Will the dial finally shift on energy storage in 2025?

TL;DR

• Effective grid-scale energy storage is essential if the world is to be able to incorporate renewable energy sources effectively without destabilising the power grid.

• Until now, the industry has been limited by high costs, complexities, and a lack of Government support.

• These factors have now been addressed. Thanks to the rapid rate of production in China, the cost of batteries has decreased dramatically in recent years, falling by more than 90% in the last 15 years.

• Technology has also evolved; there are several different types of batteries offering an alternative to lithium-ion such as sodium-ion and flow batteries as well as large-scale technologies harnessing the power of water, air, and gravity.

• Governments worldwide have also introduced favourable initiatives and legislation to help them meet their ambitious energy storage targets. However, with many countries relying on China to supply affordable lithium-ion batteries, it remains to be seen whether the incentives and tariffs are enough to encourage homegrown manufacture at scale.

The detail

As demand for energy escalates and net zero deadlines get ever closer, the adoption of renewable energy will need to increase at speed. However, one of the biggest drawbacks of clean power sources like solar PV and wind is unpredictability.

That’s where grid-scale storage comes in.

These technologies will be essential to handle the variations – which can be seasonal, daily, or even hourly – in renewable electricity output while keeping the power grid stable and reliable. While the methods they use may differ, grid-scale storage technologies are all designed to store excess energy and then supply it back to the grid when required.

The need is evident. It’s predicted that the capacity of lithium-ion batteries alone, one of the most common ways to store energy, will need to increase 14 times to 1200 GW by 2030 if the world is to achieve net zero. In the UK Government’s Clean Power 2030 Action Plan, it also made it clear that battery storage will need to increase in the next five years. The country currently has approximately 4.5 GW capacity, which will need to rise to somewhere between 23 and 27 GW by 2030 to meet demand. In fact, the report even hinted that grid-scale battery storage could receive a special mention in future planning reforms.

However, despite its importance, grid-scale energy storage has remained stubbornly expensive and complex to deploy. But is 2025 the year when this narrative finally starts to shift?

Will falling prices boost battery growth?

One important factor that could ramp up battery supply more rapidly is that costs have dropped dramatically recently. In less than 15 years, battery costs have fallen by more than 90% and in 2024, global average battery prices fell 20% to just $115 per kWh. There are several reasons for these price drops but arguably the most impactful is China’s prolific production. The country leads the way when it comes to lithium-ion battery production, generating an excess that feeds the global market. It is currently producing enough batteries to satisfy world demand and has announced plans to expand its capacity by a further 5.8 TWh this year.

In the US, there has also been rapid growth of large-scale Battery Energy Storage Systems (BESS) especially across Texas, Nevada, Arizona, and California - California has already reached more than 13 GW of capacity. In the UK, the total battery storage project pipeline currently contains a total capacity of 127 GW with just over 5 GW of capacity under construction. It’s predicted that the country’s battery storage capacity will exceed 10 GW in the coming years.

Batteries are the most scalable solution to meet the demand for energy storage and, while lithium-ion batteries are favoured for their high energy density, long lifecycle, and efficiency, there are competitors emerging in the market that could help to expand the sector at speed. Sodium-ion, flow, and solid state batteries are all potential alternatives to lithium-ion, which could be especially beneficial given the rising costs of lithium.

Sodium-ion batteries benefit from the fact that sodium is an abundant raw material with excellent thermal stability meaning that these batteries can be used in high temperature environments. Sodium-ion batteries are also expected to be embraced commercially due to their relatively low production costs and strong safety profile. Their potential has already been identified by China, which launched the world’s largest sodium-ion BESS in 2024.

Flow batteries are a cross between a conventional battery and a fuel cell. Power is stored in liquid electrolytes, held in external tanks, and pumped through a reactor. The chemical reactions that take place in the reactor then produce energy. This versatile storage solution is also adaptable as the amount of power generated and stored can be changed. The more the storage capacity increases, the lower the cost per kWh as no new battery packs are needed. That’s why flow batteries are one of the cheapest ways to store electricity for more than eight hours and they’re now being commercially produced in Japan, China, and Europe. Solid state batteries are also an emerging technology, which uses solid electrolytes instead of liquid, potentially improving safety, energy density, and lifecycle.

Water, air, and gravity weigh in

Batteries aren’t the only grid-scale storage solution with potential. Pumped hydro storage is the most widely used storage technology in the world, accounting for 90% of total global electricity storage. This type of energy storage uses excess electricity during off-peak hours to pump water from a lower reservoir to an upper reservoir. The water is then released during peak periods and passes through turbines to generate electricity.

The UK currently has 2.8 GW of long-duration energy storage across four pumped storage hydro schemes based in Scotland and Wales. It’s also estimated that 4.5 GW of new long-duration pumped hydro storage could save up to £690 million per year in energy costs by 2050. However, hydro projects aren’t a silver bullet solution; they can be difficult to scale, expensive to build, and have exacting geographical requirements to work effectively.

Compressed Air Energy Storage (CAES) uses geological reservoirs to store energy. Electricity is used to compress and store ambient air under pressure but, when power is required, the compressed air can be drawn through the expander to power a generator. A similar technology, known as gravity batteries, has been pioneered by a company called Gravitricity. It has successfully trialled its first gravity battery prototype: a 15m steel tower suspending a 50-tonne iron weight. Inch-by-inch, the electric motors hoist the weight upwards before gradually releasing it back to earth and powering a series of electric generators with the force of the downward drag.

Encouraging initiatives

Alongside these innovations, Governments around the world are encouraging the landscape to shift by introducing initiatives and legislation in favour of grid-scale storage. At the end of 2024, COP29 issued the Energy Storage and Grids Pledge committing to increase global energy storage capacity to 1,500 GW by 2030 with those endorsing the pledge required to scale up investments in the grid to add or refurbish more than 80 million kilometres by 2040.

Europe has also made several pledges to build its energy storage capacity. The European Commission has committed significant funding through programmes like the Horizon Europe fund, the European Battery Alliance (EBA) has been established to create a competitive and sustainable battery value chain on the continent, and the EU Battery Directive will help offset raw material shortages and contribute to overall cost reductions. Individual EU member nations have also introduced supportive policies; in Spain, the Government approved an update to its National Integrated Energy and Climate Plan in September 2024, which increased its installed energy capacity targets to 22.5 GW in 2030.

In the UK, a cap and floor investment framework has been launched to support the development of long-duration energy storage projects to lower the risks involved for investors while further afield in Australia, the Government launched a $550 million national battery strategy to expand the domestic manufacturing of batteries in 2024.

The energy storage industry in the US may benefit from the Department of Energy equitable cost-sharing initiative for required grid asset upgrades, requiring new storage projects to be evaluated on realistic financial models. It also opened applications in September 2024 for up to $100 million in funding to support pilot-scale energy-storage projects using non-lithium technologies. Domestic battery manufacturer may also increase due to the Inflation Reduction Act and its Section 45X Advanced Manufacturing Production Credit.

The actions of the Trump administration could either progress or stall the growth of BESS. Trump has recently announced an additional 10% tariff on goods from China, which includes batteries, bringing the total tariff on BESS products from China to 48.4% from January 2026. In 2024, 90% of the US BESS industry uses Chinese lithium-ion phosphate cells, which have been 60% cheaper than those manufactured domestically. The future of the Inflation Reduction Act is also in doubt.

A deciding moment

The stage is set for energy storage to thrive. There is a wealth of different storage solutions in varying stages of development, the cost of batteries has decreased dramatically in the last decade, and Governments have recognised the need for growth in this industry and introduced favourable legislation in response.

The biggest unknown? China. The country dominates the battery supply chain and many of the minerals needed to create lithium-ion batteries. As countries look to boost their domestic battery manufacturing and move away from a reliance on China, it remains to be seen whether costs will stay low and the initiatives already in place will be enough to make change this geopolitical dynamic.

Time is running out; 2025 must be the year that energy storage is taken seriously and plays its part in helping the world achieve net zero in just 25 years’ time.

— Lew 👋

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