【Economic Observer】Independent Energy Storage in Inner Mongolia Is Taking Off — Where Does It Go from Here?
For investors, independent energy storage in Inner Mongolia is gradually evolving from a business model that primarily focuses on calculating compensation standards into one that requires simultaneous consideration of compensation, grid nodes, electricity prices, and operational capabilities.
At the end of 2025, almost all of JDEnergy’s key business personnel rushed to the Taiyaoxin Energy Storage Power Station in the western desert of Bayannur, Inner Mongolia.
The project is surrounded entirely by desert. The only man-made features are several high-voltage power poles, energy storage cabinets, and a simple two-story container building. The team’s goal was to complete the “3 charge + 3 discharge” testing of the 500 MW/2,000 MWh energy storage power station before 2026.
Behind this rush to build was the pursuit of Inner Mongolia by independent energy storage investors over the previous two years.
In 2025, Inner Mongolia added approximately 10.03 GW of new-type energy storage capacity, ranking second nationwide, just 0.2 GW behind Xinjiang, which ranked first. Its cumulative installed capacity ranked first in China. In March this year, the Inner Mongolia Energy Bureau released the List of the First Batch of Independent New-Type Energy Storage Projects for 2026, with a total scale of 8.15 GW/32.6 GWh. In May, the second batch added another 22 projects, totaling 5.55 GW/22.2 GWh. The proposed construction scale for 2026 has even exceeded the cumulative installed capacity built previously.
The investment boom began with a compensation policy for discharged electricity.
In March 2025, the Inner Mongolia Energy Bureau issued the Notice on Accelerating the Development of New-Type Energy Storage (hereinafter referred to as the “Notice”), stipulating that the compensation standard for electricity discharged by independent new-type energy storage power stations in 2025 could reach a maximum of RMB 0.35/kWh, with a 10-year guarantee period. The Notice directly fueled investors’ enthusiasm for energy storage projects in Inner Mongolia.
According to data from the Inner Mongolia Energy Bureau, among the 42 independent energy storage power stations receiving compensation before February this year, 11 projects were completed and commissioned before November 10, 2025, receiving compensation of RMB 0.335–0.35/kWh. Another 30 projects were completed and commissioned between November 10 and December 31, 2025, receiving compensation of RMB 0.30–0.35/kWh. One project was completed and commissioned between January 1 and January 26, 2026, receiving compensation of RMB 0.28/kWh.
The reporter learned that energy storage investors currently generally set a minimum acceptable return of approximately 4.5% for centrally administered and state-owned enterprises, and 5.5% for market-based capital. Xu Xiaodong, Deputy General Manager of Huanghe Industrial and General Manager of Huanghe Capital, said that energy storage power stations built and completed in Inner Mongolia in 2025 and eligible for compensation could achieve returns of more than 10%.
However, in 2026, the compensation standard has already fallen to RMB 0.28/kWh.
“If the compensation price introduced in September this year can remain above RMB 0.22/kWh, the Inner Mongolia market will still be profitable. Last year, investment was a must; next year, it will be a case of ‘invest or not invest.’ Investors will need a more robust economic model to determine whether to enter the market,” said Wang Yangjun, Assistant General Manager of JDEnergy and General Manager of its Engineering Center.
Racing Against the Window
“Fast” and “large capacity” are Wang Yangjun’s most direct impressions of the current independent energy storage market in Inner Mongolia.
The development of an energy storage power station typically involves multiple stages, including preliminary research and site selection, project registration and filing, grid connection approval and technical assessment, engineering design and equipment procurement, civil construction and equipment installation, system integration testing and grid acceptance, as well as grid connection and delivery.
A significant amount of time is consumed during the preliminary and intermediate stages of administrative procedures. Site selection alone can require hundreds of mu of vacant land for a GW-scale energy storage power station, with a series of practical issues requiring confirmation one by one, including land-use attributes, nearby pooling-station resources, available grid connection bays, and whether the connection bay can be secured after project completion.
“Just finding the land can take two months,” Wang Yangjun said. These external procedures are difficult to shorten, while policy deadlines cannot be changed. Therefore, the project owner’s main room for reducing the schedule lies in construction and equipment installation. The Taiyaoxin 2 GWh energy storage project under Wang Yangjun’s responsibility entered the site in September 2025, completed construction and the “3 charge + 3 discharge” testing within three months, and achieved grid connection by the end of December.
The “3 charge + 3 discharge” test in western Inner Mongolia is an important test before an energy storage power station is connected to the grid and put into operation, and is also regarded as one of the most stringent tests in the industry. It requires the power deviation during each charge and discharge cycle of an independent energy storage power station to remain within a specified range.
“A newly built energy storage power station faces the risk of battery consistency issues, and its actual output power must remain within the required range. Problems can also occur with newly installed box-type substations. Once a unit goes offline, the test may fail. Many newly grid-connected power stations find it difficult to meet the ‘3 charge + 3 discharge’ requirements in a single attempt,” an energy storage power station technical professional told the reporter.
“The Inner Mongolia Energy Bureau announced in September that the 2026 compensation standard would be RMB 0.28/kWh, while project owners had a firm requirement to achieve grid connection before 2026. If a project’s grid connection was delayed, the project could lose hundreds of millions of yuan in revenue, and the project owner would hold those responsible accountable,” Wang Yangjun said.
“Fast” can only mean speeding up construction, as the other stages cannot easily be accelerated. As a result, competition around construction speed has become increasingly intense. In terms of products, unlike the traditional model of on-site assembly in separate stages, step-by-step commissioning, and fragmented processes, all project equipment is integrated at the factory, undergoes rigorous factory testing and pre-commissioning, and adopts a “factory prefabrication, rapid on-site installation” approach. At the project site, a lightweight construction solution using pile foundations and steel platforms is adopted instead of traditional concrete-based civil construction. Throughout the construction process, multiple workstreams are carried out in parallel, with a dedicated task force coordinating and managing the entire process while balancing construction speed, engineering quality, and production safety. Wang Yangjun gave the example. In his view, rapid deployment of large-scale energy storage power stations requires, first, selecting a technology route suited to rapid delivery, and second, ensuring that equipment suppliers have sufficient delivery capabilities.
How Will Compensation Decline?
Inner Mongolia has become a hotbed for independent energy storage investment not only because of its high compensation, but also because of its abundant renewable energy resources, grid structure, and electricity price volatility.
Inner Mongolia has abundant wind and solar resources, and its installed renewable energy capacity continues to grow. From the perspective of the power system, renewable energy generation is inherently variable: when wind and solar generation is high, large amounts of electricity enter the market; during peak load periods, renewable generation may not necessarily be able to meet demand at the same time.
The reporter learned that in the development plans for the “strategic emerging industries” formulated by relevant Inner Mongolia authorities, there are plans to leverage the region’s abundant green electricity from wind and solar resources to develop industries such as computing centers. Electricity prices and their stability are among the reference indicators. Relevant authorities believe that although Inner Mongolia can provide electricity at relatively low prices nationwide, significant price fluctuations are unfavorable to the stable operation of industrial enterprises requiring continuous production. Independent energy storage is therefore regarded as an important resource for smoothing such fluctuations.
High compensation has attracted large amounts of capital, but as the scale of independent energy storage has rapidly expanded, the compensation itself has also created new costs.
According to the Notice, compensation costs for independent energy storage are calculated on a monthly basis and allocated among generating units and power plants according to rules such as installed capacity.
The reporter learned that due to compensation costs for independent energy storage, the settlement prices for renewable energy and thermal power in the western Inner Mongolia market have already been affected to some extent. Some individual generation plants have faced relatively high compensation allocation costs as a proportion of their revenue during months when their electricity generation was relatively low. Some power generation companies have also called for a reduction in this burden.
A source focused on energy storage investment told the reporter that the RMB 0.35/kWh compensation provided by Inner Mongolia in 2025 clearly served to attract investors to develop and build energy storage power stations. As the number of independent energy storage projects increases and the power system’s regulation capability improves, overall electricity price volatility will decline, and compensation levels will gradually decrease.
At the same time, the charging and discharging behavior of independent energy storage is also becoming subject to greater constraints.
In February this year, the Inner Mongolia Energy Bureau released the 2026 Revised Draft of the Inner Mongolia Electric Power Multilateral Trading Market Rules System (for Public Comment), stipulating that when independent energy storage participates in the electricity spot market by submitting quantities without submitting prices, the maximum number of full-capacity charging cycles per day is 1.5.
The aforementioned energy storage investment source said that as long as significant price volatility remains in the Inner Mongolia electricity spot market, the capacity value of independent energy storage will not disappear.
Xu Xiaodong said that Document No. 114, the Notice on Improving the Capacity Electricity Pricing Mechanism on the Generation Side, clarified the capacity value of new-type energy storage at the national level for the first time. It requires grid-side independent new-type energy storage to be incorporated into the generation-side capacity electricity pricing mechanism, with the applicable standard determined based on reliable capacity. This also means that the current “compensation based on discharged electricity” model in western Inner Mongolia may gradually shift toward a “capacity-based compensation” model in the future.
From Racing for Projects to Racing for Grid Nodes
The current revenue of independent energy storage power stations in Inner Mongolia mainly comes from two sources: compensation and participation in the electricity market. Compensation currently accounts for a relatively large share, while frequency regulation ancillary services may become an additional source of revenue in the future.
Xu Xiaodong said that frequency regulation ancillary services may become a new source of revenue in the future. Since frequency regulation performance varies among different power stations, operational capabilities will have an increasing impact on returns.
However, as the number of energy storage power stations continues to increase, participating in the electricity market is also becoming more challenging.
Wang Suitao, Deputy General Manager of Xi’an JDE Cloud Carbon Technology Co., Ltd., said that the western Inner Mongolia market adopts a mechanism under which independent energy storage power stations submit quantities without submitting prices. Energy storage power stations participating in the market need to submit their expected daily output curves one day in advance. However, when making decisions and carrying out actual operations, they do not know the complete operating strategies of other energy storage power stations, making it a form of operation that is, to some extent, a “black box.”
At present, the independent energy storage power stations operated by Wang Suitao’s team rank among the top 10% in regional returns. “A GW-scale energy storage power station can charge or discharge millions of kWh in a single cycle. At an electricity price spread of RMB 0.1/kWh, that represents RMB 100,000. Improper operation could result in losses of hundreds of thousands or even millions of yuan per day. Project owners place great importance on electricity trading capabilities,” Wang Suitao said.
Zhao Weiliang, JDEnergy’s Electricity Operations Manager, said that when an energy storage power station enters the market, it essentially buys electricity from the grid to charge when prices are low and sells electricity back to the grid when prices are high. However, energy storage power stations themselves can also influence market prices.
If a large number of energy storage power stations charge simultaneously during the same period, they will push up electricity prices during that period. If they discharge simultaneously, they will push prices down. All market participants want to charge at the lowest prices and discharge at the highest prices, but the resulting collective behavior may in turn change the peak and off-peak price patterns that were originally forecast.
The reporter learned that there have been instances in the western Inner Mongolia market where large numbers of energy storage power stations collectively chose to charge around noon, causing prices during what had originally been a low-price period at noon to rise significantly.
Under these circumstances, where a power station is located is becoming increasingly important.
Zhao Weiliang said that when calculated on a daily basis, it is not uncommon for the returns of a good power station and a poor-performing power station to differ by hundreds of thousands of yuan. Over the long term, even when equipment and operational capabilities are similar, different grid nodes can create significant differences in returns. “Independent energy storage power stations in Inner Mongolia participate in the market by submitting quantities without submitting prices, while grid congestion is significant. As a result, node-level electricity price differences are substantial, gradually giving rise to a development model dominated by node electricity prices. The greater the intraday spot electricity price volatility at a node, the greater the arbitrage potential,” Wang Suitao said.
Inner Mongolia, particularly western Inner Mongolia, has a large installed base of renewable energy while also facing significant grid constraints. Electricity prices therefore vary considerably across different areas.
As of September 2025, the installed renewable energy capacity in the Hohhot-Baotou-Western region was approximately 44,585 MW, with wind and solar accounting for 45.83% and 46.63%, respectively. In the Hohhot-Baotou-Eastern region, installed renewable energy capacity was approximately 24,500 MW, with wind and solar accounting for 73.26% and 21.38%, respectively. Differences in renewable energy mix, load size, and grid transmission capacity across regions collectively contribute to differences in node prices.
Zhao Weiliang gave an example: when there are many photovoltaic power stations near a particular node, high solar generation around midday may drive electricity prices down, while prices rise during the evening peak, creating a large charge-discharge price spread. However, if wind power accounts for a relatively high proportion of generation nearby, transmission capacity may become constrained during periods of strong winds. Even if the energy storage power station wants to discharge, it may be subject to dispatch restrictions.
Therefore, site selection for an energy storage power station is no longer simply about finding a piece of land that can be connected to the grid.
Zhao Weiliang said that before developing and constructing an energy storage power station in western Inner Mongolia, it is necessary to repeatedly assess the conditions of a particular node together with grid dispatch authorities, design institutes, and other parties. Node selection should consider not only current electricity supply and demand, but also the expected renewable energy capacity, load growth, and grid development in the surrounding area over the next 10 to 15 years. “The logic is the same, but every node needs to be evaluated based on data,” Zhao Weiliang said.
Xu Xiaodong summarized that the site selection of independent energy storage in western Inner Mongolia mainly considers three factors. First is renewable energy density: at nodes with high renewable energy penetration, low-price periods may see even lower prices, creating greater peak-to-valley arbitrage opportunities. Second is grid congestion: prices may fluctuate more significantly at nodes affected by transmission constraints, although dispatch restrictions must also be taken into consideration. Third is distance from load centers: nodes closer to load centers may have higher evening electricity demand and could potentially offer better conditions for participating in frequency regulation and other ancillary services in the future.
As compensation declines, energy storage capacity increases, and participation in the electricity spot market varies from project to project, the scale of a project itself is also beginning to affect its returns.
For investors, this means that independent energy storage in Inner Mongolia is gradually evolving from a business model that primarily focuses on calculating compensation standards into one that requires simultaneous consideration of compensation, grid nodes, electricity prices, and operational capabilities.
