SHANGHAI - US carmaker Tesla on Friday inked a deal with Chinese partners to build a grid-side energy storage station in Shanghai using its Megapack energy-storage batteries.

The deal, with a total investment of 4 billion yuan (about $556 million), marked Tesla's expansion into China's burgeoning energy storage market, paving the way for its facility to connect with the country's vast power grid, the largest in the world.

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The gigawatt-hour-scale energy storage station is to be located in the Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, as per the deal signed by Tesla, the administrative committee of the Lin-gang Special Area, the people's government of Shanghai's Fengxian District, and China Kangfu International Leasing Co, Ltd.

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It will be Tesla's first grid-side energy storage station to be built on the Chinese mainland.

Dong Kun, general manager of Tesla China's energy business, said the station, once launched, will participate in electricity spot trading, helping balance peak and off-peak power demand in the local grids and enhance grid stability.

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Also, Tesla is set to enhance its collaboration with China Kangfu to roll out the zero-carbon energy solution globally.

In February this year, Tesla's new Megafactory in the Lin-gang Special Area, its second plant in Shanghai after the Gigafactory, started production of Megapack batteries.

Tesla anticipates a year-on-year increase of 50 percent in energy storage deployments in 2025.