Middle East Investments Surge as Global Energy Storage Market Expected to Grow Over 50% by 2025

Middle Eastern Investors are Spending Big! By 2025, global energy storage growth is expected to exceed 50%.

Since the beginning of 2025, the global energy storage market has experienced significant fluctuations. Major policy announcements have emerged from both China and the United States, the two largest installed capacity regions. In the U.S., ongoing trade tensions with China have led to tariffs reaching 64.9% (comprising a 3.4% basic tariff, a 7.5% tariff under Section 301, a 20% new tariff on Chinese goods, and an additional 34% retaliatory tariff). It is projected that the Section 301 tariff will rise to 25% starting January 1, 2026, which would result in a total tariff of 82.4% on energy storage products exported to the U.S. Despite these policy challenges, the performance of the global energy storage sector in the first quarter still supports a high growth forecast for installations this year. New installations are expected to reach 184.95 GWh in 2024, with 282.51 GWh forecasted for 2025, marking a year-on-year increase of 52.7%.

In China, following the release of Document No. 136, the domestic bidding market has remained robust. According to data from the ICC Xinluo Energy Storage Database, the total scale of domestic energy storage bids reached 99.25 GWh in the first quarter of 2025, reflecting a remarkable year-on-year growth of 339.25%. The implications of Document No. 136 on new energy installations and energy storage are critical. For new energy installations, projects that connect to the grid before May 31, including onshore and offshore wind, centralized and distributed photovoltaic projects (including residential solar), will continue to benefit from certain protective policies. Furthermore, the “Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation” issued by the National Energy Administration stipulates that projects connecting to the grid after April 30 must either self-consume a significant portion of their generated electricity or enter the market for trading, thus losing fixed electricity price benefits.

This means that the first half of 2025 presents two critical periods for new energy installations: a rush for solar installation by April 30 and another for new energy installations by May 31. The demand for energy storage has surged due to these two periods. However, the cancellation of the mandatory energy storage requirement from June 1 will eliminate rental income from storage capacity, potentially decreasing energy storage profitability. Consequently, recent predictions for domestic energy storage installations in 2025 have been revised downward. Nevertheless, the removal of mandatory storage requirements as a precondition for grid connection places further demands on energy storage systems to enhance their capacity in reducing curtailment, supporting the grid, and extending their lifecycle.

From an overall perspective, while demand may decline in the latter half of the year, we still anticipate that large-scale storage installations in China will maintain a growth rate of 55-60%. According to the 14th Five-Year Plan for energy storage installations, a total of 86.6 GW is planned across 25 provinces (excluding Xinjiang, Heilongjiang, Tibet, Chongqing, Hainan, and Shanghai). By the end of 2024, 73.76 GW had already been completed. Given that Xinjiang and Tibet are significant areas for energy storage installations, there is still an anticipated gap of 30-40 GW for new energy storage installations required to meet the 14th Five-Year Plan by 2025. Coupled with the final year “buff,” this provides strong support for installations this year. Considering policy impacts, installation plans, and the market enthusiasm seen in the first quarter, we predict that domestic lithium battery energy storage installations will reach 130-140 GWh in 2025, representing a year-on-year growth of 55-60%.

In the commercial storage sector, driven by policy guidance, the proportion of new energy entering the market continues to rise, especially in the photovoltaic sector. With an increase in midday generation, electricity prices during these hours are expected to decrease further, expanding the potential for arbitrage between peak and off-peak pricing. This year, installations are projected to reach 12 GWh, marking a growth of over 70%.

Looking at the overseas market, particularly in the U.S., although tariffs have recently increased, the prevailing delivery method for exports is FOB (Free on Board), meaning domestic manufacturers do not typically bear these tariffs. Due to sustained installation demand, U.S.-based integrators still require significant imports of Chinese cells, and the rising tariffs will directly raise procurement costs for these integrators. In practical terms, the burden of tariff costs may be shared among U.S. system integrators, Chinese energy storage suppliers, and end customers. Although tariffs will likely increase the price of storage systems, leading to a decline in the internal rate of return (IRR) for U.S. storage projects, consideration must also be given to the overseas expansion strategies of Chinese manufacturers. For instance, CATL has established seven overseas factories in locations such as Germany, Hungary, the U.S., Indonesia, Thailand, Spain, and Morocco, and has licensed LFP battery technology to Ford to circumvent local content requirements under the IRA. Other companies, such as EVE Energy and BYD, are also investing in new manufacturing facilities abroad to mitigate tariff impacts.

In Europe, 2024 is projected to witness a significant drop in overall energy storage growth, with residential storage installations experiencing negative growth while large-scale storage grows by an impressive 203.9%, becoming the primary contribution to last year’s European market expansion. The renewable energy share in Europe’s electricity generation has surpassed fossil fuels, accounting for 48%. However, challenges remain, such as inadequate grid regulation capacity and insufficient storage equipment, leading to price volatility in the energy market. Countries like the UK and Italy are ramping up efforts in energy storage, with a growing number of large-scale projects being connected to the grid.

In Australia, the Clean Energy Australia 2024 report forecasts substantial growth in battery storage installations, projecting an increase from 3 GW in 2024 to 19 GW by 2030, translating to over 500% growth. Recently, Prime Minister Anthony Albanese pledged to implement a “Cheaper Home Battery Plan,” which aims to subsidize the cost of residential battery storage systems, encouraging households to combine rooftop solar with storage, thereby reducing reliance on the grid.

In the Middle East, the market is also expanding rapidly, with significant new projects underway. For instance, Sungrow secured a contract for a 7.8 GWh energy storage project in Saudi Arabia, while BYD won a contract for a 20 GWh data center storage project in Abu Dhabi, with the first phase expected to connect to the grid by 2025. This rapid growth positions the Middle East as a leading contributor to global energy storage expansion in 2025, with new installations anticipated to reach 20 GWh, a staggering growth of over 350%.