The Surge in Energy Storage: Analyzing Growth Dynamics and Market Trends

Energy Storage Surges: What Does the Future Hold?

Since the beginning of this year, the energy storage market has experienced unexpected growth. Why is there a shortage of core components, yet prices remain stable? After the initial rush to install new systems, what are the key factors supporting ongoing prosperity?

Starting in September 2025, the core component of energy storage systems—large-capacity battery cells—has faced supply constraints. Some energy storage cell manufacturers have indicated that the primary concern for system integrators is no longer price but rather delivery timelines. The phrase “hard to find a cell” has become a common sentiment in the industry. Leading battery manufacturers are operating their production lines at full capacity, while second-tier manufacturers have also seen their capacity utilization exceed 80% since the second quarter of 2025, with some orders already scheduled for delivery in 2026.

The battery production lines are working overtime to keep pace with the rapid growth of the global energy storage market. According to InfoLink, a new energy industry information agency, the global shipment of energy storage batteries reached 240.2 GWh in the first half of 2025, marking a year-on-year increase of 106.1%. Data from the China Energy Storage Industry Technology Alliance (CNESA) indicates that in the first half of 2025, China’s new energy storage installations totaled 23.03 GW/56.12 GWh (power/energy), with both indicators seeing over 68% growth year-on-year. Cumulative installed capacity and energy have surpassed 100 GW and 240 GWh, respectively.

While the data confirms a robust energy storage market, prices have not followed suit. Despite the “hard to find a cell” situation, the prices of energy storage systems have not significantly increased, with new bidding prices even hitting record lows, seemingly contradicting market trends. The key question remains whether this high growth rate, driven primarily by policy changes, can be sustained after the current installation rush.

Global Expansion of the Energy Storage Market

Over the past four years, the global energy storage market has transitioned from sporadic setups and pilot policies to commercial implementation and large-scale expansion. Global shipments of energy storage batteries have grown from less than 50 GWh in 2021 to over 240 GWh in the first half of this year. InfoLink predicts that total shipments for the year could reach 460 GWh, demonstrating an annual growth rate exceeding 70%. In China, which accounts for 90% of global demand, cumulative installed capacity has grown from single digits in 2021 to over 100 GW, and installed energy has increased from 12 GWh to 240 GWh.

From a data perspective, the energy storage market in the first half of 2025 has maintained high growth rates similar to previous years. However, the perceived market growth feels even more pronounced. The disparity between the data and perception can be attributed to two main reasons:

• Unexpected Growth: At the beginning of 2025, many anticipated a slowdown in energy storage market growth due to high previous year baselines, policy uncertainties in major global markets, and trade friction risks. Contrary to these expectations, supportive policies in key regions—China, the U.S., and Europe—stimulated demand. For instance, China’s cancellation of mandatory energy storage for new energy projects led to a rush for installations, while the U.S. “Inflation Reduction Act” maintained tax exemptions for energy storage projects until 2033, further encouraging investment.
• Diverse Growth Regions: According to data from Gaogong Industry Research, between January and August 2025, Chinese energy storage companies secured over 250 orders in overseas markets, totaling 188 GWh, a year-on-year increase of 183%. The Middle East led with 38.75 GWh in orders, followed by Australia (37.88 GWh), Europe (32.49 GWh), India (11.25 GWh), and Chile (10.8 GWh). Prior to 2024, most overseas orders for Chinese energy storage companies primarily came from the U.S. and Europe. Emerging markets have become a core growth engine for demand, significantly contributing to the heat in the 2025 energy storage market.

Why Prices Remain Stable Amid Shortages

The rapid growth of the energy storage market has led to a supply shortage of core components, specifically energy storage battery cells. Since the second quarter of 2025, the capacity utilization rate of major Chinese battery manufacturers’ energy storage production lines has exceeded 80%. Some leading companies have reached full production capacity, resulting in a situation where orders are waiting for production capacity. For example, CATL’s energy storage production line has already scheduled orders into the first quarter of 2026. Many battery company representatives have noted that downstream system integrators are now more concerned with delivery timelines than prices.

Interestingly, the tight supply of battery cells has not led to increased prices; in fact, prices have continued to decline as of August 2025. For instance, in a major procurement project for a 25 GWh energy storage system, the bid price for a 4-hour energy storage system reached an industry low of 0.37 yuan/Wh, a decrease of over 42% from the end of 2023. Prices in overseas markets have also fallen, with the cost per kWh for 2-hour energy storage systems exported to Europe and the U.S. dropping by $10 in the past year, and battery cell prices decreasing from $51/kWh to $46/kWh.

After September 2025, some battery manufacturers began to propose price increases to smaller clients amid tightening supply, but prices for larger clients remained stable. The reasons for this paradox—where there is a high demand for battery cells but prices do not rise—can be attributed to three main factors:

• Technological Advancements: The ongoing increase in battery cell capacity has lowered overall system costs, offsetting some of the upward price pressures. The market’s mainstream products have shifted from 280 Ah to 314 Ah, with new products introduced by major manufacturers at industry exhibitions reaching capacities of 500 Ah to 700 Ah, and some cells exceeding 1000 Ah. For example, BYD’s latest “Haohan” energy storage system features a single cell capacity of 2710 Ah. Larger battery cells reduce the number of cells needed in energy storage systems, simplify battery management systems (BMS), and lower integration, manufacturing, installation costs, and footprint.
• Strong Bargaining Power of Large Clients: The market’s growth is concentrated among large clients with significant bargaining power. Current global market growth mainly stems from large projects, such as independent energy storage stations, new energy integration, and data center storage. These projects are typically procured by large power companies and energy developers, giving them strong negotiation leverage. To secure contracts and foster long-term relationships, suppliers are willing to adjust prices, which suppresses overall price increases.
• Excess Capacity of Smaller Cells: The supply of smaller battery cells has not been fully absorbed, leading to an overall surplus in the battery market. Although large cells dominate large energy storage projects, smaller cells (280 Ah and below) are still used in residential storage, commercial storage, off-grid projects, and in price-sensitive emerging markets (e.g., Africa, Brazil, India). This provides market space for second- and third-tier manufacturers of small cells, meaning their capacity will not be cleared in the short term. Thus, while there is a shortage of large cells, the overall market still has an excess supply, which is fundamentally suppressing price increases.

It’s important to note that during this round of energy storage market expansion, Chinese companies are undoubtedly the primary drivers and beneficiaries. The market share of Chinese manufacturers has further increased, leading to a situation where competition in the global energy storage market has gradually turned into an “internal conflict” among Chinese enterprises. Looking back at the 2023 global energy storage battery shipment rankings, two South Korean companies, Samsung SDI and LG Energy Solution, were still in the top ten. By 2024, only Samsung SDI remained. By the first half of 2025, all ten leading companies were Chinese, collectively holding a market share of 91.2%.

In this competitive landscape, Chinese companies have adopted aggressive pricing strategies to capture market share. When key competitors are seasoned in price wars, raising product prices becomes nearly impossible.

How Long Can High Growth Continue?

The current enthusiasm in the energy storage industry is not driven by a single factor; it is crucial to clarify the different growth drivers’ impacts and sustainability in the short, medium, and long term. Short-term momentum primarily stems from the concentrated release of policy effects—new policies replacing old ones, changes in tariffs and subsidies, and incremental stimulus measures—fueling a rush for installations in the Chinese and U.S. markets. In contrast, the long-term growth is supported by industrial policies, innovative market mechanisms, expanded application scenarios, and accelerated technological iterations.

Policy factors play a dual role—providing long-term stability while also fostering short-term installation rushes. Establishing long-term, predictable industrial policies forms the foundation for the energy storage sector’s development. Developing energy storage projects has been elevated to a strategic priority for major economies worldwide, aimed at ensuring energy security, promoting energy transition, and stabilizing grid operations. The National Energy Administration of China released a document in April 2024 to promote the integration and operational utilization of new energy storage, while in September 2025, the National Development and Reform Commission and the National Energy Administration published the “Action Plan for Large-Scale Construction of New Energy Storage (2025-2027),” which aims to add 100 GW of new energy storage installations nationwide within three years, ultimately reaching a cumulative installed capacity of 180 GW.

In the U.S., the “Inflation Reduction Act,” passed in July 2025, significantly reduced or eliminated subsidies for new energy vehicles, wind energy, and photovoltaics, but retained investment tax credits (ITC) for independent energy storage projects until 2033, providing market participants with long-term investment certainty and encouraging capital inflow. The EU’s “REPowerEU” energy plan considers new energy storage as a core technology to reduce dependence on fossil fuels and ensure energy independence. The European Commission is creating a favorable macro environment for energy storage development by streamlining project licensing and approval processes and promoting supportive measures among member states.

Additionally, there are urgent short-term policies that have spurred the installation rush. In early 2025, the National Development and Reform Commission of China announced the cancellation of mandatory energy storage requirements for new energy generation projects, prompting many project developers to expedite construction to secure the benefits under the existing subsidy policy. This resulted in a record-breaking 10.25 GW of new energy storage capacity added in May 2025 alone, accounting for 44.51% of the total capacity added in the first half of the year.

The situation in the U.S. market is more complex, with multiple key policies’ deadlines overlapping in 2025, including anticipated tariff increases on imported energy storage equipment and time-sensitive requirements for tax credits. These factors have pushed developers to accelerate their timelines and start projects originally planned for the coming quarters sooner.

Market drivers indicate that new energy storage is undergoing a fundamental shift from relying on direct subsidies to achieving market returns based on intrinsic value. The capacity pricing mechanism is a key catalyst. Traditional electricity markets primarily value generated electricity (KWh), while capacity markets monetize the ability to guarantee reliable supply (KW). As the penetration of intermittent renewable resources like wind and solar increases, the demand for ancillary services—such as frequency stability and voltage support—becomes more critical. Energy storage systems, with their rapid response and flexible adjustment capabilities, are ideal resources for providing these services. The capacity pricing mechanism quantifies and commercializes the “reliability” value of energy storage through long-term contracts, providing stable, predictable cash flows and reducing investment risks, thus enhancing the financing prospects of projects.

Technological advancements impact the energy storage market in two main areas: reducing the cost per kilowatt-hour and expanding application scenarios. Ongoing iterations in key components like batteries, energy management systems (EMS), and power conversion systems (PCS) continue to drive down the cost of energy storage systems, improving project economics and laying the groundwork for long-duration storage systems. As costs decrease, the mainstream energy storage duration for projects in China, Europe, and the U.S. has extended from 2 hours to 4 hours, with some projects even reaching 8 hours.

Moreover, technological innovation continually expands energy storage’s application scenarios, opening new markets. A notable example is the grid-forming inverter technology, which allows energy storage systems to actively establish voltage and frequency references, providing essential services like inertia support and black start capabilities—services previously only available from fossil fuel-based power plants.

Leading storage manufacturers are building new competitive barriers by enhancing software capabilities, with AI-based operational systems playing a crucial role. AI operations optimize charging and discharging strategies in real-time by analyzing vast operational data, enabling energy storage systems to maximize revenues across various channels, including energy arbitrage and ancillary services. These systems can also predict equipment failures, enhancing availability and extending asset lifespan, which is critical for ensuring long-term profitability and financial stability.

In contrast, energy storage projects relying solely on price arbitrage for revenue experience significant cash flow volatility. In contrast, projects that leverage smart platforms to participate in multiple markets have smoother and more predictable returns, making them more attractive to investors.

In summary, the robust surge in the energy storage market in 2025 is partly due to short-term, unexpected boosts from overlapping policy changes, but more importantly, the foundational support for long-term industry growth is steadily strengthening. Major economies are strategically defining the long-term role of energy storage, with stable policy directions; market-oriented rules, represented by capacity pricing mechanisms, are gradually improving to provide more stable investment expectations for storage projects. Additionally, ongoing software and hardware innovations continue to enhance system efficiency and profitability, injecting new technological momentum into industry expansion. Given these combined positive factors, it can be anticipated that the rapid growth of the global new energy storage market is sustainable and will likely continue its strong expansion for at least the next three to five years.