Tesla is set to take a major step in expanding its footprint in China, announcing plans to build its first grid-scale energy storage facility in the country.

In a statement posted on Chinese social media platform Weibo, Tesla confirmed that the project is designed to help balance electricity supply by providing flexible adjustment of grid resources. The company noted that it will “effectively solve pressures relating to urban power supply.”

“After completion, this project is expected to become the largest grid-side energy storage project in China,” Tesla added.

The planned facility comes as China pushes for greater integration of renewable energy sources, particularly solar and wind, which can create challenges for grid stability during fluctuating supply periods. By storing excess electricity during periods of low demand and releasing it during peak hours, grid-scale storage systems like Tesla’s are seen as essential to managing the transition toward cleaner energy sources.

According to Chinese media outlet Yicai, Tesla Shanghai joined Shanghai officials and China Kangfu International Leasing Co. in a signing ceremony to finalize the deal on Friday. The report said the project involves an estimated investment of 4 billion yuan, equivalent to about $560 million.

The announcement arrives during a period of heightened trade tensions between the United States and China. Although negotiators from both countries recently met in London for two days of talks, only a tentative “framework” agreement was reached. A full resolution to the tariff disputes that began during President Donald Trump’s administration has yet to materialize.