Since July, a combination of rising upstream costs, concentrated demand releases, and structural production line adjustments at cell manufacturers has pushed up both long-term contract and spot prices for some battery cells. Cell makers have simultaneously increased advance payment requirements and shortened payment terms. The previous strategy of "winning projects at low prices first, then sourcing cheaper cells later" is no longer viable, as contract prices are fixed while cell costs have risen.
In mid-July, a manager surnamed Li from an energy storage system integrator in Changzhou, Jiangsu, made a special trip to meet with the owner of an independent energy storage project. Li's company had won the bid for the project's energy storage system equipment supply at the end of April, signed a contract in June, and paid a 5% performance bond based on the contract value. This hundred-megawatt-hour (MWh) project had a system price of below 0.5 yuan/Wh. In April, when energy storage system prices were still at historic lows, this was a low-margin order that could still contribute to the company's performance sheet. However, by July, Li calculated that if the project were delivered at the original contract price, it could result in a loss of several million yuan.
The problem lies in the changing assumptions behind the original calculation. A project manager from a central state-owned enterprise (SOE) integrator explained that companies previously dared to bid low prices, betting that the cost of key components like battery cells and PCS (Power Conversion Systems) would fall further between the bid win and delivery. Since July, factors such as rising upstream costs, concentrated demand, and structural production line adjustments at cell makers have led to higher long-term contract and spot prices for some cells. The path of "securing a project at a low price and then buying cheaper cells later" is blocked; contract prices are locked, but cell prices have increased.
Low-Price Orders Face Delivery Challenges
At the time of the bid, the project was considered a "must-win" order for Li's company. Li noted that when energy storage system prices were still low, competitors were bidding increasingly lower prices. "If you don't bid low, you don't even get a chance to be shortlisted," he said. He analyzed that the basis for this bidding strategy was the long-term stability of 314Ah battery cell prices, which had fluctuated between 0.30 yuan/Wh and 0.33 yuan/Wh for the past year and a half, with monthly changes typically no more than two or three cents. When bidding, most small and medium-sized integrators relied on this long-term, steadily downward price trend to back-calculate their offers, forming the habitual expectation that cells would be even cheaper between the bid win and delivery. Therefore, Li's company did not reserve significant room for price increases on key components like cells during the bid. Li admitted, "There was little profit margin when we bid for this project; the calculated gross margin was less than 3%." The company's judgment at the time was to secure the project first to gain performance records, advance the process, and keep the team operational.
Reviewing the situation later, Li noted that on one hand, the project owner wanted to achieve grid connection before year-end deadlines for new energy capacity assessments and capacity electricity price policy adjustments. On the other hand, cell factories faced tight production schedules and extended delivery cycles. Leading cell makers proactively adjusted their production lines, shifting more capacity towards new specifications above 500Ah, leaving production lines for standard 314Ah cells saturated and with tighter schedules. Integrators had to order materials and plan production well in advance. The price of upstream lithium carbonate began to rebound in late April. Li said, "From the second half of 2023 to the first half of 2025, cell prices were almost a steadily declining small slope. Everyone was used to budgeting costs along this curve. No one expected the line to suddenly turn upward when we quoted a few months ago."
According to the contract, the project must achieve full-capacity grid connection by the end of December 2026, with equipment arriving and being installed in batches starting from October. This leaves the integrator with an operational window of only about three to four months. When bidding, Li's company had a framework agreement with a second-tier cell manufacturer, but the price was only locked until the end of June. When renegotiating in June, the other party offered a new long-term contract price for 314Ah cells at 0.365 yuan/Wh, requiring a 20% advance payment, with production scheduled for after September. In July, Li surveyed the spot market and found 314Ah cell prices had risen to nearly 0.39-0.40 yuan/Wh, with many suppliers requiring cash on delivery. His recalculations showed that if he sourced cells at 0.365 yuan/Wh or higher, the total project cost would significantly exceed the original contract price. He said, "For a small and medium-sized company like us, losing millions on one project is devastating." Li noted that by July, a PCS supplier had already issued a price increase notice. The company's estimated PCS cost, originally calculated at around 0.06 yuan/Wh, now needed to be reconfirmed at a higher price. He said, "This project won't result in a huge loss, but it will basically be a break-even deal, all for nothing."
Pressure Felt by Leading Companies Too
Leading integrators faced pressure from low-price orders later. A project manager from a leading energy storage system integrator told reporters that for the projects they won in the first half of the year, about 75% of the cell supply was secured through annual long-term contracts, primarily framework agreements with leading cell manufacturers. Volumes were locked first, with prices negotiated quarterly. The company's long-term contract price was slightly above 0.33 yuan/Wh in Q1, rose to 0.35-0.36 yuan/Wh in Q2, and is expected to adjust further in Q3, but at a slower pace than the spot market. This manager revealed that based on current long-term contract costs, the gross margins on several energy storage system projects won in the first half of the year, priced around 0.48-0.49 yuan/Wh, are already very thin, at about 3% to 5%. This is lower than the 8% to 10% margin seen on some projects in the second half of last year. He said, "We have an advantage with bulk procurement, getting cells two or three cents cheaper than smaller companies. We also develop PCS and BMS in-house to some extent and centrally procure structural components. This allows our total system cost to be about four to five cents per watt-hour lower than smaller integrators. For the same low-price order, a small company might lose money, while we can still make a thin profit."
However, even leading companies are changing their bidding thresholds. The manager stated that since July, the company has internally redefined its stance on low-price projects: in principle, it will not bid for 4-hour energy storage systems priced below 0.48 yuan/Wh, and will be very cautious with 2-hour systems below 0.55 yuan/Wh. Exceptions are made only for strategic clients or when the project owner clearly commits to a follow-up project of the same type and region under equal or better terms. His explanation: it's not that it's impossible to do, but the risk-reward ratio is unfavorable. If the price is too low, any issue during the delivery process could eat up the profit. The manager was aware of the price changes earlier than Li because, starting from May when the long-term cell price showed its first increase signal, the leading company had already begun re-evaluating the low-price projects won in the first half of the year during the second half of Q2. In other words, "the pressure came later" not because change happened later, but because leading companies have longer buffer periods thanks to long-term contracts and bulk procurement advantages.
The Cell Variable
A key variable putting pressure on these low-price orders as they enter the delivery phase is the battery cell. In the past, companies could win low-price bids and then wait for cell prices to fall further to compensate for the thin margins. But this time, when orders actually entered the procurement stage, cell prices, production schedules, and payment terms had all changed. A research and development manager from a leading energy storage cell manufacturer, surnamed Li Ming, told reporters that 314Ah cell prices began to rise gradually from Q2. For integrators who won low-price bids, a change of just a few cents can completely rewrite the project's financials. Li Ming gave an example: an integrator signed a framework agreement with them in Q1 but didn't lock in a specific purchase volume. In June, this company came to purchase a batch of 314Ah cells, hoping to pay the Q1 price. The cell maker refused. After two weeks of negotiation, the integrator eventually accepted the higher price, but the delivery date was pushed back to September. Li Ming said, "A framework agreement locks in the intent to cooperate and annual volume, not the current contract price. If the purchasing company didn't lock in volume and price at the time, they have to renegotiate based on current prices and production schedules."
Beyond price, production schedules are also tightening. Li Ming stated that the utilization rate of their 314Ah production lines is now above 95%, while new lines for cells larger than 500Ah only started ramping up in June and are still in the ramp-up phase. Orders are currently booked through October. Normally, the delivery cycle for standard specification cells is two to three weeks, but it has now been extended to four to five weeks. Payment terms are also being adjusted. Li Ming said they have tightened internal payment conditions for some integrator clients who obviously won orders at low prices. In the past, some clients could get three or even six months of credit. Now, similar orders require higher advance payments or are changed to cash-on-delivery, or payment within 30 days of delivery. Li Ming further expressed that just because an order "isn't attractive anymore" doesn't mean companies can back out, as they are bound by contracts, performance bonds, and credit records. He said, "Some integrators know the margins are thin, but if they don't take the cells now, they might be even more expensive later, or they might miss the grid connection deadline."
Responding to the Squeeze
As low-price orders enter the delivery phase, project owners are also adjusting their strategies. A project manager from a central SOE power investment platform told reporters that in the last two months, there have been more cases of suppliers requesting discussions on prices, payments, and delivery schedules. However, in state-owned enterprise projects, the winning bid price is difficult to change after being filed. The project manager is more concerned about whether suppliers will cut corners on configuration during delivery to protect their profits. His company has started tightening the acceptance inspection of incoming equipment. Battery cells are subject to random sampling and traceability checks. The brands and models of PCS and BMS are verified against the bid documents. Fire suppression, temperature control, and other equipment are also checked for consistency with the technical agreement. For bids significantly below market levels, the project team requires suppliers to provide details on cell sources, production plans, equipment delivery schedules, and warranty arrangements. The project manager admitted, "Now, what we fear most is not the supplier coming to discuss payments, but them verbally agreeing to the contract while secretly swapping out components for cheaper ones during actual delivery."
Industrial and commercial energy storage users are also re-evaluating low-price bids. Zhao Mingyuan, a project manager for a supporting photovoltaic and energy storage project at an electrolytic aluminum plant in Yunnan, told reporters that his company is currently tendering for a second phase 50MW/200MWh energy storage project. The system equipment quotes received mostly range between 0.52 yuan/Wh and 0.58 yuan/Wh, but two bids were significantly lower. Zhao's first reaction upon seeing the low bids was not "cheap" but "can it be delivered?" His technical team reviewed the bids and found that one bidder listed the cell brand as "domestic first-tier brand" without specifying the actual manufacturer. The BMS was described as "self-developed," yet the company's largest previous project was only a few MWh. The warranty period was also shorter than other bidders. Zhao said, "We are an electrolytic aluminum plant; our biggest fear is a power outage. If the storage system can't discharge when needed or fails during operation, the money saved on equipment is not enough to cover the loss from a single production halt." In this tender, Zhao's company set the price score at around 40%, giving higher weight to technical solutions and business qualifications. Suppliers with significantly lower bids than others are required to provide face-to-face explanations of their cost structure, equipment brands, and warranty arrangements.
Evaluation rules for related central and state-owned enterprise projects are also changing, with more frequent use of abnormally low-price reviews. The aforementioned project manager from the central SOE power investment platform mentioned that in a project last month, one bidder quoted around 0.45 yuan/Wh, about 15% lower than the next lowest bid. The bid evaluation committee required them to explain their cost structure. The bidder could not clearly explain the source of the cells, procurement prices, and system configuration, and ultimately failed to proceed further. Across this energy storage supply chain, from integrators to cell manufacturers to project owners, everyone is recalibrating their assessment of low-price orders.
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