Explainer: The role of energy storage technologies in the energy transition

There is a growing need to increase the capacity for storing the energy generated from the burgeoning wind and solar industries for periods when there is less wind and sun. This is driving unprecedented growth in the energy storage sector and many countries have ambitions to participate in the global storage supply chains.

According to Robert Piconi, Chief Executive Officer of Energy Vault, “With clean energy rapidly gaining momentum, we are seeing heightened demand for energy storage infrastructure to solve for intermittency issues. There is no one-size-fits-all solution as far as energy storage is concerned. The scale-up of a diverse mix of hardware and software technology solutions will be essential.”

Energy storage creates a buffer in the power system that can absorb any excess energy in periods when renewables produce more than is required. This stored energy is then sent back to the grid when supply is limited. It also plays an important role in times of any grid emergency, it can supply the grid with enough power in a short duration to prevent grid failures.

Batteries are at the core of the recent growth in energy storage, particularly those based on lithium-ion. Batteries for energy systems are also strongly connected with the electric vehicle market, which globally constitutes 80% of battery demand.

The global energy storage market in 2024 is estimated to be around 360 GWh. It primarily includes very matured pumped hydro and compressed air storage. At the same time, 90% of all new energy storage deployments took place in the form of batteries between 2015 to 2024. This is what drives the growth.

According to Bloomberg New Energy Finance, the global energy storage market is expected to grow six-fold to more than 2 TWh by 2030. Annual deployments are expected to grow by an average of 21% per year and triple by 2030.

China represents 43% of this future market followed by the United States, with a 14% market share. It is expected that China will remain the leader in the energy storage space with Europe and India taking up the third and fourth largest market positions by 2030.

The cost of lithium-ion batteries has dropped more than 90% over the last decade; 2024 saw a 40% drop in costs. The prices of battery cells are expected to continue this downward trend in the coming years, making it even more attractive as an energy storage option for end-use deployments.

Continuous innovation and increasing scale help continuously drive costs down. Most recent price drops are, however, often attributed to a global oversupply of batteries. For example, BNEF projects that as of 2024, China alone produces enough batteries to cater to the entire global demand. The US and Europe are believed to manufacture batteries at a cost premium of 20% more than batteries produced in China.

Despite the current overcapacity, the supply chain of lithium-ion batteries has been in focus for all major countries due to their ambitions to build local manufacturing, create jobs, attract investment and gain international advantage. Another key consideration is related to supplies of raw materials, like lithium, cobalt, nickel, manganese and graphite, required to produce batteries.

Currently, China leads in this respect. It has captured more than 60% of the global manufacturing capacity of lithium-ion batteries and more than 90% of the processing capability of raw metals and minerals. Many countries attempt to catch up and compete with taxes and duties on imports from China while promoting domestic manufacturing through production-linked incentives, tax incentives, subsidies and grants.

At present, the global storage requirement lies between two to four hours. Lithium-ion finds little competition due to having the advantage of a much-matured supply chain and technological maturity. Hence, it is expected to remain the dominant chemistry choice for storage deployments in the present decade.

According to Claudio Spadacini, Founder and CEO of Energy Dome, “one of the most critical bottlenecks in the energy transition is the lack of available solutions for long-duration energy storage. While lithium-ion batteries and pumped hydro have shaped the past decade, they cannot address the full range of challenges the grid now faces.”

There are other technologies beyond the lithium space that are emerging, however. These will be particularly important for storage requirements that go beyond the current four hour duration.

Some of the most matured technologies include sodium-ion, flow batteries, liquid CO2 storage, and a combination of lithium-ion and clean hydrogen. Due to the fact that these technologies are less dependent on critical raw minerals and the supply chain can be established anywhere, they generate strong interest among governments.

The World Economic Forum supports an integrated approach to energy solutions, including energy storage, advanced nuclear, clean fuels, hydrogen and carbon removal. No single technology will solve the energy transition on its own; it will take a mix of solutions. Different regions, industries and companies will have their own strategies, but they must work together.

Platforms, such as the Forum’s Advanced Energy Solutions community, can help speed up this cooperation and accelerate the deployment of new technologies from decades to years, such as energy storage, clean fuels and hydrogen and advanced nuclear and carbon removal.

The community engages industry leaders who drive frontier segments of the energy system to shape the advanced energy solutions industry vision and narrative. It supports partnerships among innovators, large energy companies, energy users and investors and informs policymaking.