1% and 0.7% respectively.

The European Commission projects the agreement will increase the EU’s GDP by more than EUR 77.6 billion, and exports by up to EUR 50 billion. It says this will boost Europe’s farmers, many of whom held last-ditch protests. The protestors argue the deal will in fact undermine domestic produce; France has consistently opposed the deal, fearing its impact on local farmers.

There is also a “rebalancing” mechanism, enabling the EU to suspend parts of the deal if it feels Mercosur is not honouring environmental commitments; the Mercosur states have been granted less power to suspend trade in this way. For example, the EU may raise a dispute regarding deforestation, which has been touted as a potential boost for international environmental protection. Experts tell Dialogue Earth that such a boost is far from guaranteed.

‘Ambiguous’ environmental protections

Bartesaghi says any move towards universalising Europe’s high environmental standards would be a step forward: “The European Union demands environmental clauses that do not exist in Mercosur. On trade and the environment, the EU is largely acting alone and pushing very high standards.”

A 2024 study by a group of Brazilian researchers concluded that, despite its limitations, the deal could be a “useful additional tool for improving sustainability governance” in trade between the regions: “The [deal] could set a positive benchmark for future free trade agreements that Mercosur might negotiate with other countries that are larger importers of agricultural commodities.”

However, others point to the ambiguity surrounding environmental compliance in the deal. While the agreement allows for action in the case of a “serious breach” of environmental standards, it is not made clear what these standards are, or how things like deforestation should be measured. That is according to Igor Olech, an agriculture and food economics researcher at Poland’s National Research Institute (IAFE-NRI) in Warsaw.

“That ambiguity is one of its main problems,” says Olech, whose research on the agreement was published last month. “It opens the door to endless legal disputes. If the European Union believes the Amazon is not adequately protected, it can claim a serious breach. Brazil will argue that it is not. The agreement does not clarify who would be right.”

Olech says this would benefit large producers, which are more able to afford certification, over smaller ones. He adds that it risks making producers “judges of their own compliance”. 

There are also concerns that the liberalisation of trade could lead to an increase in deforestation or “dirty” extractive industries, like mining. Batista says: “The deal encourages the import into Latin America of highly polluting and health-damaging products, such as cars, plastics and pesticides from Europe, in exchange for commodities often sourced from deforested areas.”

An analysis conducted by European law academics working at the University of Amsterdam, and published by Climate Action Network (CAN) Europe, warns the agreement could “facilitate trade in some highly emission-intensive food products” like beef or soy. This would contribute to global emissions. Audrey Changoe, a trade expert at CAN, says the rebalancing mechanism could become a “tool to pressure EU countries into weakening green regulations”, which should be regarded as a “red line” by lawmakers.

The deal could also encourage a reliance on longer food supply chains, thus increasing the overall carbon footprints of goods – studies show transport accounts for nearly 20% of food industry emissions.

‘Neocolonialism in disguise’

Some observers have expressed concern that the deal also entrenches postcolonial relationships between Europe and the Global South, while delivering little in the way of trade benefits. 

Changoe calls the deal “neocolonialism in disguise”, adding: “Higher value EU goods are being exported to South America, intensifying deindustrialisation and job losses there, while condemning South America to the eternal role of exporter of low-value raw materials with massive ecological impacts to the EU.”

Laura Restrepo Alameda, an advocacy officer at CAN Latin America, says the deal risks “reinforcing an agribusiness model based on exports of large-scale monocultures, dangerous pesticides and the concentration of power” in the hands of a few large companies. She points out that these companies are already pushing to roll back environmental protections.

Not all in South America are so critical. “The agreement will bring trade benefits for Mercosur countries but we must be prepared to take advantage of them,” says Bas. “Countries should consider the policies that will be required to reap the benefits of the agreement and neutralise any negative effects on trade.”

Brazil’s environment minister, Marina Silva, has also defended the pact. In a ministry statement, she asserts that the negotiations have produced “a balanced text” aligned with “contemporary environmental, social and economic challenges”. The statement also says the EU-Mercosur agreement is anchored in a confidence that Lula’s government is pursuing a “serious” environmental agenda.

Sam Meadows

Sam Meadows is Dialogue Earth’s Latin America editor based in London. Prior to joining in 2025, he worked as an environmental reporter in Colombia and Argentina, writing for media outlets including the Guardian, New Lines Magazine, Mongabay and Climate Home News. His areas of specialism include conservation, climate change, transition minerals, particularly lithium, and climate finance. Before moving to the region he worked in television production at the BBC and has also worked in news for national papers including the Times of London and the Telegraph.

Flávia Milhorance

Flávia Milhorance is the Brazil editor for Dialogue Earth and joined in 2021. She is based in Rio de Janeiro and has extensively covered Brazilian affairs for both domestic and international outlets, including the New York Times, The Guardian, Time, National Geographic, and BBC Brazil. Flávia holds a master’s degree in financial journalism from Aarhus University in Denmark and City University London in the UK, plus postgraduate diplomas in photography and sociology from top Brazilian universities. Her journey into environmental journalism began with the Rio+20 UN Conference on Sustainable Development in Rio de Janeiro in 2012. Her current interests lie in stories at the nexus of politics, economics, and the environment, especially those concerning under-reported Latin American communities. She speaks Portuguese, English and Spanish.

(Sources: Dialogue Earth)