New rules to Europe’s battery game

Europe installed 25.3 GWh of energy storage capacity in 2025, with annual additions expected to reach 35.1 GWh in 2026. Confidence among developers and investors has remained strong, supported by a robust project pipeline. At the same time, the market has been quietly absorbing a wave of increasingly unpredictable cost pressures. InfoLink Consulting CEO Corrine Lin sees that prices across the supply chain are no longer moving in a single direction, cost pass-through has become less linear, and the market has entered a new phase marked by structural tensions.

Last year marked a turning point in Europe’s energy storage market. Utility-scale storage capacity additions surged from 8.2 GWh in 2024 to 16.1 GWh, while residential storage additions declined from 10 GWh to 9.2 GWh.

Emerging markets beyond the traditional “big three” of the United Kingdom, Italy, and Germany are gaining momentum. Bulgaria is advancing under policy incentives with large-scale projects beginning to roll out, while Spain has included energy storage as a strategic asset within its energy transition agenda. Meanwhile, the residential storage market, which contracted in 2025, may regain momentum this year as multiple countries roll out support measures.

Cost game

In China, the lithium market has moved into a firmer price range. As of early May, average spot prices for battery-grade lithium carbonate equivalent exceeded CNY 190,000 ($28,000)/MT, rising 20% month on month. While lithium price increases were largely passed through to the cell segment in the first quarter, the strength of cost pass-through weakened after prices moved above CNY 150,000/MT.

Average prices for 314 Ah LFP cells remain around CNY 0.365/Wh, with most newly signed orders priced above CNY 0.36/Wh, indicating a stalemate at high prices. This latest round of hikes has also triggered isolated cases of project deferrals and contract defaults in China’s utility-scale storage market.

In the integration segment, cost pass-through is weakening. Average prices for two-hour battery energy storage system (BESS) in China stand at around CNY 0.58/Wh, while four-hour BESS are priced at CNY 0.51/Wh. Although system prices have recovered from previous lows, downstream integrators are increasingly resistant to higher prices, and profit margins at the system level have yet to improve accordingly.

The situation in Europe is even more complex. At present, free on board (FOB) prices for two-hour DC-side BESS in Europe range from $71/kWh to $89/kWh – slightly lower than in the US market, but still subject to multiple layers of cost pressure.

Procurement window

China’s export tax rebate rate for batteries and energy storage systems (ESS) fell from 13% in December 2024 to 6% in April 2026 and is set to be fully eliminated by January 2027. This trajectory has reshaped market expectations for medium- to long-term procurement costs in Europe, while also affecting delivery schedules and the pace of new contract negotiations.

Procurement activity since April 2026 suggests that price movements in the European market are driven mainly by rising upstream costs, while the direct impact of China’s export tax rebate phase-down remains limited for now. Price acceptance among European downstream buyers remains weak, and additional costs have yet to be fully passed through.

In the medium to long term, the phase-out of export tax rebates will reduce the profit buffer for Chinese suppliers in overseas markets. Whether these additional costs can eventually be passed through will depend on supply-demand dynamics, project delivery schedules, and supplier bargaining power. The phase-down will inevitably raise the baseline export cost structure, pushing market participants to establish new competitive advantages through product quality, system integration capabilities, local delivery capacity, and compliance records.

Battery passport

The growing complexity of Europe’s energy storage compliance landscape has become a key challenge. Phased implementation of the EU Battery Regulation (2023/1542) is raising entry barriers. At the same time, the European Commission’s May 2026 update expands existing EU public funding restrictions to cover inverters from “high-risk countries” – previously limited to solar and wind applications – to now include energy storage power conversion systems (PCS).

For developers currently evaluating energy storage investments in Europe, BESS projects relying on Chinese suppliers will face direct obstacles when applying for EU financing, including support from the European Investment Bank.

Although Europe’s domestic inverter manufacturing capacity is sufficient to meet current demand, shifting to Western suppliers for utility-scale projects would add to certain system costs.

Chinese energy storage suppliers have to reconsider what types of solution are financeable in Europe, and to reassess both product architecture and corporate governance design.

According to InfoLink’s cost analysis, in Europe’s relatively low-tariff market environment, the FOB cost of core energy storage equipment from China, including DC-side battery containers, PCS, and energy management systems (EMS), is about $75/kWh.

Divergence and opportunities

The global energy storage market is entering a new phase of differentiation driven by cost restructuring. For Chinese suppliers, the gradual withdrawal of export tax rebates marks the beginning of a new competitive phase. For European developers and investors, the ability to understand supply chain restructuring and anticipate future cost trends is becoming more important than a low quote. What determines project realization is not today’s pricing, but financing availability, delivery certainty, and broader price trends over the two-year horizon.

About the author

Corrine Lin has over a decade of expertise in renewable-energy research and market intelligence, spanning solar, energy storage, and the net-zero transition. As InfoLink’s chief analyst since its founding, she has led the team in delivering actionable industry insights. In January 2026, she assumed the role of chief executive officer of InfoLink Consulting, advancing the company’s research-driven strategy and advisory capabilities.

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