Rapid Growth of the Energy Storage Market in 2026: From Grid-Scale Batteries to Next-Generation Technologies
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Explosive Growth of the Grid-Scale Energy Storage Market
As of January 2026, the global energy storage market is experiencing the most rapid growth in its history. According to the latest report released by the International Energy Agency (IEA) last week, the global grid-scale battery installation capacity in 2025 reached 42GWh, an 85% increase from the previous year, and a staggering 340% increase compared to 2022. This explosive growth is driven by the rapid increase in renewable energy generation, the strengthening of carbon neutrality policies by governments worldwide, and the innovative advancements in battery technology.
A particularly noteworthy point is the significant improvement in the economic viability of energy storage systems (ESS). According to Bloomberg New Energy Finance (BNEF), the average price of lithium-ion battery packs fell to $89 per kWh by the end of 2025, a 60% decrease compared to 2020. This price drop has shortened the payback period for ESS projects from 7-8 years to 4-5 years, significantly boosting private investment. In the United States, a total of $4.7 billion was invested in ESS-related projects in 2025, a 73% increase from the previous year.
The market is being led by companies from China and the United States. China’s Contemporary Amperex Technology (CATL) maintained its top position with a 34.2% market share in the global ESS battery market in 2025. CATL has shown particular strength in large-scale grid projects and recently announced a contract for a 1.2GWh large-scale ESS project in Texas, USA. Korea’s LG Energy Solution ranked second with a 22.8% market share, followed by Samsung SDI with 15.4%. These three companies together hold 72.4% of the global ESS battery market, confirming the overwhelming dominance of Chinese and Korean companies.
In the U.S. market, Tesla occupies a unique position. Based in California, Tesla differentiates itself with an integrated solution that combines its own battery manufacturing capabilities with software technology. Tesla’s Megapack system was upgraded to a 3MWh capacity by the fourth quarter of 2025, with an improved thermal management system that increased discharge efficiency to 94.5%. Tesla shipped a total of 6.2GWh of ESS in 2025, a 76% increase from the previous year. Notably, Tesla’s ESS business revenue reached $6 billion in 2025, accounting for about 6% of its total revenue.
Acceleration of Commercialization of Next-Generation Energy Storage Technologies
While lithium-ion batteries currently dominate the ESS market, next-generation technologies are rapidly entering the commercialization phase. The most notable technology is the solid-state battery, which offers significant advantages in safety and energy density compared to traditional liquid electrolytes. California-based QuantumScape began operating a pilot production line at the end of 2025, announcing that the initial product’s energy density reached 400Wh/kg, approximately 60% higher than conventional lithium-ion batteries.
Solid-state battery technology jointly developed by Japan’s Toyota and Panasonic is also aiming for commercialization in the first half of 2026. The two companies are investing a total of $2 billion to build a solid-state battery production plant in Shizuoka Prefecture, Japan, with plans to secure an annual production capacity of 10GWh by 2027. Toyota’s solid-state batteries are known for their excellent performance in charging speed, capable of 80% charge in 10 minutes. This rapid charging capability is expected to be highly advantageous for frequency regulation services in grid-scale ESS.
Meanwhile, physical energy storage methods are also gaining attention. Switzerland’s Energy Vault developed a gravity-based energy storage system, starting its first commercial operation in China in 2025. This system stores energy by lifting composite blocks weighing 35 tons to a height of 120 meters and generates electricity by lowering the blocks to spin a generator when needed. Energy Vault’s Ludan project in China has a capacity of 25MW/100MWh, with a round-trip efficiency of 85%. Unlike batteries, this technology can be used for over 30 years without performance degradation, making it attractive from a long-term investment perspective.
Compressed Air Energy Storage (CAES) technology is also proving competitive in the large-scale, long-duration storage sector. Germany’s Siemens Energy completed a 320MW/2,560MWh CAES facility in the Netherlands in 2025. This facility stores compressed air in underground salt caverns and can discharge continuously for 8 hours. The biggest advantage of CAES is that there is no limit to the storage duration, making it suitable for seasonal energy storage. Siemens Energy is pursuing additional CAES projects in the U.S. and Australia based on the success of this project.
Highview Power, a UK company developing Liquid Air Energy Storage (LAES) technology, began operating a 50MW/250MWh commercial plant in Manchester in 2025. LAES stores energy by liquefying air with electricity and then vaporizing the liquid air to drive a turbine when needed. The current round-trip efficiency of this technology is 60-70%, but Highview Power plans to improve it to 75% by 2027. The biggest advantage of LAES is that it does not use rare earths or lithium, freeing it from geopolitical risks.
Market Trends and Investment Outlook
The rapid growth of the energy storage market is significantly boosting investment inflows. Global venture capital investment in the energy storage sector reached $8.7 billion in 2025, a 94% increase from the previous year. Investment is particularly concentrated in next-generation battery technologies and the Long Duration Energy Storage (LDES) sector. U.S.-based Form Energy raised $400 million in a Series E round in 2025 to develop iron-air battery technology, the largest single investment in the LDES sector.
Government policies are also supporting market growth. The U.S. provides a 30% investment tax credit for ESS installations through the Inflation Reduction Act (IRA), with total tax benefits amounting to $2.8 billion in 2025. China surpassed 75GWh in cumulative ESS installation capacity by the end of 2025, ranking first globally. The Chinese government aims to expand ESS installation capacity to 300GWh by 2030, providing annual subsidies of 20 billion yuan (approximately $2.8 billion) to achieve this goal.
The Korean government also aims to achieve world leadership in the ESS sector by 2030 through the K-Battery Belt initiative. Korea’s ESS exports in 2025 increased by 67% from the previous year, reaching $14.2 billion, making it the second-largest export item after semiconductors. LG Energy Solution achieved sales of 34 trillion won in its ESS business segment in 2025, accounting for 41% of its total sales. Samsung SDI plans to expand its production capacity to 45GWh, 2.5 times the current level, by 2026 by adding dedicated ESS production lines in Hungary and Malaysia.
Market analysts predict that the energy storage market will grow at an average annual rate of 28% over the next five years. According to the latest report from Wood Mackenzie, the global ESS market size is expected to grow fivefold from $24 billion in 2025 to $120 billion in 2030. The grid-scale ESS market is expected to drive overall growth, while residential and commercial ESS are projected to grow at solid annual rates of 22% and 25%, respectively. Regionally, the Asia-Pacific is expected to maintain its position as the largest market, accounting for 45% of the total market, with North America and Europe expected to account for 28% and 19%, respectively.
However, the rapidly growing market also faces several challenges. The biggest issue is the instability of the supply chain for key raw materials. Lithium prices began to rise again from the second half of 2025, exceeding $20,000 per ton. Cobalt and nickel prices also rose by 15% and 23%, respectively. These increases in raw material prices are putting pressure on the margins of battery manufacturers, and some companies are adjusting their production plans. Additionally, the issue of ESS fire safety remains a challenge to be addressed. A total of 23 ESS fires were reported worldwide in 2025, three of which occurred at large grid-scale facilities.
The industry is also concerned about a shortage of skilled labor. According to the International Renewable Energy Agency (IRENA), approximately 1.8 million new jobs are expected to be created in the ESS sector worldwide by 2030, but the current education system is estimated to supply only 60% of the required workforce. As a result, major companies are expanding their own training programs and strengthening industry-academia cooperation with universities. Tesla invested a total of $5 billion in research and development in 2025, with 30% allocated to workforce development and education.
The future of the energy storage market depends on technological diversification and cost competitiveness. While lithium-ion batteries are expected to dominate the market in the short term, solid-state batteries, sodium-ion batteries, and various physical storage technologies are expected to compete, optimized for different applications in the long term. Technologies such as CAES, LAES, and gravity storage are expected to find significant opportunities in the seasonal energy storage market, which requires long-duration storage of over 24 hours. For investors and policymakers, this technological diversity is expected to provide new opportunities while diversifying risks.
This analysis is intended for general informational purposes only and does not constitute investment advice or recommendations. Please consult a professional before making any investment decisions.
