Beyond scale and hardware

Starting points may be different for solar and BESS, but the strategic challenges are converging. Manufacturing scale remains important, but hardware alone is becoming less of a competitive differentiator. With margins already under pressure, the window to reposition is narrowing. The question becomes, where can manufacturers capture value beyond equipment?

Since 2015, total installed solar capacity has increased around 13-fold, from 220 GW to 2.7 TW in 2026, while BESS capacity has grown more than 200-fold, from 2.2 GW in 2015 to around 470 GW in 2026. By 2035, cumulative capacity is on track to exceed 8 TW for solar and 2.4 TW for BESS.

Solar is already deep into an oversupply cycle. Global module manufacturing capacity exceeded 1.1 TW in 2025, nearly twice annual demand. Tier-1 PV module manufacturers responded by cutting production, with average utilization rates falling from 75% in 2023 to around 60% in 2026. Lower utilization increased unit costs just as intense price competition eroded margins. Slower Chinese demand in 2026 has added further pressure.

BESS manufacturing, on the other hand, is still in a strong growth phase. Deployment is growing rapidly, supported by falling costs, grid reliability needs, renewables integration and emerging AI data center demand. That growth is still absorbing new capacity entering the market. But the gap is narrowing, manufacturing capacity is expanding rapidly, particularly in China, while cells and storage hardware are already facing stronger price competition. BESS is not yet where solar is today, but some of the same pressures are emerging.

Manufacturing advantage

China’s scale and integrated supply chains have helped lower solar and battery costs, but rapid capacity expansion has also intensified competition. Tier-1 companies accounted for 83% of global solar module shipments in 2025, compared with 62% for BESS, with the top five accounting for 58% and 42%, respectively (see chart p.21).

BESS remains more fragmented because suppliers can still differentiate through technology, safety, software, and integration. But as cells and standardized hardware commoditize, differentiation is also shifting beyond the battery itself.

Profitability pressures

Market leadership does not necessarily translate into financial strength. Solar shows how quickly the economics can turn: rapid market growth drove aggressive manufacturing expansion, lifting average Tier-1 revenue to more than three times its 2018 level by 2023. But as capacity began to run ahead of demand, oversupply pushed prices down and revenue fell.

For solar, these economics are difficult to sustain, particularly when manufacturers sacrifice margins to defend market share. For BESS, the challenge is to preserve profitability as the market matures. For both, strategy is shifting toward three areas: geography, integrated offerings and new sources of demand.

Solar diversification

Solar manufacturers are reaching the limits of a scale-first strategy. Geography is one answer. Expanding into emerging markets can diversify sales and open new sources of demand, although competition is rising as more suppliers pursue the same opportunity.

Protected markets offer another route. In the United States and India, manufacturers are expanding locally to benefit from domestic manufacturing policies and greater protection from imports. Localization can support higher margins and market access, but the advantage can shift as quickly as the policies supporting it.

The other answer is to sell more than solar. A notable shift is underway among some Chinese manufacturers, evident even in their names. JA Solar has become simply “JA”, while JinkoSolar is proposing to become “Jinko Holdings.” The rebranding reflects a broader move beyond modules into storage and integrated energy solutions.

Moving into adjacent technologies brings a different set of challenges. BESS is already a crowded market and requires capabilities many solar manufacturers lack. Partnerships and acquisitions offer a faster route in, while companies within larger energy or industrial groups have an advantage if they can draw on expertise already available elsewhere in the business. Inevitably not all will successfully make this transition.

Storage differentiation

BESS manufacturers start from a stronger position because more of the system can still provide differentiation. Cell technology and system design remain important, but value is moving toward software, cybersecurity, energy management systems and the overall integrated offering. The strategic question is how suppliers can capture more of that value before competition catches up.

One opportunity already being pursued is deeper system integration. Battery cell manufacturers have increasingly been moving downstream from cells and battery modules into complete BESS solutions, giving them greater control over technology, supply, and cost. Moving the other way is harder: system integrators face the capital and technical barriers of cell manufacturing and typically remain exposed to third-party battery prices and project execution risk.

Other value pools remain closer to the cell. Scaled manufacturers such as CATL, BYD, LG Energy Solution and Gotion are better positioned to commercialize new battery chemistries.

Another opportunity is to follow where demand is growing fastest. AI data centers play directly to BESS strengths, in fast deployment, reliability and power quality. OEMs are already adapting: Fluence Energy has secured master supply agreements with two major hyperscalers, while CATL is investing in data-center power infrastructure.

Future leaders

The next generation of leaders may look less like equipment manufacturers and more like energy technology platforms, combining competitive hardware with software, services and integrated energy solutions. The real test will be which companies can expand beyond hardware without sacrificing profitability.

The post Beyond scale and hardware appeared first on pv magazine Global.